Sheltering from the credit crisis in so-called defensive stocks could prove a disappointment to investors and a great opportunity for short-sellers, according to Liontrust hedge fund manager James Inglis-Jones.

Inglis-Jones, who runs a hedge fund for Liontrust and who recently took on the First Income fund after the departure of star manager Jeremy Lang, has short positions in sectors such as tobacco and pharmaceuticals and has recently added more.

"It's an interesting opportunity when something is seen as safe," he told me. "When the company delivers a disappointment the payoff can be pretty good."

In February Hedge Hub reported Crispin Odey saying defensives were becoming "interesting shorts" and that he "certainly wouldn't own them".

However, with markets having bounced so much recently -- the FTSE 100 is up by a quarter since March -- and many defensives having missed out on most of the rally, are defensives still expensive or do they offer better relative value now?

Much of that depends on whether the rally has legs or is a dead cat bounce. Barclays Wealth came out today saying it is "shifting to the tactical offensive", adding, "The big question now is whether the pick-up is temporary or the real thing. We suspect the latter." Several big names have already pointed to a new bull market, but after a 25 percent rally where do we go from here?

Financial public relations firms, who elevated the honing of corporate messages to a highly profitable art form, are having to adapt their businesses and in some cases cut staff as the economic gloom intensifies.

With far fewer deals to publicize and lucrative “retainer” contracts under pressure, companies are cutting costs and are increasingly focusing on work thrown up by the crisis, such as capital-raising, restructuring and repairing tarnished images.”

So what exactly are they up to?

Some recent pr industry blogs and other web postings shine a light on some of the spinmeisters’ latest tactics.

Flacking firm Fishburn Hedges openly boasts about how a big capital-raising by a UK mortgage lender was kept off the front pages by presenting it as “a technical, esoteric story suitable for business sections”.

For former News of the World Editor Phil Hall, who advised former RBS boss Fred Goodwin on his parliamentary testimony a few weeks ago, there’s apparently no such thing as bad publicity.

Even amid the current financial wreckage, financial pr remains a fiercely contested field as shown by the fact that there’s even a dedicated M&A league table for PR advisers.

Most hedge funds agree that the credit crisis has thrown up some interesting assets at bargain-basement prices, particularly in credit markets.

The problem? When you have to report net asset value performance to jittery investors and prices of these cheap assets are getting even cheaper, when do you buy?

That's the dilemma facing many fund managers, some of whom have got burned by snapping up asset-backed securities and other assets too quickly.

After all, a security that has fallen 90 percent is one that has dropped 80 percent and then halved.

Chris Woods, chief investment officer at Man Global Strategies, speaking at Wednesday's Euromoney bond conference in Westminster, helps us out.

"Just as 50 is the new par, so early is the new wrong," he says.

As investors have found, it may be cheap, but it could get a lot cheaper.

The timing of the Alternative Investment Management Association's hedge fund disclosure initiative indicates just how strong the winds of change are blowing in hedge fund land.

Coming just a day after ECB President Jean-Claude Trichet called the credit crisis "a loud and clear call" for extending hedge fund regulation, the move shows the hedge fund industry feels it must be more active in deciding the future shape of regulation.

The move, which will include regular -- probably quarterly -- disclosure of systemically significant holdings and risk exposure to national regulators, goes further than that suggested at last month's Treasury Select Committee by Marshall Wace chairman and Hedge Fund Standards Board trustee Paul Marshall, who had proposed aggregating data through prime brokers.

"The international agenda is starting to gallop away... We can see which way the wind is blowing and we want to exercise leadership," said AIMA CEO Andrew Baker, adding the proposals had been in the pipeline since early in the new year.

But AIMA's drive to do this also serves to highlight the low number of funds that have signed up to the HFSB's voluntary code -- a fact seized upon by last month's Treasury Select Committee.

AIMA is proposing unifying all the industry standards -- AIMA, the HFSB, IOSCO, PWG and MFA -- into one code. Their fear is that regulators may do this for them.

The Detroit Three automakers go to Washington today, armed with fresh restructuring plans they hope will convince federal lawmakers to open the bailout spigot. For General Motors, Ford and Chrysler the stakes couldn’t be higher.

GM has been reviewing its already revamped business plan and may take steps that include dropping or selling off the Pontiac, Saab and Saturn brands. Ford, seen as the strongest bet to survive of the three because of its better cash position, is considering the sale of Volvo. And Chrysler, seen as the most vulnerable of the bunch, finds itself having to spell out the reasons it needs federal funds even though it’s also looking to hook up with foreign automakers.

As IHS Global Insight analyst Aaron Bragman says: “Just as General Motors is too big to fail, Chrysler is too small to survive on its own.”

GM, Ford and Chrysler have all declined to discuss their restructuring plans before submitting them to key lawmakers today.

The cap-in-hand CEOs will be making their cases against a dire background for automakers globally. Consumers, shocked into hiding by the credit crisis, are reluctant to part with cash. Sales have registered double-digit drops in Germany, Europe’s largest car market, and South Africa, Africa’s top economy. U.S. auto sales, due later on Tuesday, are expected to be just as bad. Toyota Motor Corp, the world’s biggest auto manufacturer, has unveiled new production cuts to deal with the slowdown.

The last time the Detroit Three visited Washington to beg for help, they were heavily criticized for flying in on their corporate jets. Not quite the image of a sector under siege. It’s going to be different this time. Ford’s CEO, Alan Mulally, will actually drive to Washington from Detroit. That’s a 500-mile haul. Talk about trying to make an impression.

More Deals of the Day:

** Coca-Cola Co said it had filed an application for anti-trust approval in China for the company’s $2.5 billion bid for top domestic juice maker China Huiyuan Juice Group.

** Singapore Airport Terminal Services (SATS) will pay state investor Temasek up to US$333 million for control of Singapore Food Industries (SFI), and said it was open to making more acquisitions.

** Memory chip maker Numonyx delayed a purchase of a small stake in its Chinese joint venture with Hynix Semiconductor, Hynix said, as chip makers grapple with a major industry downturn and cash shortage.

** The owners of fast-growing Russian lender Ursa Bank and top-30 bank MDM are eyeing a merger that would create Russia’s second largest private bank, Vedomosti reported, quoting members of the banks’ boards.

** Kuwait’s troubled Gulf Bank has received “numerous” merger offers but believes the time is not right for a deal, its chairman said.

** French advertising giant Publicis announced the latest in a series of acquisitions in China as it looks to boost its presence in fast-growing emerging markets.

** Banks that lent money to the core shareholders of Spanish property firm Metrovacesa have taken a 54 percent stake in the company in exchange for debt, the Sanahuja family said in a statement.

** South Korea’s third-largest steel maker Dongkuk Steel Mill said it would ask a government agency to delay sealing Dongkuk’s $321 million offer for a small domestic builder for “at least one year.”

** French utility Electricite de France said it had made commitments to European regulators as part of its proposed 12.5 billion pound ($18.55 billion) takeover of nuclear operator British Energy Group Plc.

** Sierra Wireless Inc said it was launching a friendly 8.50 euros per share offer for Wavecom, topping a hostile 7 euros per share bid by France’s Gemalto .

Thanksgiving has come early for embattled Citigroup. The second-largest U.S. bank by assets received a pardon of sorts from the government late on Sunday, getting a $20 billion lifeline – the biggest bank bailout yet.

The bank had been widely thought to be too big to fail because of its global reach. Chief Executive Vikram Pandit and other top management will keep their jobs, but the government will have the final say on executive pay packages.

Citigroup’s shares lost 20 percent of their value on Friday, closing at $3.77, down 60 percent for the week and reaching their lowest level since December 1992. The group’s market value fell to $20.5 billion. That’s a far cry from the good old days of late 2006 when the bank’s market value topped $270 billion.

Citigroup’s market value is now also in line with Goldman Sachs Group Inc. Which makes for interesting speculation: Might Goldman be interested in picking up its rival at current low prices? A person familiar with Goldman’s strategy said it was not interested, but CreditSights said an acquisition of Citigroup by Goldman or Morgan Stanley would significantly add to earnings, if Citi’s bad assets were absorbed by the U.S. government.

For now, Citigroup is alive. But the carving of the turkey may be just around the corner.

More Deals of the Day:

** China Life Insurance Co, the world’s biggest life insurer by market value, is interested in buying Asian assets of American International Group, a senior China Life manager briefed on the situation said.

** Johnson & Johnson Inc will acquire Israel’s Omrix Biopharmaceuticals Inc for $27 a share, or a total of $465 million, the Globes financial news website said.

** Major shareholders of Hynix Semiconductor picked Credit Suisse, Woori Securities and Korea Development Bank to lead manage the sale of 36 percent of the chip maker in a deal that could be worth about 968 billion won ($646 million) at current market prices.

** The United Arab Emirates began to bail out Dubai’s rattled lenders, consolidate its financial sector and cap a building spree as the former boomtown began cutting state spending in the face of the global crisis.

** Slovenian telecoms provider Telekom said on it hopes to buy Macedonian mobile phone operator Cosmofon, adding it was also looking for other takeover opportunities in the Balkans.

** Inhaled-drug specialist Vectura’s Chief Executive Chris Blackwell said the company is looking to make acquisitions to boost its pipeline, adding that it may consider non-inhaled products to do so.

** EADS agreed to keep for three years a majority stake in three German plants it had planned to sell, German newspaper Financial Times Deutschland reported, citing industry sources.

** Key details remain undecided about a government-led plan to restructure swathes of Dubai’s financial sector, Wasim Saifi, chief executive of Dubai-based mortgage lender Tamweel said.

** SSL International Plc, a maker of Durex condoms and Scholl footcare products, said it agreed to buy the Crest condom brand and related assets for 7 million Swiss francs ($5.72 million) in cash from privately owned Doetsch Grether AG.

Another day, another round of hand-wringing: Do I, or don’t I? That seems to be the mantra of top executives mulling buys in what continues to be a rocky market while those on the receiving end are left wondering will he, or won’t he?

So far, it ain’t looking good — for the sellers, or the buyers.

Late last night, Samsung Electronics Co Ltd, the world’s top memory chip maker, decided to dump its pursuit of flash memory card maker SanDisk Corp. That unsolicited deal would have been worth $6 billion, but Samsung apparently got cold feet after seeing SanDisk’s wider-than-expected quarterly loss.

“Your surprise announcements of a quarter billion dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organization all point to a considerable increase in your risk profile and a material deterioration in value, both on a stand-alone basis as well as to Samsung,” Samsung CEO Lee Yoon-woo wrote to SanDisk management in a letter disclosed by Samsung on Wednesday.

As a result of these developments, we are no longer interested in acquiring SanDisk at $26/share.”

Ouch. At least Lee won’t be accused of beating around the bush.

The move, of course, wasn’t a big surprise. Many investors had been doubtful a deal would get down in the first place, given that the spread between Samsung’s offer price and SanDisk’s trading price was 80 percent, according to Reuters data.

But it’s also another sign that caution rules these days. As reporter Jessica Hall pointed out in her DealTalk column earlier this week, even marquee mergers have become more difficult and costly to close amid an ongoing credit freeze and financial crisis.

Look at GE and its appliance unit. That dance card has been open since May and suitors remain reluctant. Reporter George Chen, in another DealTalk column, points out that potential buyer Haier, China’s largest home appliance maker, plans not to bid for the unit until it sees clear signs of a U.S. market recovery. Chen was citing people with direct knowledge of the matter.

Meanwhile, General Motors is looking for a large investment from outside investors as a possible alternative to a deal with Chrysler, the Financial Times reported on Tuesday. GM and Chrysler have been in merger talks in an attempt to shore up cash and survive an industry slump, sources have said.

As the old saying goes, money makes the world go round. But the globe doesn’t appear to be spinning very fast these days.

More Deals of the Day:

** Japan’s largest beer maker Asahi Breweries Ltd is in a leading position in a bid for Groupe Danone’s Australian and New Zealand businesses, which could be worth up to A$1 billion ($678 million), a financial source said.

** Samsung Electronics Co Ltd, the world’s top memory chip maker, dropped a $5.9 billion unsolicited bid for flash memory card maker SanDisk Corp, citing the U.S. company’s deepening losses and uncertain outlook.

** Barnsley Building Society is to merge with larger UK rival Yorkshire Building Society after revealing a possible 10 million pound writedown from its exposure to two Icelandic banks, the companies said in a joint statement.

** Nissan Motor Co is proposing to buy about 20 percent of Chrysler and bring the troubled automaker into the Franco-Japanese alliance with Renault SA , the Detroit News reported, citing sources familiar with the situation.

** British Gas owner Centrica Plc said it bought Semplice Energy Ltd, a clean technology services provider, for up to 1.5 million pounds ($2.53 million) in cash to expand its range of energy efficiency and low-carbon capabilities.

** Legal and professional fee insurer Abbey Protection Plc said it would acquire three companies in the Accountax fold for an initial consideration of 4.4 million pounds ($7.4 million).

** Shares in global miner and takeover target Rio Tinto Ltd jumped 5 percent in a weak market, swept up by rumours ranging from a sweetened cash bid by BHP Billiton to a Chinese counter-bid.

** Wind turbine maker Clipper Windpower Plc said it has completed a joint venture agreement with an energy unit of oil major BP Plc for the development of a windfarm in U.S.

** Spain’s largest property company Martinsa Fadesa said its 50 percent owned Moroccan unit has sold assets for 165.7 million euros ($218.5 million), making a pretax gain of nearly 43 million.

** U.S.-based DTCC (Depository Trust & Clearing Corporation) and London-based LCH.Clearnet said they planned to merge to form the world’s leading clearing house. LCH.Clearnet shareholders would receive total consideration of up to 739 million euros ($974.7 million), the majority of which would be funded through LCH.Clearnet’s revenue, the companies said in a media release.

** Vienna stock market operator Wiener Boerse agreed to buy a majority stake in the Prague Stock Exchange to boost its position in the emerging markets of central and Eastern Europe.

** CITIC Pacific Ltd said it was in preliminary talks to sell its motor vechicle and food distribution unit, Dah Chong Hong Holdings Ltd.

Having trouble understanding the credit crisis? The comic strip “Sinfest” would like to proffer an explanation: