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Old 11-21-2008, 12:39 PM   #361
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OK fellow bank stock holders.....let's talk!

Citi below $5 a share; BAC fast approaching $10/share; BCS under $8....

As some of you may remember, I am DEEP into BAC and have taken the full ride from $55 to present levels....and it is (or WAS) the biggest part of my portfolio....with my returning to some sort of w*rk almost assured now, I am now trying to focus on the future of my financial investments.....HELP!

I know that I shoulda, woulda, coulda....but I have to get past that and see what I can salvage from what's left....

It would seem that my 1st focus should be on harvesting tax losses - some or maybe even a lifetime's worth.....what say you?

Assuming that my loss is about $40+ per share, would you sell a few shares or maybe all?

Brew once said something to the effect that if BAC fails, we will have a lot more serious issues to deal with.....well, I can't say that my current confidence level is good...'cause it looks like a distinct possibility.....I would have to say that if C fails that BAC couldn't be far behind....

D*mn, I sure wish that I had taken up drinkin' at some point in my life....'cause this sh*t is drivin' me !!!
You may remember me at the time, I was concerned that the low on BAC would be $12 based on previous losses on banking stocks when BAC was trading for $50 and that the KRE regional banking index would fall to $24-$26 when it was trading at $42, I also thought that Citicorp would possibly fall out of existence when it was trading at $40 since they had more exposure than anyone at the time and when there were serious economic declines, bank stocks performed very poorly and that prompted the offsetting comment by Brewer you quoted.

An issue that has transpired in the past year was the purchase of Wal-Mu by BAC, which is not working right now as they thought it would and the Merrill Lynch fiasco. The dividend has been cut and is more likely than not I think to be cut again. Knowing what their business model will provide going forward seems very murky to me, but their safety as a dividend provider is very much in doubt.The safety rating on BOA on value line was lowered on 10/17/08 the stock price on that date was 23 and would have caused me to immediately sell myself it is a very negative indication in my experience using Value Line.
http://www.valueline.com/dow30/f6291.pdf

At this point it is hard for me to know what the right approach to take is. However, I would in these times want to be in equity stocks where I am more sure the dividend is safe. My top 2 stocks for that right now are KO and JNJ, yielding 3.6% and 3.3% respectively. It still seems to me these stocks could decline to a 5 percent dividend yield before the market reaches a bottom, but I would still be willing to buy even more at that price. Other candidates in my mind are PG (however I would not buy until it fell to a 3.5% yield or greater) Chevron, UTX which has more economic exposure than JJ or KO and DD which is a more speculative play, however a very great company with a juicy yield which could be one speculative issue I would be willing to buy. On any of these individual stocks though I would sell if either the Safety Rating or Financial Strength was lowered by value line. Their ability to lower and downgrade, as in the case of Bank of America, is not stopped by market pressures.


I would avoid any stock that holds any amount of debt as the market is destroying those companies right now (i.e. the REITS). These stocks can be easily followed and watched on the Value line website for declines in either their financial strength or Safety.
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Old 11-21-2008, 12:43 PM   #362
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What makes this whole situation with so many of the bank stocks so awful is the dividend cuts, which makes it that much harder to ride out this downturn. And to the extent that the TARP program inhibits (or prevents) dividend increases, it only makes matters worse. The government is even starting to make noises about not allowing banks that take TARP funds to pay dividends at all.
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Old 11-21-2008, 12:50 PM   #363
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For a novice like myself, what does that mean?

the VIX stands for Volatility Index. you can read the details on Wikipedia. there is a formula they use to calculate it and the higher the VIX number the lower the market drops, in theory. It is supposed to measure fear.

I don't remember the exact formula but it's basic statistics like a lot of technical analysis signals. and what happens is when a market drops the initial drop is long and drawn out giving time for the averages to start going down and make a down trend.
then you get a rally like in the last month and this causes the statistical formulas to start trending up and finally you get another quick drop like we just had. we dropped around 25% including today's low so far in 3 weeks.
what happens in these cases is that the formulas don't have time to drop below their previous lows, unlike the market indexes and they make a higher low when the market makes a lower low.
In tech analysis it's called a bullish divergence, in English it's called capitulation. when the technical analysis averages trend up with a higher low and the market indexes make a lower low is usually a good time to buy. It's not 100% accurate but around 90% accurate for a buy signal.

if you look at 2000 - 2002 bear market and the VIX you'll see that the VIX made a high in July when the market indexes made a low. The market rallied for a month and then fell to a lower low in October, but the VIX didn't reach July levels this time. VIX hit 45.08 in July 2002 and 42.64 at the October low. In October 2008 the VIX hit intraday 89 and change and 81.48 yesterday. if you count only the closing prices than it did close a bit higher yesterday but the MACD which is a big tech signal and averages out the last few weeks of prices is trending down for the VIX over the last month which signals the VIX will probably drop and that the stock market will go higher.

look at what happened in the last year. October 2007 to Sept 2008 we get a 25% to 30% drop in the market indexes over a year with a few rallies in between. The VIX and the MACD have time to make a nice downtrend. We rally in the last 6 weeks and then drop almost 30% in a few weeks. The VIX and MACD don't have time to take these prices and go below their October 10th lows so we get a higher low on both.

Add that the average volume has dropped in the latest leg down, the news makes you want to jump out the window and this is a very strong possiblity that we are at the end of the bear, very close to the end or we rally from here and drop again next year. I think it's choice c because in the 2000-2002 bear it took almost 3 months to make a lower low. but in the 1973-1974 bear market which was about as long as the 2000-2002 it took around a month for the final market low compared to a higher low on the MACD
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Old 11-21-2008, 01:06 PM   #364
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For a novice like myself, what does that mean?
Basically, the VIX is an average of the implied volatilities of the at-the-money one and two month options on the S&P 500. It thus reflects the cost of insurance (the put premium) embedded in the option price, hence the reference to fear. The more investors/traders are fearful of the market going down, the more they are willing to pay for insurance (puts). The higher put premiums translate into higher implied volatilities and, hence, a higher VIX.
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Old 11-21-2008, 01:11 PM   #365
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and just like 2002 the Put/Call ratio is lower now when the market is lower. logically the lower the market goes the higher the put/call ratio is supposed to go.

oct it peaked at 1.51 and it was 1.410 a few days ago and is now trending down
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Old 11-21-2008, 03:50 PM   #366
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Other candidates in my mind are PG (however I would not buy until it fell to a 3.5% yield or greater)
You think the price is going to drop that much? Not that I doubt the possibility in this market, but I bought on the 24th of last month just before it hit it's low (for the moment anyway) and the yield was still short of 3% then.
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Old 11-21-2008, 04:30 PM   #367
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You think the price is going to drop that much? Not that I doubt the possibility in this market, but I bought on the 24th of last month just before it hit it's low (for the moment anyway) and the yield was still short of 3% then.
If you really would be happy with PG at a 3.5% yield, you could take advantage of today's high implied volatilities and sell the April 50 put for about 3.60 with PG at 63.

PGPJ.X: Summary for PG Apr 2009 50.0000 put - Yahoo! Finance

If you get assigned in the next six months you will own PG at 46.40 which is just about a 3.5% yield (before a likely dividend increase next April). If you are not assigned you will still have earned about 7% on the 50 strike in 6 months.
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Old 11-21-2008, 11:02 PM   #368
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You think the price is going to drop that much? Not that I doubt the possibility in this market, but I bought on the 24th of last month just before it hit it's low (for the moment anyway) and the yield was still short of 3% then.
Not necessarily, but the growth prospects at a price lower than that do not really thrill me even though I think it is an excellent well run company. At other market lows PG actually returned 5 percent, so that would not totally surprise me at a market bottom. Less than 3 percent is not enough payment for a stock with forecast growth under 10 percent, not enough cushion in the growth prospects to forgo a dividend less than 3.5 percent for me, I move on to other prospects while keeping a watch on a stock I otherwise really like.

I waited a long time for Coca-Cola to get in a target dividend range over 3 percent.
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Old 11-22-2008, 03:59 AM   #369
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Small investors putting money at the epicenter of the nuclear meltdown takes some B@LL$. Especially with certain banks that might not survive.

I learned my lesson investing in damaged companies that were implementing triage and trying to survive many years ago. I will leave that opportunity to the specialist who know more than me.

Good luck with it.
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Old 11-22-2008, 11:41 AM   #370
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If you are looking for value in bank stocks, consider these three Canadian banks. The OECD recently ranked Canada's banking system the best managed, and these three banks are the best run. But stay away from CIBC, which had significant exposure to subprime loans.
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Old 11-22-2008, 03:49 PM   #371
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VA - By the way, I appreciate your sense of humor about this. I guess in these markets that's about all we have left....
I was going to say, VA is one of the guys I want on my team when the Martians invade. Way to hang in there man!

Ha
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Old 11-22-2008, 08:13 PM   #372
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Small investors putting money at the epicenter of the nuclear meltdown takes some B@LL$. Especially with certain banks that might not survive.

I learned my lesson investing in damaged companies that were implementing triage and trying to survive many years ago. I will leave that opportunity to the specialist who know more than me.

Good luck with it.
you can buy an ETF
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Old 11-22-2008, 11:36 PM   #373
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[quote=Running_Man;751016]You may remember me at the time, I was concerned that the low on BAC would be $12 based on previous losses on banking stocks when BAC was trading for $50 and that the KRE regional banking index would fall to $24-$26 when it was trading at $42, I also thought that Citicorp would possibly fall out of existence when it was trading at $40 since they had more exposure than anyone at the time and when there were serious economic declines, bank stocks performed very poorly and that prompted the offsetting comment by Brewer you quoted.


Running Man...

I remember you and your prediction re: BAC. I thought BAC would never fall as low as you suggested it might. No way. Very impressive. KO, you say? JNJ, you say?
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Old 11-23-2008, 09:03 AM   #374
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[quote=redduck;751743]
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Originally Posted by Running_Man View Post
You may remember me at the time, I was concerned that the low on BAC would be $12 based on previous losses on banking stocks when BAC was trading for $50 and that the KRE regional banking index would fall to $24-$26 when it was trading at $42, I also thought that Citicorp would possibly fall out of existence when it was trading at $40 since they had more exposure than anyone at the time and when there were serious economic declines, bank stocks performed very poorly and that prompted the offsetting comment by Brewer you quoted.


Running Man...

I remember you and your prediction re: BAC. I thought BAC would never fall as low as you suggested it might. No way. Very impressive. KO, you say? JNJ, you say?
Me too Red....

....so I can sell some BAC and put it in JNJ, have enough capital losses to never worry about tax increases (or capital gains taxes for that matter) for...say....EVER!....and MAYBE get back on the right track to solvency??

Sound like a plan RunningMan??
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Old 11-23-2008, 10:21 PM   #375
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If you are looking for value in bank stocks, consider these three Canadian banks. The OECD recently ranked Canada's banking system the best managed, and these three banks are the best run. But stay away from CIBC, which had significant exposure to subprime loans.
I've also been looking at the Canadian Banks. I also wrote off CBIC but I am curious as to why BMO didn't make your list. Which Canadian banks will not cut their dividends?
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Old 11-23-2008, 10:59 PM   #376
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[quote=VaCollector;751840]
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Me too Red....

....so I can sell some BAC and put it in JNJ, have enough capital losses to never worry about tax increases (or capital gains taxes for that matter) for...say....EVER!....and MAYBE get back on the right track to solvency??

Sound like a plan RunningMan??
I am reticent to put so much in one stock, however I would be willing to sell portions of BAC and buy KO and JNJ. Obviously one problem is this could be a bottom for BAC at this point, also the fact that your dividend income shrinks by about 2/3 for every dollar of BAC you would convert into KO or JNJ hurts quite a bit.
You have some very difficult decisions on your retirement and investments and you deserve to have everything work out for you sooner rather than later and I hope your fortunes turn out that way.
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Old 11-24-2008, 07:32 AM   #377
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I've also been looking at the Canadian Banks. I also wrote off CBIC but I am curious as to why BMO didn't make your list. Which Canadian banks will not cut their dividends?
BMO is OK too. As for cutting dividends, who knows? See this morning's Globe and Mail:

reportonbusiness.com: Dividends are safe, says TD's Clark
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Old 11-24-2008, 07:38 AM   #378
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looks like Citi dividends are going bye bye
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Old 11-24-2008, 02:42 PM   #379
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BMO is OK too. As for cutting dividends, who knows? See this morning's Globe and Mail:

reportonbusiness.com: Dividends are safe, says TD's Clark

Thanks for the article....BMO is up 12% today. This article plus the overall rally gave it quite a boost.
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Old 11-25-2008, 08:52 PM   #380
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I've also been looking at the Canadian Banks. I also wrote off CBIC but I am curious as to why BMO didn't make your list. Which Canadian banks will not cut their dividends?
You are right, BMO's Q4 profits announced today were up 24% and its common stock closed at C$34.95, up 83. But they will not forecast performance in future quarters (perhaps wisely).
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