Join Early Retirement Today
Reply
 
Thread Tools Display Modes
The Banks - Whadaya Think
Old 09-04-2011, 04:37 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
The Banks - Whadaya Think

I was looking at SPDR KBW Bank ETF (KBE).

https://www.spdrs.com/product/fund.seam?ticker=KBE


The PE is about 9.5 and the PB .74 Expense is .34%

And Div Yield of 1.03%


It holds about 25 banks.

It just got beatup... probably some sentiment because of that law suit (some of the holdings are identified in the suit)... also probably due to economic sentiment.

It has been off its peak (about $60) for over 4 years. It is less than 30% of its all time high. and is off about 30% from its recent high (much of that in the last month).

They are obviously still adjusting...

What is your outlook for banks over the next 3 - 5 years? Another 5 years would approaching 10 years since the meltdown.

Would this be a good value investment (for the sector).... buy it, then cash out (3 - 5 year time frame).

What do you think the down-side might be (over that period)? Anymore nasty surprises out there or are we just looking at the healing process?

Opinions if you got 'em. Even better... recent analysis if ya did it (or know of a handy source).
chinaco is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-04-2011, 08:01 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,797
What do any of us know that the market as a whole has not priced in? And 1% yield, that's worse then the SP500.
Lsbcal is offline   Reply With Quote
Old 09-04-2011, 11:57 AM   #3
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Morningstar's Fair Value graphs mostly show a recent trend toward more undervalued for financial services and banks in most regions:
Market Fair Value by Sector, Industry, Super-Sector, Index | Morningstar
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 09-06-2011, 01:06 PM   #4
Full time employment: Posting here.
CCdaCE's Avatar
 
Join Date: Apr 2006
Posts: 897
Hehe. I was ready to back up the truck and load up at the beginning of the year. Then things really fell off a cliff lately. It seems like I thought the worst was over, but, there still has to be lots of deleverging left to do.

If you look at the graphs linked above, regional banking has always been "cheap", since '01 or '02, even. But, now is the second lowest "dip" since it's been ranked.

It's hard to see how you could go wrong (Google finance says it is at PE 4-something), but like I said, I've thought that it was 'how-can-it-go-any-lower' low before. It does seem like an overreaction. Just a matter of your timeframe, I guess.

Looking at the list of holdings, I'd be more inclined to believe your PE number, but I haven't done the math.

-CC
__________________
"There's those thinkin' more or less, less is more, but if less is more, how you keepin' score?
It means for every point you make, your level drops. Kinda like you're startin' from the top..." "Society" - Eddie Vedder
CCdaCE is offline   Reply With Quote
Old 09-06-2011, 01:23 PM   #5
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,433
Personally, I'd be more comfortable buying JPM which has a 3% yield, and IMO, is a much stronger bank than most contained in the KBW ETF.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 09-06-2011, 01:51 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 4,366
I'd want to know how much foreign debt each bank holds before I'd touch them with a ten-foot pole. I think the European debt crisis is still being largely under estimated. It appears that many US banks have significant PIGS debt exposure. There could be plenty of fallout when that all implodes.
Animorph is offline   Reply With Quote
Old 09-06-2011, 02:42 PM   #7
Moderator Emeritus
 
Join Date: May 2007
Posts: 12,890
I bought some shares of Wells Fargo today. Time will tell if it was a wise decision.
FIREd is offline   Reply With Quote
Old 09-06-2011, 04:06 PM   #8
Recycles dryer sheets
 
Join Date: Sep 2008
Posts: 60
FD, I had a limit order placed for WFC today, but it didn't get filled. (I missed the price dip in the morning).
Uncle Drew is offline   Reply With Quote
Old 09-06-2011, 04:18 PM   #9
Moderator Emeritus
 
Join Date: May 2007
Posts: 12,890
Quote:
Originally Posted by Uncle Drew View Post
FD, I had a limit order placed for WFC today, but it didn't get filled. (I missed the price dip in the morning).
I put in a limit order for $23 last night. Then, before the market opened this morning, I felt I was being too greedy and upped the limit to $23.50.
FIREd is offline   Reply With Quote
Old 09-06-2011, 04:59 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Bernanke sees "manageable" exposure to European banks

Read the above article today and it reminded me of "the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. " - Bernanke, March 2007

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 09-06-2011, 10:30 PM   #11
Recycles dryer sheets
GusLevy's Avatar
 
Join Date: May 2008
Posts: 98
Quote:
Originally Posted by chinaco View Post
What do you think the down-side might be (over that period)? Anymore nasty surprises out there or are we just looking at the healing process?
The biggest bull case for the banks since '08 is prob that since there has always been banks, that there will always have to be banks as long as capitalism exists. Therefore, the banks that survived will not only be eventually stronger, but also bigger, since the industry had to consolidate post-crisis. That's the easy part - the hard part is to get a decent entry point in a world that has a whole lotta arrows pointed in all directions with very bad aim. Macro forces, unfortunately, are not making it easy to buy banks and feel even somewhat comfortable these days.

I would like to buy the banks as well but the following thoughts and opinions, in no particular order, are what holds me back for now:

1) [Mod edit] Blame for the inevitable result of all this is irrelevant as an investor - however, the fact that it will take a long time for the housing market to be "fixed" is relevant and that amount of time is yet unknown.

2) "Operation Twist" - this current market chatter that the Fed will buy long bonds in order to flatten the yield curve for a lengthy period of time is growing louder by the minute. The target of this policy is almost comical: To maintain low mortgage rates so that more people can afford homes (the ones that were kicked out in San Bernandino can now buy homes in Palmdale, and vice versa!) or for current homeowners to be allowed to refinance their current mortgage into lower rates! The problem here, of course, is that (1) the banks cannot make money in a flat curve environment (borrow short, lend long...), and (2) the Fed Govt wants the banks to take in old mortgages at par and refi them at lower rates. Not good.

3) Europe is clearly a sh!tshow. The mortgage and leverage problem in #1 above became a global problem since money has no borders. Real estate in Ireland and Spain, for example, became even more insane than the US market...and the problem is magnified in Europe since they basically have only adjustable mortgages so their growth rates are almost boxed in. Add this to the various Govts' fiscal problems that we all read about in the WSJ in addition to the fundamental problem in the structure of the Euro in which the currency is only a monetary union rather than a political one...uh oh. The banks hold each others mortgages, each others Govt bonds, each others corporate bonds, etc...we have a prisoners' dilemma where if nobody moves everybody loses and if someone moves everybody loses. We need a war to divert attention.

4) Recession. The only way we don't get recession at this point is through monetary inflation - which is neither good nor bad in itself except for the fact that ultimately the Fed will run out of bullets themselves. I suppose that we'll hear a lot in the next several months about how the Fed Govt can magically create employment and heal housing if only the country had the political will to do so but I believe that doing so will not be possible in this politically bifurcated climate that we live in.
GusLevy is offline   Reply With Quote
Old 09-07-2011, 05:03 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Thanks for the comments.

Here is a recent analysts comment on US Bank exposure to the US downgrade. He comments on the European Exposure.

Banking Sector Expert Equity Analyst Sees No Effect From US Debt Downgrade And European Sovereign Debt Crisis: An Interview With Christopher Mutascio Of Stifel, Nicolaus - Yahoo! Finance
chinaco is offline   Reply With Quote
Old 09-07-2011, 06:19 AM   #13
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,433
Quote:
Originally Posted by chinaco View Post
Direct exposure is probably minimal, and presumably one can learn that by looking at a bank's balance sheet. I'm more concerned with indirect exposure through swaps with European (and other) banks where there is counter-party risk, but I don't know how one can know that with any degree of accuracy.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 09-07-2011, 06:37 AM   #14
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
Quote:
Originally Posted by FIRE'd@51 View Post
Direct exposure is probably minimal, and presumably one can learn that by looking at a bank's balance sheet. I'm more concerned with indirect exposure through swaps with European (and other) banks where there is counter-party risk, but I don't know how one can know that with any degree of accuracy.
Once you find the BoA 10-K for 2010 (they don't make it easy), you'll need to read 866 pages. I tried this in '08, thinking then to invest a bit but wanting to first see what kind of assets were on the balance sheet. Maybe it is obfuscation, perhaps my analytical capabilities are in decline, or it could be that it wasn't worth the effort, but I couldn't find any of the specifics I was searching for.
MichaelB is online now   Reply With Quote
Old 09-07-2011, 08:14 AM   #15
Full time employment: Posting here.
CCdaCE's Avatar
 
Join Date: Apr 2006
Posts: 897
Quote:
Originally Posted by FD View Post
I bought some shares of Wells Fargo today. Time will tell if it was a wise decision.
Warren Buffet loves it, and keeps loading up.

Why Warren Buffett's Berkshire Hathaway owns Wells Fargo - Apr. 20, 2009

And again last quarter.

And there's no mention of options to make 10% guaranteed profit or anything like that, for him.

-CC
__________________
"There's those thinkin' more or less, less is more, but if less is more, how you keepin' score?
It means for every point you make, your level drops. Kinda like you're startin' from the top..." "Society" - Eddie Vedder
CCdaCE is offline   Reply With Quote
Old 09-07-2011, 08:36 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by MichaelB View Post
Maybe it is obfuscation, perhaps my analytical capabilities are in decline, or it could be that it wasn't worth the effort, but I couldn't find any of the specifics I was searching for.
I think a truism of bank accounting is that outsiders can't ever really tell what is going on inside. As we've found out recently, even insiders don't always know. I'm actually surprised Buffett is taking a flyer in this sector, it doesn't seem to lend itself to the kind of analysis he's known for.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 09-07-2011, 11:54 AM   #17
Full time employment: Posting here.
CCdaCE's Avatar
 
Join Date: Apr 2006
Posts: 897
Quote:
Originally Posted by Gone4Good View Post
I think a truism of bank accounting is that outsiders can't ever really tell what is going on inside. As we've found out recently, even insiders don't always know. I'm actually surprised Buffett is taking a flyer in this sector, it doesn't seem to lend itself to the kind of analysis he's known for.
He seems to think they don't follow the "group think" of other banks, they're the top of the heap, and aren't as exposed in risky areas (ARMs, T-bills, etc.) as other banks are/were.

-CC
__________________
"There's those thinkin' more or less, less is more, but if less is more, how you keepin' score?
It means for every point you make, your level drops. Kinda like you're startin' from the top..." "Society" - Eddie Vedder
CCdaCE is offline   Reply With Quote
Old 09-07-2011, 01:28 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,483
Quote:
Originally Posted by Gone4Good View Post
I'm actually surprised Buffett is taking a flyer in this sector, it doesn't seem to lend itself to the kind of analysis he's known for.
Fro Warren, it's all about the warrants he gets with such deals.........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 09-07-2011, 01:31 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,483
The only bank I would buy right now is JPM. Jamie Dimon is the perferred son of the Treasury, and that's not likely to change. Should another Beat Stearns opportunity arise, he is the first one they will approach........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 09-07-2011, 02:10 PM   #20
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 4,366
Here's some general data on PIGS debt in the U.S. and globally:

The Street Light: Betting On the PIGs

I remember seeing some bank-specific data somewhere, but can't locate it now. Anyway, this looks to me like it has serious falling-knife downside for now.
Animorph is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Internet Banks question Chuckanut FIRE and Money 17 01-17-2012 06:40 PM
Federal Agency Set to Sue Major Banks Today or Tuesday Retire Soon FIRE Related Public Policy 39 09-07-2011 09:24 AM
Low Interest Rates and Banks Investments chinaco FIRE and Money 4 07-16-2011 01:29 AM
Banks Abandon Reverse-Mortgage Business obgyn65 FIRE and Money 10 07-03-2011 03:58 AM

» Quick Links

 
All times are GMT -6. The time now is 05:36 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.