Bank Stocks

[Running_Man]

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.

This is referring to October 18th when Citicorp announced they would have slightly over 1 billion in writeoffs and they expected market conditions to return to normal by the 4th quarter. In lieu of activity in the last 18 days, I don't think it was ever very clear to anyone what they had in terms of risks NOT on their books.
MY QUOTE
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.
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.

Since this point only 18 days ago Citicorp has announced the writeoffs need to be 6.5 +8-11 billion and perhaps more. The banking stocks have continued to be the worst performing industry in the stock market. Now the realization phase is fully hitting that this may not be the golden era for banks as further rate cuts are probably on hold with the collapse of the US dollar. I will stick by my prediction of March 3, 2007, predictions for which I have earned animal abuse analogies and metallic headgear claims:

The subprime market collapse is a BIG deal in my opinion. 17.86% of all subprime loans are in default. In the New York Times today it was disclosed that forclosures have hit their highest level ever since the forclosure rate has been measured. General Motors is injecting 1 billion dollars into GMAC for bad subprime loans. General Motors is really not in a good position to bail out their credit arm.

The decline in this segment is due IMO to the decline in housing values of 8 percent over the last year. When you borrow 100% there are no gains to bail you out and no reason to not default. As these mortgages fail the homes will be put for sale and credit terms will be tightened. This will insure fewer buyers, more houses so lower prices and sales for '07. This unfolding process will first hurt:

Homebuilders (already obviously affected)
Financial Institutions lending to home buyers (bearing the brunt now)
Home supply centers - Home Depot, Lowe's thumped, shares downgraded - Nov. 5, 2007
Paint manufacturers (fewer houses painted for sale) realization:soon
Chemical companies - supply raw materials for the paint industryEarnings Preview: Dow Chemical: Financial News - Yahoo! Finance
Auto Manufacturers/Suppliers - car sales will slow drastically as basic industry slows


I would hate to have investments in the above group but from there later it will spread to non-cyclicals.

[Running_Man]

Quote:

Originally Posted by James5v So which is the better buy, BAC or KEY, both have great dividends? Of course, looking at the market today, the rate may continue to get better.

From what I would say if forced to choose between the two I would take Bank of America. I don't think KEY has a firm grip on what their results are going to be at all and therefore more likely to fall and more likely to end with a dividend cut. Also Bank of America has more well-connected friends. But I would not buy either for a while until the revaluation process comes nearer to an end.

[VaCollector]

BAC down as low as $43.30 today....and it's not the bottom yet you say?? .....I definitely need to STOP watching this stuff...even though I KNOW that I'm in this for the long haul, this kind of "correction" does NOTHING for my self confidence!! ....kinda makes you crazy

It's even worse when you're fully invested and you KNOW that this stock is ON SALE!!!

[brewer12345]

Snore. Wake me for the next Fed rate cut.

[VaCollector]

Quote:

Originally Posted by brewer12345 Snore. Wake me for the next Fed rate cut.

Ohhhh....but if we all could have YOUR confidence level !!

[brewer12345]

Quote:

Originally Posted by VaCollector Ohhhh....but if we all could have YOUR confidence level !!

I have stopped paying attention to what the market does on these names. Most of the people trading them (i.e. setting the price) have no idea how these institutions work and what any given press release means. So why pay attention to the droolings of the clueless? Eventually they wil run out of shares to sell and things will go back to normal. In the mean time, I set my dividends to "reinvest."

[Hamlet]

True enough. That is why I would recommend KRE over KBE.

Of the big banks, I think US Bank has the least exposure to the craziness (I have no numbers to back that up though). They haven't made any dramatic writedowns yet. Citigroup and BAC have had to make large writedowns already. I don't think the writedowns are the end of the world, but I prefer US Bank to the other two.

I bank at US Bank. My mortgage is there. They are making decent money off of me, and none of their marketing offers are extremely stupid. They seem to be pretty careful. The .75% of recent rate cuts should improve their earnings a little bit.

Quote:

Originally Posted by Texas Proud Someone else had an article that Prince is going to resign this weekend... guess some other heads are rolling... Hamlet... the biggest banks in 'general' are also huge investment banks... but there are some investment banks that are only investment banks... If you do not want to own investment banks you need to get down to the regionals... and then hope they are not bought by one of the big ones..

[brewer12345]

I think AF, HCBK and maybe WFC are worth a gander. I own some of the first two, and they are among the most conservative mortgage lenders in existence. Sniffing around BRKL, and I wonder why it hasn't been bought out.

[Hamlet]

Brewer, what do you think of TCB?

I've owned them for quite a while. They have a lot of their loan portfolio in home equity loans in the Midwest. They've had an uptick in defaults, and their stock has been punished, so that they now yield almost 5%.

I just can't see disaster ahead. Most of the Midwest has pretty reasonable home valuations. Outside of Michigan, the economy is pretty good.

Granted, they may not have great earnings for the next couple of years, but I don't see anything life-threatening ahead.

Am I missing something?

[brewer12345]

I always thought they were well-run, but never all that cheap. They continue to be well run, but are a little cheaper. The question mark with those guys could be asset quality, as they have a sizable slug of second lien home equity loans. But I don't see any obvious problems with them.

Nice bank, and probably an eventual M&A target.

[al_bundy]

Quote:

Originally Posted by 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.

the issue is not rates being too high, but that the banks made a lot of loans they had no business making under the impression that people can pay 80% of their incomes toward their mortgage or that prices will always go up and they will find a new sucker to buy a 1000sq foot shack for $600,000 in SoCal.

a lot of these people could barely afford the teaser rate payments

[Running_Man]

Quote:

Originally Posted by Running_Man It is interesting to me that of the stocks initially listed Huntington Banc Shares have held up well. While Key has continued to drop -- now down 21.2% from the initial post and National City is down 15%. Huntington BancShares are also hovering just above it's multi-year low and was decimated earlier over the 12 months than the other two. I am curious to see if the declines will continue or if HBAN can jump to the top and posssibly out of its 3 month trading band of 16-18. I would take that as a very positive sign for the banking industry or sign of more trouble to come if new lows are struck.

Well HBAN has broken 16 this morning and KRE is making a new low again today and not surprising the market is on a big break again with this occurrence. Len Walter on WBBM business news in Chicago was claiming to have talked to a Bank of America executive who told him Bank of America was going to have to cut their dividend, I cannot find anything on that on the internet but shortly after he said that BAC dropped from 44.5 to 43.75.

[brewer12345]

Quote:

Originally Posted by Running_Man Well HBAN has broken 16 this morning and KRE is making a new low again today and not surprising the market is on a big break again with this occurrence. Len Walter on WBBM business news in Chicago was claiming to have talked to a Bank of America executive who told him Bank of America was going to have to cut their dividend, I cannot find anything on that on the internet but shortly after he said that BAC dropped from 44.5 to 43.75.

What's the saying?

"A lie can run around the world before the truth can get its boots on."

[Running_Man]

There is no doubt I would not consider what Len Walter said as anything more than an unsubstantiated rumor, which is why I looked on the interenet to see if there was an announcement. Normally would not repeat but Len Walter is definitly an old school business reporter.

[twaddle]

You sure he wasn't talking about WaMu?

In any case, I think we'll see a slew of dividend cuts before this is over. This is just the first inning.

[Running_Man]

Quote:

Originally Posted by twaddle You sure he wasn't talking about WaMu? In any case, I think we'll see a slew of dividend cuts before this is over. This is just the first inning.

I am listening to his reports every half hour he did not repeat with this last one. I will try and listen closely but BAC will have the last word on this anyway

[James5v]

Well, the downward trend continues, BAC looks like it is taking another hit.

[maddythebeagle]

Quote:

Originally Posted by James5v Well, the downward trend continues, BAC looks like it is taking another hit.

Looks like everything in the financials and retailers are taking a hit... Oh, the humanity....

[VaCollector]

Quote:

Originally Posted by James5v Well, the downward trend continues, BAC looks like it is taking another hit.

....and then there's is my ER in May......with an inherited portfolio that is 75% BAC....down from about $55/share this time last year....and I've continued to buy (what I could) on EVERY dip in price that I was just SURE was the bottom....bought @$52....bought @49.50....bought @ $46....and now that I'm totally out of investable monies, is it time to "double down" and think about buying more on margin!??....nahhhh ....it was just a thought......I hope!!

...and it comes from all of the years of listening to the pundits......"buy on weakness"....."the time to buy is when everyone is running the other way".....wellllll......

Isn't THAT exactly where we are now ......so while I am NOT buying BAC on margin if I can keep my wits about me , I really do think that it just may represent that other thing we have all heard about...."the buy of a lifetime" ....or is it just a fool and his $$$ being parted....

....forgot to add that Brewer and I are gonna laugh about all of this in another year or two...lighting our cigars with hundred $$$ bills, etc....(we hope!!)

[haha]

Quote:

Originally Posted by VaCollector ...and it comes from all of the years of listening to the pundits......"buy on weakness"....."the time to buy is when everyone is running the other way".....wellllll......

Quite possibly, or even likely you will be fine. But understand, a small investor with no inside information ordinarily is taking considerable risk to average down on a single issue. Averaging down on KRE is fundamentally different from averaging down on BAC. Though BAC likely is "too big to fail", so that no matter what happens I doubt there could be a total wipeout.

When I was younger I averaged down on some stocks that I found out were not too big to fail.

Ha