Bank Stocks

have to give it a few more days to be sure, but Citi, Goldman Sachs and Lehman are now below their previous lowest closing price. few other big financial names like Chase are very close
 
S&P down graded WAMU's credit rating today. If one includes after-hours trading it looks like it fell at least 8.2% today.

My gut says that they won't be able to dig themselves out of the hole they've dug and are holding off short sale approvals and foreclosure write downs.

Maybe because I live in a part of the country that hasn't been really slamed by foreclosres, I haven't seen many properties that were formerly owned by their mortgage clients offered for sale.
 
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Brat said:
My gut says that they won't be able to dig themselves out of the hole they've dug....
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The market obviously agrees with you.

Bloomberg.com: Worldwide


Contracts on Seattle-based Washington Mutual increased 158 basis points to a record 700 basis points, according to CMA Datavision.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

The article also gives the CDS rates on C (207), BAC and JPM (135), WB (305), and BSC (405).

I loved this quote:

``I've been in this market for 30 years, I'm one of the senior citizens of the bond market, and I have never, ever seen such a confluence of negative events,'' said Marilyn Cohen, who manages $215 million in fixed income investments as president of Envision Capital Management in Los Angeles. ``Clearly the Fed has been rendered impotent on doing anything to end this credit crisis.''

Hang onto your hats.
 
Having worked for 35 years in banking and the majority of it was in small banks, I do not invest in small banks. The term too big to fail is very true. The Feds could care less about a small two billion dollar community bank failing. They could never let B/A or Citi bank fail. Such a failure would drain the FDIC fund and case major financial problems.

I worked mostly in middle management and had dealings with board members. Most small bank board members have no idea what they are doing. When I left the last bank I worked at (I am FI now) two board members took me out to lunch and I told them the same thing - I do not invest in small banks and gave them my reasons. At the time I left the bank stock was selling for $35 dollars a share I exercised and sold my options the day I left. Today three years later the stock is under $12 a share and the bank is facing major problems. You can not tell what condition a bank is in by reading it's financial statement or listening to conference calls. Banks as stated before do not want to recognize problem loans. Small banks got into the housing boom not by financing home mortgages but by financing the builders. It is those construction loans that Fed is now forcing banks to write down. A small bank can not go to the Arabs for a bailout.

Bernanke said so the other day he said there will be more small bank failures this year. He is the head of the Federal Reserve Bank that regulates a lot of banks and he knows what his examiners are reporting back to the FED on the problems small banks are having.
 
Citibank may be too big to "fail", but that doesn't mean investors are going to come out well. They made massive numbers of bad loans. Those bailouts are massively diluting the existing shareholders.

Frankly, I'm more interested in a bank's lending standards over the last few years than a particular size.

Why buy Citibank over JP Morgan?

I would rather own US Bank or Wells Fargo than Citibank as well.

Citibank stepped with both feet into the foolish lending practices of the past few years. Why would I want to invest in a bank that shows such horrible judgement?


Freein05 said:
Having worked for 35 years in banking and the majority of it was in small banks, I do not invest in small banks. The term too big to fail is very true. The Feds could care less about a small two billion dollar community bank failing. They could never let B/A or Citi bank fail. Such a failure would drain the FDIC fund and case major financial problems.

I worked mostly in middle management and had dealings with board members. Most small bank board members have no idea what they are doing. When I left the last bank I worked at (I am FI now) two board members took me out to lunch and I told them the same thing - I do not invest in small banks and gave them my reasons. At the time I left the bank stock was selling for $35 dollars a share I exercised and sold my options the day I left. Today three years later the stock is under $12 a share and the bank is facing major problems. You can not tell what condition a bank is in by reading it's financial statement or listening to conference calls. Banks as stated before do not want to recognize problem loans. Small banks got into the housing boom not by financing home mortgages but by financing the builders. It is those construction loans that Fed is now forcing banks to write down. A small bank can not go to the Arabs for a bailout.

Bernanke said so the other day he said there will be more small bank failures this year. He is the head of the Federal Reserve Bank that regulates a lot of banks and he knows what his examiners are reporting back to the FED on the problems small banks are having.
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Hamlet I don't disagree with what you say I was just pointing out if you don't want to lose your money stick with the big banks. Also those chasing high dividend yields better be careful because they can be cut in a second. You may be wrong about Wells Fargo they are one of the largest real estate lenders in the country. They are also a large servicer.
 
I'm saying that some of the smaller banks had tight enough lending practices to avoid most of the trouble the larger banks are having. I've invested heavily in TCF (ticker TCB). They didn't make many foolish loans. I think that they will avoid having a lot of defaults. The fact that they aren't huge is beside the point.

Wells Fargo has a balance sheet built like a fortress. They will have write-downs, but if they have problems that threaten their solvency, we're all going to be buying guns and canned goods anyway. Citibank would fail long before Wells.

Freein05 said:
Hamlet I don't disagree with what you say I was just pointing out if you don't want to lose your money stick with the big banks. Also those chasing high dividend yields better be careful because they can be cut in a second. You may be wrong about Wells Fargo they are one of the largest real estate lenders in the country. They are also a large servicer.
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a lot of bank stocks are up today, worthy of some looking into

could have been a bottom
 
How many bottoms does that make so far? And how many more to go? :)

My prediction: the banks will get a bounce when the fed cuts. And then we'll see another wave of selling when cracks start forming in commercial real estate and LBO debt.
 
BAC and some others are showing strength, but C is down to it's 1998 Long Term Capital Management crisis days. next stop is the asian financial crisis and after that it's the mexican and the latin american crises.

if it doesn't go up from these levels, i think it will be the biggest fall in it's history from an all time high price
 
still watching it, but looks like for Citi next stop is Clinton vs Dole
 
whereas I'd be unlikely to buy C today.. I have a bunch from when they bought other bank stock that I have had since the '80s.. basis about $3k.. it's now $20k (well, as of last week) off from a high of $40k but according to Quicken along w/dividends that's still 15+% annualized. Should I pay CG on $17k and bail? Seems late in the game but I guess you never know when "too late" is.. I am such a buy and hold person and so lazy, too, that I dread thinking about things like this.
 
i don't what is going to happen next year or 10 years from now, but Citi did drop by something like 60% from 1987 to 1992 until Prince Bandar came to the rescue

The Fed is going to try to prevent a BK, but does anyone know how much they are exposed to with all the off-balance sheet junk they have?
 
Actually, banks cannot be debtors in bankruptcy (11 USC Sec. 109(b)(2) for those who want to see for themselves). I believe that it would be a receivership proceeding under the auspices of the Office of the Comptroller of Currency. I don't know the rules for that, but I assume depositors have the highest priority.
 
Gumby said:
Actually, banks cannot be debtors in bankruptcy (11 USC Sec. 109(b)(2) for those who want to see for themselves). I believe that it would be a receivership proceeding under the auspices of the Office of the Comptroller of Currency. I don't know the rules for that, but I assume depositors have the highest priority.
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Actually, you have it partially correct. Bank receivership proceedings are conducted under the auspices of the FDIC for any federally insured bank or thrift institution (e.g, savings and loans associations, mutual savings banks, etc). The OCC regulates national banks, like Citibank, N.A., and by statute, must appoint the FDIC as receiver, whenever the OCC decides to "close" a national bank for liquidity/insolvency or safety and soundness reasons.

Insured depositors, of course, get taken out by FDIC insurance. But any uninsured depositor (the amount in excess of your insured coverage) has the highest priority in the claims process, after payment of the FDIC's administrative expenses as receiver.

"Too big too fail" policy has been around since the Continental Bank failure in 1984; by "fail," I think people mean that the bank is placed in liquidation mode, where the assets and liabilities of the bank would be handled under the orderly liquidation/receivership process. The last bank that was too big too fail was Bank of New England in 1991, which drew comparisons, with the failure of Freedom National Bank, a small bank founded by Jackie Robinson, among others, in which the uninsured depositors, including several charitable orgainzations took a hit. Congress mandated that the regulators use the "too big too fail" policy under very limited circumstances, but mega-banks would probably qualify.
 
bsc has 115 some odd shares outstanding and 78 million traded so far

i bet by the end of the day it will be around 115 million and average volume is like 10 million. it's like every shareholder decided to sell the stock today.

for days like this,who needs coffee?
 
I eagerly await investor votes on Bernake next week

A very interesting week will be on tap for the bank stocks next week. Never in decades has their been a time where the entire world will be wondering about investor reaction to the Federal Reserve's move as they will be in the coming week.
  • If the Fed reduces rates by 1 percent down to 2 percent will a massive rally follow?
  • I would never have believed the Fed would totally abandon the US dollar what effect will that rate cut have on foreign investor confidence in the US?
  • What is the impact of the Bear Stearns buyout by the Fed?
  • The entire spectrum of bank stocks is hovering around their 52 week lows. Will these prices hold and catapult the stocks up indicating a bottom is at hand?
Until evidence conclusively proves my original thesis from one year ago incorrect I am staying with my initial conclustion there is no reason to move into these stocks. The level of unwanted financial assets is just too high and Bernake is showing absolute panic in his actions in the financial markets, if they break decisively through to new 52 week lows the market will follow with an even bigger break down than has been seen in many many years.


But if Bernake has played all the right notes and a big rate cut soothes all the fears the market should really rally and be strong from here led by the banking stocks and surpass the high of last Wednesday. I am positioned for and fear the market break scenario, primarily but I do remain alert that Bernake may possibly sneak calm into the market and allay all fears. In any case I think next week will provide a difinitive answer and not be a week of meandering around the recent mean.

The suspense is terrible, I hope it will last.
 
the final number was around 186 million shares trading, this is beyond belief. reminds me of the part in Cramer's book where he asks the CEO of Cendant how things are going and he is told they couldn't be better. Two days later they announce accounting problems and Cramer's $17 million stake in the company vanishes in an instant. he said his fund spent the day day trading it to minimize their losses


The Fed said the new lending facility is $200 billion. bear stearns isn't borrowing $200 billion. who else is in trouble?

and in the blogs i read they said what did bear in was Alt-A and not subprime. supposedly the Alt-A market crashed this past week because a lot of supposedly AAA rated mortgage bonds are having default rates in the 20% range. but SP said things are going to get better soon
 
AltaRed said:
So much for Bears Stearns. JPMorgan to Buy Bear for $2 a Share: Financial News - Yahoo! Finance It is likely only the first of a few more that are going to fail. Monday may be another brutal day for financial stocks.
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Actually the SP Futures fell and then jumped on the news. You can never tel what the market will do, Bear is belly up, I lost 98% on the stock, but since they will not have to dump their paper on the market it's now a good thing. Go figure.
 
I don't buy individual stocks. I don't trust my educational level in regards to stock picking. If you asked me Friday. I would have said Bear was a steal at 30. :2funny:
 
RockOn said:
Actually the SP Futures fell and then jumped on the news. You can never tel what the market will do, Bear is belly up, I lost 98% on the stock, but since they will not have to dump their paper on the market it's now a good thing. Go figure.
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bloomberg.com has futures way way down

the whole deal puts a damper on ibank valuations
 
it will take a few days for the details to come out, but i wonder if they really bought bsc or just some assets they wanted. one of the blogs i read said bsc had a derivatives book who's value was in the trillions of $$$. that's a lot of risk to take on.
 
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