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Old 01-20-2008, 08:33 AM   #161
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The selling of many of these stocks (regionals in particular) is way over done. One that I own and will buy more if it continues to slide is RF. Last quarter they raised their dividend and have already announced no div cut for the current quarter. May not be at the low yet (in this market) but if you are a long term investor, I think many of these will prove to be good investments. In fact, I hope they stay down for a while (since div reinvestment will increase long term gains).
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Old 01-20-2008, 09:33 AM   #162
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I do like RF, it might be a better pick than BAC, thanks for the tip.

....after checking it out on Morningstar, the yield is great but they are heavily in the Florida real estate market. That's why they have been dropping like a rock. You might be correct that it will be a great long term pick but like every other bank stock, it's hard to tell where/when the bottom of this credit cycle ends.
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Old 01-22-2008, 08:58 AM   #163
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If any of you guys are around they are having a sale on the market today. BAC is cheaper than it was.
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Old 01-22-2008, 09:37 AM   #164
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If any of you guys are around they are having a sale on the market today. BAC is cheaper than it was.

I see where there CEO not only said they would be maintaining their dividend but raising it which is a good thing to hear if you own BAC.
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Old 01-22-2008, 09:57 AM   #165
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I see where there CEO not only said they would be maintaining their dividend but raising it which is a good thing to hear if you own BAC.
I missed that.....where can I find that info??

Thanks!
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Old 01-22-2008, 10:40 AM   #166
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Live Call: Bank of America Corporation Earnings Conference Call (Q4 2007) - Yahoo! Finance

I read it on the Yahoo morning update of the stock market that he said so in the conference call (see link for audio of call) and it was repeated on the Yahoo message board that the CEO did make the promise. I have not yet played the call for myself. Hereis the link though I think you'd be interested and somewhat put at ease..
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Old 01-22-2008, 10:46 AM   #167
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Live Call: Bank of America Corporation Earnings Conference Call (Q4 2007) - Yahoo! Finance

I read it on the Yahoo morning update of the stock market that he said so in the conference call (see link for audio of call) and it was repeated on the Yahoo message board that the CEO did make the promise. I have not yet played the call for myself. Hereis the link though I think you'd be interested and somewhat put at ease..
Thank YOU!!
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Old 01-22-2008, 11:33 AM   #168
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I see where there CEO not only said they would be maintaining their dividend but raising it which is a good thing to hear if you own BAC.
Here is some interesting data from Morningstar about the safety of various bank dividends.


To be considered well capitalized by regulators,
banks need to maintain a Tier 1 capital ratio of 6%—a
metric that divides a figure similar to tangible equity
by a risk-weighted measure of assets. Capital and the
Tier 1 ratio rise when the bank turns a profit; they
both fall when a bank pays out cash through dividends
or generates a net loss. When a bank draws close
to the well-capitalized line, it either has to raise fresh
capital—most likely on loan-shark terms—or reduce
its dividend rate.

The first number is the tier 1% ratio anything over 6% is acceptable to bank regulators. The second number is the number of quarters a bank can break even and still maintain its dividend while maintaining it is Tier 1 requirement. (BAC EPS of $.05 this last quarter basically counts as breaking even)


Synovus Financial SNV 11.4 23
JP Morgan Chase JPM 8.4 19
BB&T BBT 9.3 11
Dollar-Weighted Industry Average 8.0 8
Bank of America BAC 8.2 7
US Bancorp USB 8.5 7
Wells Fargo WFC 8.2 5
Associated Banc-Corp ASBC 9.1 5
Wachovia WB 7.1 4
TCF Financial TCB 8.3 3
Citigroup C 7.3 3
National City NCC 6.8 2


Source: Morningstar and
SNL Securities. Data as of Sept. 30, 2007.

Industry average includes U.S. banks covered by Morningstar.

Quarters of Dividends in Excess Capital

As you can see both Citigroup and NCC really had no choice but to cut dividends to maintain their Tier 1 ratio. Most other good banks have a year or two.

I think we have hit bottom in this industry, all of my banks are in the green today, obviously the rate cut helped, but getting 5, 6 or 7% dividends (in BAC case) while waiting for the financial mess to sort itself out can't hurt.

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Old 01-22-2008, 12:34 PM   #169
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I think we have hit bottom in this industry
Maybe. My guess is that the banks will continue losing money as long as the housing market is going down.

It's not about subprime or interest rates. It's about failed speculation. If a speculator's investment is going down, he's going to walk away even if you cut his interest rate to zero.

And that's what Wachovia says is happening in California right now. Homeowners are walking away even if they have the ability to pay.
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Old 01-22-2008, 01:37 PM   #170
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BAC bought countrywide for pennies, but the question is how much liability did they buy
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Old 01-22-2008, 02:13 PM   #171
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BAC bought countrywide for pennies, but the question is how much liability did they buy

I was just HAPPY to hear that they do not intend to cut their dividend and actually touted keeping their 30+ years of raising it ....let's hope that they really mean what they are saying and are not using "sub-prime speak"!
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Old 01-22-2008, 02:44 PM   #172
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Maybe. My guess is that the banks will continue losing money as long as the housing market is going down.

It's not about subprime or interest rates. It's about failed speculation. If a speculator's investment is going down, he's going to walk away even if you cut his interest rate to zero.

And that's what Wachovia says is happening in California right now. Homeowners are walking away even if they have the ability to pay.
Certainly that is problem, however the vast majority of homes in California are owned by home owners not speculators. Anybody know the percentage of owner occupied single family houses in the US and/or CA? Obviously, the folks with lousy credit, faced with reseting higher interest rates, and zero equity are going to walk away. There is a reason they have lousy credit scores they don't pay their debts.

For the far more typical case of a home owner with decent to good credit who bought recently with only 10% down their equity maybe close to zero, and their teaser rate is expiring. The decision to walk away isn't something to do lightly. They still need someplace to live and they don't want to ruin their credit. Finally, despite all the hype about lousy loans, plenty of home loans are still made where the home owner puts down 20% and borrows money at a low fixed rate. These folks aren't walking away.

Wachovia and Countrywide made a lot of loans to the first type of borrower, Wells Fargo made loans to the second type. The difference are pretty significant WFC had 32 million charge of on a 71 billion mortgage loan portfolio. Wachovia has a much worse track record with 1.5 billion in charge offs.
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Old 01-22-2008, 03:02 PM   #173
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There's no question that some banks are in deeper trouble than others. And that's reflected in their P/B.

I was just questioning the idea that the bottom is in for banks. My guess is no. Let's check back in 6 months.

Banks should be concerned about home prices. If prices drop 30% from the peak, that means an unprecedented 20 million homeowners will have negative equity. And that doesn't even consider the economic side-effects, which are likely to be "interesting."
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Old 01-22-2008, 04:30 PM   #174
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Certainly that is problem, however the vast majority of homes in California are owned by home owners not speculators. Anybody know the percentage of owner occupied single family houses in the US and/or CA? Obviously, the folks with lousy credit, faced with reseting higher interest rates, and zero equity are going to walk away. There is a reason they have lousy credit scores they don't pay their debts.

For the far more typical case of a home owner with decent to good credit who bought recently with only 10% down their equity maybe close to zero, and their teaser rate is expiring. The decision to walk away isn't something to do lightly. They still need someplace to live and they don't want to ruin their credit. Finally, despite all the hype about lousy loans, plenty of home loans are still made where the home owner puts down 20% and borrows money at a low fixed rate. These folks aren't walking away.

Wachovia and Countrywide made a lot of loans to the first type of borrower, Wells Fargo made loans to the second type. The difference are pretty significant WFC had 32 million charge of on a 71 billion mortgage loan portfolio. Wachovia has a much worse track record with 1.5 billion in charge offs.

if you think the only people who have ARM's resetting are people with bad credit you are deluding yourself. subprime is just a media label, Alt-A is just as bad as subprime

even National City is not doing too well and their credit quality is very good
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Old 01-22-2008, 05:08 PM   #175
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if you think the only people who have ARM's resetting are people with bad credit you are deluding yourself. subprime is just a media label, Alt-A is just as bad as subprime

even National City is not doing too well and their credit quality is very good
Where precisely did I say anything of the sort? Did I say anything good about NCC?

You have a weird habit of reading into my posts not only things I don't say but in some case like for example my post about MBIA "AAA Credit" rating, exactly the opposite of what I posted...
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Old 01-22-2008, 05:18 PM   #176
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I was just HAPPY to hear that they do not intend to cut their dividend and actually touted keeping their 30+ years of raising it ....let's hope that they really mean what they are saying and are not using "sub-prime speak"!
I am not the greatest fan of BAC, although I do expect to own it again after the Countrywide merger goes through. But I don't think they'd spend money on CFC if they couldn't maintain their dividend. A 30 year history of increasing dividends is something that no CEO is going to end without exploring a lot of other alternatives.
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Old 01-23-2008, 07:25 AM   #177
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Where precisely did I say anything of the sort? Did I say anything good about NCC?

You have a weird habit of reading into my posts not only things I don't say but in some case like for example my post about MBIA "AAA Credit" rating, exactly the opposite of what I posted...

correction, if you listen to the Wamu or Wachovia or one of the recent bank conference calls the guy says people are walking away from their homes. and there were a few news stories out in the last week about how people are walking away just because they are upside down, even if they have good credit. yes they have to live somewhere but in a lot of markets there are so many homes and all the idiot speculators are begging for renters, taking in half their mortgage/tax payments for rent and hoping for capital gains in a few years

it's true that not all the ARM people will walk away, but enough will to make rates go higher and Ambac or MBIA to go belly up. it's a fact of our market system that in many cases it only takes a small amount of people to move prices in a major way

i used to read creditboards and there is nothing really bad about foreclosing. worst thing is you can't get a mortgage for a few years.
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Old 01-23-2008, 12:22 PM   #178
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The bank stocks seem to be doing quite well today. I wonder if this is just a temporary upswing or are they oversold.
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Old 01-23-2008, 12:56 PM   #179
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correction, if you listen to the Wamu or Wachovia or one of the recent bank conference calls the guy says people are walking away from their homes. and there were a few news stories out in the last week about how people are walking away just because they are upside down, even if they have good credit. yes they have to live somewhere but in a lot of markets there are so many homes and all the idiot speculators are begging for renters, taking in half their mortgage/tax payments for rent and hoping for capital gains in a few years

it's true that not all the ARM people will walk away, but enough will to make rates go higher and Ambac or MBIA to go belly up. it's a fact of our market system that in many cases it only takes a small amount of people to move prices in a major way

i used to read creditboards and there is nothing really bad about foreclosing. worst thing is you can't get a mortgage for a few years.
Fair enough. The $64 Billion, or more likely $6.4 trillion question is how many people are going to walk away from their (actually the banks!) houses. Clearly speculator have already mailed in the keys in many markets. Ditto those folks with lousy credit, who somehow mananged to borrow 90-100% and bought in the last year or so. Hopefully this will be a painful reminder to lenders people earn lousy credit scores by not repaying debts. (I learned this the hard way on prosper.com lending money to people with lousy credit what was I thinking?)

Perhaps I am being naive but I think the vast majority of who took exotic loans in the last few year were people with good credit who couldn't afford the payments so they went with ARMs, interest only, and other products, i.e. not subprime borrowers. I think these people will try very hard to make their payments. Loan repayment for these people will be a function of future interest rates, and home equity.


I found this chart prepared by a motley fool poster interesting.

Fed Fund rates (I think)
2008 2007 2006 2005 2004 2003 2002 2001
3.5 5.25 4.25 2.25 1.0 1.25 1.75 6.50

1 year ARMs resetting at a 1.75 favorable differential.
3 year ARMs are resetting at a 1.25 unfavorable differential.
5 year ARMs are resetting at a 2.25 unfavorable differential.
7 year ARMs are resetting at a 3.00 favorable differential.

What this tells me is somebody who bought at the top with an ARM loan payments will drop next year. Even if they had a 1 year teaser interest rate. If home prices have cratered in their area and they put little down they still may walk away. But by and large they should be able to afford the new generally lower payments.

Somebody with a 3 year ARM will face higher payments, but with a fed cut of .25-.50 over the next few months the increase will generally be less than 20%. The good news is even with home prices dropping, by and large they 2008 prices are still higher than 2005 in most market. Hence the home owner will have a equity and a strong incentive to stay put.

The situation isn't so good for the 5 year ARM reset. These people will face a 2% increase in interest rates and a large increase in payments. The presidents plan will help some of these borrowers stay in the home. The good news is even if they can no longer afford the home, in virtually every market home prices in 2008 are well above the 2003 levels so even if foreclosure is necessary the banks can recover their loan.

Unfortunately, the people who used their home as piggy bank and constantly refinanced are a different and probably more severe problem.
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Old 01-23-2008, 01:09 PM   #180
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The bank stocks seem to be doing quite well today. I wonder if this is just a temporary upswing or are they oversold.
My complete guess is they were way oversold. REITs and other financials are also doing well. I had list of financial stocks I wanted to buy and they've all moved out of my price range On the other hand, I am solidly in the green today despite the major indexes moving down and my overseas index funds get hammered, so I won't bitch too much.

Still dividend income investors can pick up companies with literally generations of steadily increasing dividends, who's CEO have said in the last few days they intend to increase dividends. Still some great yield, WFC 4.6%, BBT 6.0% and BAC 6.8%

The big winner for the fed cut was banks. One thing I always keep in mind is that virtually all of the monetary policy makers throughout the world are bankers. They also advise and fund politicians. I figure you can always count on bankers to help their friends!
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