Maverick hedge fund sees more U.S. bank failures
NEW YORK, May 8 (Reuters) - Maverick Capital, the $14 billion hedge fund group headed by industry veteran Lee Ainslee, expects a wave of failures among regional U.S. banks slammed by mortgage defaults, a senior Maverick executive said.
As a result, the firm is stepping up its "shorting" among regional lenders, said Maverick principal Steven Galbraith, told investors at a New York forum on Wednesday. His firm has provided financing to several of them, he noted, without naming the lenders.
"We've had the mother of all mean reversions," said Galbraith, referring to the credit market downturn that has rocked financial markets worldwide. "It's pretty much of a traffic accident of the U.S. economy."
He also warned that commodity prices have surged into "bubble" territory over the last 18 months on demand from developing markets, and are expected to reverse. This follows a pattern of rapid price deflation that hit sectors such as housing, technology and leveraged buyouts in recent years.
"I get that there are a lot of people in China that want to eat and drive," Galbraith said, referring to the strong demand for commodities, but surging commodity indices "scare the heck out of me."
Maverick isn't alone in its outlook. British bank HSBC's $2.7 billion Absolute Return Service fund told Reuters this week that it has slashed its exposure to commodities to 2 percent from 17 percent this year, saying commodity prices had reached unsustainable levels.
The broad Reuters/Jefferies CRB index .CRB, for example, has gained 17 percent since the end of 2007, even as most equity markets have declined.
Across other sectors, Galbraith said Maverick is betting on declines in retailers with consumer spending slowing, but the firm "is really bullish on the tech sector."
(Reporting by Dane Hamilton, editing by Richard Chang) (Reuters email: dane.hamilton@thomsonreuters.com. 646 223 6161)
