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Old 10-19-2007, 10:02 AM   #21
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Maybe such speculations are not for you.

At the moment, people hates them some bank stocks. History suggests this will not always be the case.
I disagree that people are hating the bank stocks they are down some but most unless they are specifically in the subprime area are down less than 20% from their peaks and are not much below 2006 levels when the excess was in full throttle. Having seen the devestation that can hit banks in times of financial difficulty they are the first stocks to be avoided. Losses of 50 percent are all too frequent in their history.

When Wa-Mu sends 20 peddlers to Chicago commuter trains offering 7.05% for one year on opening of new savings account you have to figure there is some big troubles there.

There will be plenty of time to wait to see how the air will clear without stepping into an industry where even the CEO's such as Citicorp say they really are surprised with how much the market is changing on them.

The 100 billion fund for buying out the mortgage securities so the banks will not be forced to recognize loses on their off balance sheet conduits reeks of desperation.

Waiting and saving a potential 30-50% of my principal is far more valuable to me than a potential 5% dividend and 10% upside. The downside risk on the banking stocks is just too very large. If the bank stocks hold their recent lows then that is a decent sign, but many are just falling further away. Since Oct 10th WaMu is down 17 percent, Key is down 10 percent and KRE has outperformed only dropping 9.1%. Of the choices I would prefer the choice KRE since you get the upside of an industry reversal and thier gains without the individual bank blowup potential for unknown land mines in a single portfolio.
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Old 10-19-2007, 10:14 AM   #22
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Like I said, maybe such speculations are not for you.
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Old 10-19-2007, 02:37 PM   #23
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What about the rumoured $100 billion exposure at Citi to the SIVs risks?

Man I have never seen such a bunch a 3 and 4 letter acronyms that emerge as bearers of bad news.
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Old 10-19-2007, 02:59 PM   #24
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The Wall Street Journal story on that was hillarious. Banks are in a panic and they the Feds called in the inventors of the financial package to try and understand what the hell is going on. There is a realization by the Feds that banks are totally in jeporday if this financing vehicle which is on no banks balance sheet but they are on the hook for 100% will go belly up.

The 100 billion fund is merely a way to continue the financing of the SIV's for 6 months as that is how much of the paper is scheduled to come due and the idea is by then the crisis will have passed. If instead home prices continue to fall and creditors default these will be the worse possible investments and there is not a dime of reserve on any bank for any of them.

These investment vehicles are very reminiscent of the Enron investment vehicles that Enron used for their off balance sheet financing. Expect legislation banning the offbalance sheet vehicles
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Old 10-19-2007, 03:46 PM   #25
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[quote=Running_Man;568361]

I don't disagree that the govt will do something stupid with SIVs.

That being said, I'm looking at the disclosures now that Citigroup made. They're pretty darn clear about what they were doing. If they were trying to hide it, they weren't trying very hard.
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Old 10-19-2007, 04:15 PM   #26
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[quote=saluki9;568371]
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I don't disagree that the govt will do something stupid with SIVs.

That being said, I'm looking at the disclosures now that Citigroup made. They're pretty darn clear about what they were doing. If they were trying to hide it, they weren't trying very hard.
Obviously your tinfoil helmet isn't working well and "they" have gotten to you.
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Old 10-19-2007, 04:29 PM   #27
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The M* Dividend Investor Builder (dividend growth) real money portfolio is now 40% in bank stocks. I am not nearly that heavy. But I wrote puts on BB&T this week and with a yield of nearly 5% on cost I'll be happy to own it along with BAC and UBS.

The nice thing about dividend stocks is that even with days like today, I don't get to concerned because my income remains the same. In fact there have been a couple of dividend hikes in my portfolio this earning season and probably 20 this year.

On the other hand I am really starting to hate Oct 19, I hope in the future they declare a Oct 19 a trading holiday.
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Old 10-19-2007, 04:37 PM   #28
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But I wrote puts on BB&T this week and with a yield of nearly 5% on cost I'll be happy to own it along with BAC and UBS.
But wouldn't you be happier with, say, a 10% yield.

I think the housing mess will continue to drag the banks down for at least another year, possibily longer. Brew likes to say that banks are the cheapest they've been in 10 years, but the last 10 years have been very good to banks. Take a look back 20 years, and you'll get a better idea what "cheap" means.
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Old 10-19-2007, 04:52 PM   #29
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Brew likes to say that banks are the cheapest they've been in 10 years, but the last 10 years have been very good to banks. Take a look back 20 years, and you'll get a better idea what "cheap" means.
....and yet that doesn't make it any easier for us "newbies*" to watch our $$$ fade into oblivion ....but (here I go again with self encouragement) at least my dividend yield is getting bigger!

*new bank stock investors
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Old 10-19-2007, 04:57 PM   #30
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But wouldn't you be happier with, say, a 10% yield.
Take a look back 20 years, and you'll get a better idea what "cheap" means.
Sometime around 1979 or 1980, I bought First Virginia Bancshares at a 10% yield.

There was nothing wrong with it at all; just very high interest rates. It was hard not to make money in those days.

Ha
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Old 10-19-2007, 05:12 PM   #31
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I just calculated BofA's 1991 yield at about 7%, a time when inflation was about 4%. So, another 10% drop should get us closer to the good ol' days.
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Old 10-19-2007, 05:17 PM   #32
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But wouldn't you be happier with, say, a 10% yield.

I think the housing mess will continue to drag the banks down for at least another year, possibily longer. Brew likes to say that banks are the cheapest they've been in 10 years, but the last 10 years have been very good to banks. Take a look back 20 years, and you'll get a better idea what "cheap" means.
Actually a 10% yield for an established company like BAC or BBT would have me worried. For a shipping stocks like DSX or EGLE or a smaller commercial lender like CSE, double digit yield signal high risk but high rewards. We've seen this in the shipping stocks as the continue high charter rates and have resulted in increase dividends and big run up in price as investor chased yield. 10% yield on big establish boring banks when T-Bill are yield less than 1/2 that would a flashing red light saying dividend cut ahead.

I don't disagree that there is a least a year worth of more bad news for most banks. I doubt we will much in the way of dividend hikes (although BB&T posted a 6.5% Y2Y growth in earnings) so it is possible that management would want to keep their raising dividend streak alive with modest increase. BAC dividends were hiked 14.5% Y2Y and the pay out ratio is <80% (albeit historically high).

I am basically a value investor for my individual stocks. I have found that like Warren Buffett (ok only in my most delusional dreams), I buy stocks before they hit bottom and sell them well before the top. I agree with Brewer banks are cheap. I think BAC is capable of churning out 20-30 Billion worth of earning with growth rates in line with the GDP, this makes it a 300-400 billion company. It is currently selling for $200 billion if it drops to $125-$150 B before going back up oh well. I am content to collect a dividend which exceeds my SWR rate.
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Old 10-19-2007, 05:26 PM   #33
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Obviously your tinfoil helmet isn't working well and "they" have gotten to you.
I don't know why you are quoting me I never said that! Perhaps you are a little confused.
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Old 10-19-2007, 05:27 PM   #34
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I don't disagree that there is a least a year worth of more bad news for most banks. I doubt we will much in the way of dividend hikes (although BB&T posted a 6.5% Y2Y growth in earnings) so it is possible that management would want to keep their raising dividend streak alive with modest increase. BAC dividends were hiked 14.5% Y2Y and the pay out ratio is <80% (albeit historically high).....I agree with Brewer banks are cheap. I think BAC is capable of churning out 20-30 Billion worth of earning with growth rates in line with the GDP, this makes it a 300-400 billion company. It is currently selling for $200 billion if it drops to $125-$150 B before going back up oh well. I am content to collect a dividend which exceeds my SWR rate.
...and so with all of that in mind....would you care to call the bottom?....only reason I'm askin' is that my ER is all based on BAC producing their dividend and I'm actually looking to buy another 500-1000 shares....and like any investor ~ while I'll settle for great returns ~ I'd sure like to be close to the bottom this time (as I have bought on the last two big dips too )....thanks for your comments!
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Old 10-19-2007, 06:19 PM   #35
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...and so with all of that in mind....would you care to call the bottom?....only reason I'm askin' is that my ER is all based on BAC producing their dividend and I'm actually looking to buy another 500-1000 shares....and like any investor ~ while I'll settle for great returns ~ I'd sure like to be close to the bottom this time (as I have bought on the last two big dips too )....thanks for your comments!
If single-stock risk is your concern then perhaps you'd be more comfortable hedging your bet with the regional bank ETF KRE. Heck, even maintaining their dividend (instead of raising it) may be considered bad news.

A little over a decade ago a shipmate of mine retired, gravitated to an IT job, and was hired by a local bank. One consolidation led to another and he ended up running a big chunk of BAC's network. Nothing was too good for him and his team, he rode that all the way to the six-figure income & options with the corner office on the 17th floor, yet when the music stopped in 2000 there were hardly any chairs left for anybody... I don't think BAC will have any trouble slashing whatever's necessary to protect their income statement.

If BAC is a single point of failure with your ER then perhaps it's time to consider diversification or keeping your day job. We hold a lot of Berkshire Hathaway but it wouldn't kill our ER.
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Old 10-19-2007, 06:23 PM   #36
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The bottom will be when all the analyst say sell and Cramer pushes his sell sell sell button. I actually have no clue. The puts I wrote are at 47.50 and expire in Jan, I won't be all all upset if I end up with the stock at that price.

I hope it isn't all based on BAC, as much I like the risk reward ratio for the stock... diversification is good.
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Old 10-19-2007, 09:32 PM   #37
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...and so with all of that in mind....would you care to call the bottom?....only reason I'm askin' is that my ER is all based on BAC producing their dividend and I'm actually looking to buy another 500-1000 shares....and like any investor ~ while I'll settle for great returns ~ I'd sure like to be close to the bottom this time (as I have bought on the last two big dips too )....thanks for your comments!

I tend to be early, both in buying and selling. I can never quite believe that people would be so stupid as to push things down so far below intrinsic value or so far above intrinsic value. But they do. So I will decline to call a bottom. But it isn't hard to see that things are very cheap. Investors (a misnomer) seem to be selling things without regard to price or value. With the Fed cutting rates and the idiot lending competition having been vaporized by the credit market issues, banks are poised for 5 years of golden times. Whether this starts tomorrow or in a year, I do not know.
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Old 10-20-2007, 12:01 PM   #38
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Nords.. was that the old BAC before being bought by NCNB?

One of the problems with comparing a single bank from history is that who you think it is today might not be... many mergers and name changes (or keeping a name but a different owner) makes it hard...

And, many banks have changed what they do over the years.. in 10 or so years the emphasis can go from one extreme to the other if management has changed..
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Old 10-20-2007, 03:55 PM   #39
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OK, so I see that Washington Mutual (WM) has a yield of 7.33. I also know not to chase a yield. Is Washington Mutual an exception this coming Monday morning?
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Old 10-20-2007, 06:04 PM   #40
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OK, so I see that Washington Mutual (WM) has a yield of 7.33. I also know not to chase a yield. Is Washington Mutual an exception this coming Monday morning?
Tempting, ain't it? But WaMu has a lot of subprime exposure.

For a real eye-popper, take a look at IndyMac Bank (IMB). 12.8% yield. But a ton of exposure to Alt-A. Should be fun to watch how this one plays out.
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