Bank Stocks

[brewer12345]

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.

 

[clifp]

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.

 

[twaddle]

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.

 

[VaCollector]

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

 

[haha]

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

 

[twaddle]

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.

 

[clifp]

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.

 

[Running_Man]

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.

 

[VaCollector]

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!

 

[Nords]

...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.

 

[clifp]

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.

 

[brewer12345]

...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.

 

[Texas Proud]

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..

 

[redduck]

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?

 

[twaddle]

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.

 

[Running_Man]

From Jim Cramer One Year Ago Today

If you want to have a laugh, consider the stunned silence from the bears on the topic of loan losses. If things are so bad in housing, if the consumer is supposed to be strapped and bedraggled from higher rents and lower salaries and supposed to have a huge chunk of discretionary spending trashed by higher oil prices, at least in the previous quarter we would have seen it pop up in the loan loss reserves for all of these banks that just reported earnings.

That means the banks should have taken giant reserves this quarter for these eventual defaults and their earnings are overstated!
I have to tell you, after years in this business, the litany is incredibly easy to pen. I can craft a negative scenario for just about anything from positive results. It's so simple.

Bank of America at this point was at 54 a year ago and was touted by Cramer as a bull case. Now the actual losses have begun to hit and their are few questions listed as to what appears obvious that banks will not record losses until forced by auditors to do so. The time to buy these stocks will be when noone wants them and it will be at a much lower price than 10 below a bull case when the bear scenario proved true. The case being made back then was totally incorrect as can be seen by Cramer's comments.


I am trying to find out how much Washington Mutual has spent in buying their own stock the last 5 years in proping up their stock. That was certainly a poor use of funds unless you were cashing in options at the time. Again today their were a bevy of people passing out 7% interest promises to commuters in Chicago. I take that as a very bad sign for that bank.

When you see Merrill Lynch miss it's own estimate of the losses on CDO's it owned by 3.5 billion in a matter of 2 weeks I think it highlights the lack of understanding in the financial community of the losses they occured back in 2006 without realizing it at the time. Merril Lynch still has 32 billion of the CDO's on it's books. I am sure they are hoping for a turnaround to avoid further losses. Washington Mutual, Countrywide and Bank of America are in the middle of it and I think the rapid decline in the market when both BOA and KRE hit new yearly declines was no coincidence.

I am keeping my eye on KRE, if the ETF were to approach 26-28 which would represent a decline of 50% from the top and a yield of 5% then I would think a good portion of the bad news would be priced in.

 

[VaCollector]

Bank of America at this point was at 54 a year ago ......Bank of America are in the middle of it and I think the rapid decline in the market when both BOA and KRE hit new yearly declines was no coincidence.

I am keeping my eye on KRE, if the ETF were to approach 26-28 which would represent a decline of 50% from the top and a yield of 5% then I would think a good portion of the bad news would be priced in.

Now that's what I'm looking for.....an honest opinion AND someone willing to put a number on a "possible" buying opportunity....THANK YOU!

Got a number for BAC?

 

[Nords]

Now that's what I'm looking for.....an honest opinion AND someone willing to put a number on a "possible" buying opportunity....THANK YOU!

Better do your own math... at $42.05 (the net price I paid on 27 & 30 July) KRE is yielding 4.45% (the 46.7 cents/share dividend paid on 3 Oct).

At $28/share the dividend would be 6.7%, and you can decide the chances of the price getting down there.

 

[terminator]

KRE = 3.74% yield. Its index = 3.52%. Anything else I presume is a special dividend (like the one CORS paid in 3Q) or an increase not yet shown in the index/fund. Makes sense -- if you enter the tickers into Yahoo Finance it shows that only 10 of the 52 holdings have yields > 4.4% and most are yielding in the 2 or 3% range. (I track the components of KRE.)

For more yield, there's always KBE (5.44%).

KRE info: KBW Regional Banking ETF (KRE), KRX Fund Detail | SSgA Funds - Fund Detail

 

[Running_Man]

I believe KRE does not pay a consistent dividend from quarter to quarter but instead pays out all the dividends on a cash basis received in the prior 3 months which is not the same as the annual yield. I did not calculate by hand but if you looked at the components and spread the payment dates to the quarters you could I believe closely anticipate what the yield will be. Obviously all the banks do not have the same dividend schedule.

So far in 2007 it paid 26.8 for the March Quarter, 55.4 for the June Quarter and 46.7 for the September quarter. I used the Yahoo calculation for the anticipated yield since I have found their answer to usually be reliable. I also would imagine the December dividend paid in January will be less than 46.7 cents. However, multiplying that at the time by 4 would not give you the current yield of the stock. That is only accurate for a company that pays steady or increasing dividends

 

[brewer12345]

I would actually just go to the sponsor's website and look at what the indicated yield is on the underlying portfolio is.

 

[Running_Man]

I would actually just go to the sponsor's website and look at what the indicated yield is on the underlying portfolio is.

I did and did not see them quote that.

 

[brewer12345]

I did and did not see them quote that.

KBW Regional Banking ETF (KRE), KRX Fund Detail | SSgA Funds - Fund Detail

Looks like 3.61% div yield as of 10/26/07.

"Ask and you shall receive..."

 

[twaddle]

I smell fear! I bought a slug of bank stocks today. I think I'm way early, but I just can't help it. Can you smell it too?

 

[brewer12345]

I smell gibbering fear and abject stupidity. The fed is slashing rates every chance they get and you want to sell banks? OK, happy to take your money.