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Old 01-20-2009, 06:27 PM   #41
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I'm done "buying low" on everything for a while, and I'm certainly done with rebalancing for a while. I'll still get at least a decent share of the pop back up when this is finally behind us.
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Old 01-20-2009, 09:46 PM   #42
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I'm done "buying low" on everything for a while, and I'm certainly done with rebalancing for a while. I'll still get at least a decent share of the pop back up when this is finally behind us.
I can't imagine buying one of these hot potatoes (grenades). Even with a small bit of money I couldn't sleep at night. This sector is just imploding, govt bail out or not.
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Old 01-24-2009, 04:29 AM   #43
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bought today at 5.21
I, too, succumbed.
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Old 01-24-2009, 11:56 AM   #44
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I just want to comment briefly on the concept of "too big to fail". No doubt Citicorp and BAC are too big to fail. But they are not too big to allow the shareholders to be wiped out completely.

From today's NYT:

http://www.nytimes.com/2009/01/16/bu...anking.html?em
That's one of the more sensible observations made about investing in mega-banks.

This thread, along with its companion bank stock thread, contains a lot of conjecture about investing in banks. Most of it very flawed and not simply on the basis of 20-20 hindsight! I would hasten to point out that traditional investment analysis makes little sense here, as there is too much uncertainty; balance sheets (public information) and call reports (nonpublic information relied upon by the regulators) reflect lagging financial trends and don't have any predictive value in this environment. If Bank CEOs, armed with massive due diligence teams, and regulators, armed with the squads of examiners and sophisticated regulatory modeling, get it all wrong and cannot adequately judge the toxicity of bank balance sheets or call reports, then what makes anyone think that any of us have any clue about how things could shake out! Moreover, we certainly don't know how massive infusions of capital by the Government (or the establishment of a mega-bad bank or "aggregator bank") may result in "unintended consequences."

"Too big, to fail," as I said before simply means "too big to liquidate" completely. The Government appeared to make the wrong judgment in Lehman when it let Lehman fall into liquidation. However, in preserving an entity too big or too important too fail, shareholders and debt holders are all exposed and can be wiped out. WaMu was too big to fail, but all shareholders were wiped out in the Government-engineered transaction that resulted in JP Morgan Chase's acquisition of most of WaMu.
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Old 01-24-2009, 01:03 PM   #45
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I would hasten to point out that traditional investment analysis makes little sense here, as there is too much uncertainty; balance sheets (public information) and call reports (nonpublic information relied upon by the regulators) reflect lagging financial trends and don't have any predictive value in this environment. If Bank CEOs, armed with massive due diligence teams, and regulators, armed with the squads of examiners and sophisticated regulatory modeling, get it all wrong and cannot adequately judge the toxicity of bank balance sheets or call reports, then what makes anyone think that any of us have any clue about how things could shake out!
Just a couple of comments. First, call reports are public information. Here's a link: FDIC: Call Reports/Thrift Financial Reports

Regarding your observation that regulators couldn't judge the toxicity of balance sheets, you may be correct. However, IMHO, part of the problem was the political environment against regulation. I'm not saying we should have had more regulations, just more rigorous enforcement of existing regulations. The Washington Post has run several articles about this. Here's a link and a quote:

Regulator Let IndyMac Bank Falsify Report - washingtonpost.com

"The Washington Post reported last month that OTS allowed thrifts to lend massively while reserves against future losses dwindled. Even as problems became apparent, the agency continued to prioritize deregulation. The latest findings underscore that OTS failed to enforce its own rules."

Here's a picture of the top financial regulators proudly "cutting through the red tape". Another Washington Post article noted:

"In the summer of 2003, leaders of the four federal agencies that oversee the banking industry gathered to highlight the Bush administration's commitment to reducing regulation. They posed for photographers behind a stack of papers wrapped in red tape. The others held garden shears. Gilleran, who succeeded Seidman as OTS director in late 2001, hefted a chain saw."

Here's a link to the entire Post article titled "Banking Regulator Played Advocate Over Enforcer":

http://www.washingtonpost.com/wp-dyn...202213_pf.html
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Old 01-24-2009, 05:44 PM   #46
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I just want to comment briefly on the concept of "too big to fail". No doubt Citicorp and BAC are too big to fail. But they are not too big to allow the shareholders to be wiped out completely.

Thats true, however I personally doubt they'll wipe out the shareholders, if for no other reason out of fear of the effect it would have on the shares of other banks.


I bought C and BAC even though I know they're insolvent. But its not really a bet on what those banks will do, its a bet on what Treasury will do.
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Old 01-24-2009, 06:53 PM   #47
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Since I have modest amounts of BAC, C, UBS-Ag, and JPM in my former Drip now Norwegian widow pile - I think I shall continue to wait til football(Superbowl) has passed and maybe do nothing or maybe shift deck chairs on the Titanic.

Probably use the non logic of seeing what WB continues to own and check top ten in Pssst Wellesley and Wellington rather than attempt any stunning analysis on my own.

heh heh heh - And have a nice funeral - so long old pals - for the dogs I have tired of owning.
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Old 01-25-2009, 10:56 AM   #48
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I bought C and BAC even though I know they're insolvent. But its not really a bet on what those banks will do, its a bet on what Treasury will do.
Using that logic, you should back-up the truck for Fannie Mae and Freddie Mac and get another truck for F and GM. Seriously, if C and BAC are insolvent, then why wouldn't Treasury and the FDIC nationalize these banks, wipe out shareholders and debt holders, and begin propping up strong regional banks to fill in the void that might result in nationalization efforts? Continental Illinois National Bank is a good model for this to occur:Continental Illinois National Bank and Trust Company - Wikipedia, the free encyclopedia

Even if there's a Treasury, good-bank, bad-bank response, shareholders are still likely to get substantially wiped-out. I think you might be misreading the political climate, if you think massive injections of capital or funding to C or BAC won't result in the public and politicians wanting to have shareholders wiped out. It's paradoxical now, that banks are cheap cheap, cheap, but no one really wants to invest, invest, invest capital in them, because investors fear the Government might eventually wipe them out, like this occurrrence:http://www.nytimes.com/2008/09/27/bu...man.html?fta=y

This is just a speculative play, right?
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Old 01-25-2009, 12:36 PM   #49
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It is indeed just speculation, in fact the first time I've bought a single stock in 10 years.

I don't think they will wipe out shareholders again, at least not for the large banks. I think the view is that the risk of scaring away private capital supersedes any moral hazard concerns. And yes, I'm aware of the political climate among the general populace, its just that I don't think the leadership can afford to kowtow to it in this case.

I may be wrong, of course, but that's my read of the situation and I'm willing to bet money that I'm correct. The upside potential is pretty darn good and on the downside I have a stop-loss at 0 so I'm willing to take the risk.



Re F and GM, I less convinced that the shareholders will come out ok, I don't think there's as much at stake there, so the government doesn't have the same constraints.
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Old 01-26-2009, 11:06 AM   #50
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I may be wrong, of course, but that's my read of the situation and I'm willing to bet money that I'm correct. The upside potential is pretty darn good and on the downside I have a stop-loss at 0 so I'm willing to take the risk.
Good luck, as I think you'll need it. Here's a timely analysis in today's NY Times. http://www.nytimes.com/2009/01/26/bu...s.html?_r=1&hp
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Old 01-26-2009, 11:32 AM   #51
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I can easily envision the government requiring more upside than they have to date, the question is whether they wipe out existing shareholders (any more than they already have been, that is - not everyone bought at the levels I did).

I think even Ms. Pelosi doesn't think they will:

Quote:
“I’m not talking about total ownership,” she quickly cautioned...
And I doubt the relevant voices in the Administration are to the left of her.

FWIW, the market reaction to the Sunday comments seems to be on my side. BAC is up over 8%, Citi up over 4, while the S&P is up only 1.75%

Having said all that, I may well be wrong. If you're confident that I am, you could always take the other side of the bet.
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Old 01-26-2009, 11:37 AM   #52
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I can easily envision the government requiring more upside than they have to date, the question is whether they wipe out existing shareholders (any more than they already have been, that is - not everyone bought at the levels I did).

I think even Ms. Pelosi doesn't think they will:



And I doubt the relevant voices in the Administration are to the left of her.

FWIW, the market reaction to the Sunday comments seems to be on my side. BAC is up over 8%, Citi up over 4, while the S&P is up only 1.75%

Having said all that, I may well be wrong. If you're confident that I am, you could always take the other side of the bet.
I tend to think that you are right. That it is a speculation on the government, and that they won't let you down. But I couldn't begin to put probabilities on the various possible outcomes so I don't feel like playing.

From my POV there are other less uncertain plays that may have similar possible gain. But I definitely see your position here. I certainly would not want to take the other side.

Ha
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Old 01-26-2009, 11:59 AM   #53
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I can easily envision the government requiring more upside than they have to date, the question is whether they wipe out existing shareholders (any more than they already have been, that is - not everyone bought at the levels I did).

I think even Ms. Pelosi doesn't think they will:



And I doubt the relevant voices in the Administration are to the left of her.

FWIW, the market reaction to the Sunday comments seems to be on my side. BAC is up over 8%, Citi up over 4, while the S&P is up only 1.75%

Having said all that, I may well be wrong. If you're confident that I am, you could always take the other side of the bet.
Actually, I'm on the other side of the bet already and contemplating dumping the C shares I've held for quite a long time now. (I've been snake-biten with holding and riding too many stocks down to zero, in the past, such as K-Mart, WCOM, NT, and CC.)

The question is not whether they wipe out existing shareholders, as they will, in some fashion or another be seriously diluted, but how will the Government structure its equity piece (whether in preferred stock or warrants) in such a manner to attract new private equity. You might still stand after Government intervention, but you might find you're on the bad side of a 10-1 reverse split too.
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Old 01-26-2009, 12:00 PM   #54
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Hedge your bet on some Political response? You have a lot more faith than I do (at least on something these people would say).
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Old 01-28-2009, 08:20 AM   #55
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Re nationalization:

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House Financial Services Chairman Barney Frank said yesterday “the government should not take over all the banks.”
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Old 01-28-2009, 12:36 PM   #56
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Keep telling yourself that and perhaps the fear might go away. The operative word in Mr. Frank's statement is "all." Do I think the Government will nationalize some banks? Well, is past, prologue? Is the President, Black? Is the Pope, German?
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Old 01-28-2009, 02:57 PM   #57
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Its possible that is the way he meant it, but I have trouble imagining them nationalizing just one bank. It would put the non-nationalized banks at a disadvantage. Whom would you rather buy a CDS from - BAC or the US Treasury?
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Old 01-28-2009, 03:51 PM   #58
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Why do you have trouble with the image? It's been done before. Technically, we've already had one major, though not mega, bank nationalized in this mess, namely IndyMac, which was operating under FDIC conservatorship for almost 6 months. And mind you, if one of the mega-banks was actually "insolvent" or "unsafe or unsound," the regulators have little choice but to close the bank under applicable law -- that's precisely one of the reasons you have capital injections going into these banks from Uncle Sam, i.e. to avoid the closure and activating systemic risk protocols, which right now are under the sole purview of the FDIC for insured banks.

I'm afraid, Maurice, that your "bet" is just a bet, nothing more, nothing less. But if you want to wager in an informed manner, I do believe there's more than meets the eye in statements made by Pelosi or Frank. Remember, the politicians can also get their foots in their mouths over these issues, like Senator Schumer did with IndyMac.

We do have an aversion to "nationalizing" anything, but let's face it, when all the other alternatives stink and something really bad happens to a mega-bank, like panic silent runs, overnight borrowing freezes or counterparty recalcitrance, you be surprised how quickly that sentiment can be dislodged in favor of pragmagtism.

Again, good luck on the wager. I do hope you're right by the way.
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Old 01-28-2009, 04:20 PM   #59
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Of course its just a bet. I've not tried to represent it as anything else.

Re IndyMac, I think nationalizing a retail bank is different than nationalizing an IB. I think to do the latter with just one or two banks would be problematic for OTC markets.

Anyway I don't think they'll do it.
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Old 01-28-2009, 06:02 PM   #60
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Keep telling yourself that and perhaps the fear might go away. The operative word in Mr. Frank's statement is "all." Do I think the Government will nationalize some banks? Well, is past, prologue? Is the President, Black? Is the Pope, German?
Do I understand how to use, commas?
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