Thursday, 10 September 2009 01:00

As the markets climb on top of one big, incestuous pool of concentrated risk...

First of all, I would like to call attention to a well written article by J.S. Kim, The Coming Consequences of Banking Fraud. It just so happens to mirror my thoughts, exactly. Those who have been following my subscription services for a while, or even have just started, should realize that I have been quite accurate in my fundamental analysis. Although I am not always 100% on the money with everything, I am within the ballpark 80% to 90% of the time, give or take - which is quite a strong track record. The problem has been over the last quarter or two, that accuracy with the fundamentals has meant relatively little in terms of actual share prices. This means (it always has and always will) that we are in a severe speculative bubble (or conversely a fear driven post crash lull). I think we all know which one it is. It has even gotten to the point where some commenters on the blog claim "fundamentals no longer matter". The last time I heard that preached consistently was right before the dot.com crash, which was notoriously hard to time, but was clear as day in the ability to be seen coming by those who still counted profits and losses.

My research tells me that a large bubble has been blown again, even as the most recent one was still in the process of popping. Like Mr. Kim in the article above, I have found it quite difficult to time the coming if the anticipated bubble pop this 2nd time around (I did successfully and accurately anticipate the bubble being reblown, but severely underestimated the extent, breadth and depth), thus have resorted to market neutral strategies to prevent loss of capital/profits while still keeping my finger on the bearish trigger (see In this difficult to trade market, you have to be more than just right... ). Don't get me wrong. I am not a doom and gloomer, or a permabear. I am a realist. I have absolutely no problem going net long (not market neutral) when I feel the time calls for it. The problem is that the issues that caused last year's market crash (which I pronounced loudly in 2007) have not even come close to being rectified, and as a matter of fact, are in many ways actually worse. In addition, the share prices of many of the companies that are laden with these issues have increased several hundred percent, with many currently hovering at pre-bubble burst prices. This is not the market for a fundamentals guy to go long in. Momentum investors and those who seek fads are currently having their time in the sun, but those who astutely followed the fundamentals are still significantly ahead of the game, by far. It is my belief that if a crash does come, and investors are significantly positioned, those windfall profits will return again, and be predictably manageable because fundamentals will come into play, and not the need to follow stories about high frequency trading, or to catch up with the rest of the market because you were on the sidelines while prices shot up.

Look at this chart of American Express.

axpchart.gif

It is trading right about pre-Lehman implosion levels, despite the fact that we have 10% unemployment and rising, with no sign of near term reprieve. Credit card default and charge off rates are near or at historical highs!!! Was Amex really trading that inexpensively during the most recent credit and stock bubble that it should return to those prices now? I won't even bother to comment on the massively insolvent, $183 billion bailout king known as AIG (Worthless companies now rallying several hundred percent in price - What a market for stock pickers) where even the government doubts it will get its money back!

This brings me to the continuation of the study of JP Morgan, and more importantly, not how much it is worth, nor whether it is solvent or insolvent nor too big to fail - but whether it and its brethren are actually too big to let survive - at least in their current form! Before we go on, please see "Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?" to catch up on my findings thus far regarding JP Morgan.

In attempting to fine tune the assumptions of the derivatives portion of the JP Morgan forensic model, my analysts explained to me that they were having problems complying with my request that they quantify the losses/gains of JPM through its counterparty transactions due primarily to a lack of reporting clarity and differences across industry lines. I suggested the following...

Since the discretion allowed by management is so wide and malleable, a better tract would be to attempt to ascertain the practical likelihood of JPM actually being able to offset $1.78 trillion of risk and exposure through counterparties who are both credit worthy and not already significantly concentrated in said risk buckets, in addition to those counterparties not offsetting said risk to another counterparty who would be pretty much in the same position. My hunch is that the chance of doing such is highly unlikely. There is just not enough credit worthy capital in the market place that is not already concentrated to offset nearly $2 trillion of risk (and this is just for one company, not the entire market), thus creating an adverse selection scenario. For instance, as the risk started to unwind from the monolines, where did it go? Was it simply left unhedged or was it dumped on other banks or insurers or hedge funds? This is a fundamental question since nearly all participants were deleveraging during this time when the monolines were trying to expel risk and the banks were looking for more counterparties.

Do the banks, who are all deleveraging, actually accept other banks risk? Where is JPM putting $1.8 trillion of hedges? How about the next ten banks in the list of large exposures? Where are they hedging? The only practical answer is that they are hedging with each other, for the same, concentrated risks - which means that those risks are not truly transferred, they are simply share in one big incestuous pool.

Remember, the monolines and insurers were some of the biggest derivative hedge for the banks before they started collapsing.

As a result, we have looked into derivative exposure of top commercial banks to determine if they are hedging with each other to an extent that engenders systemic risk. We have sourced the data from OCC report (attached for your reference, see pdf occ_q1_2009_derivatives 10/09/2009,01:37 190.49 Kb). Overall derivative products in U.S have grown at a staggering pace rising from $41 trillion by 2000 year end to $202 trillion, or nearly 14.0x of U.S GDP as of March 31, 2009. Of the $202.0 trillion notional value of derivatives in United States, top 5 banks alone account for 96% of the total industry notional amount The high concentration of derivatives among the top five players strongly suggest (this actually being politically correct, realistically it practically assures us) that they may be subject to extreme levels of counterparty risk towards each other. JPM is the largest player in derivative markets accounting for approximately 40% of total notional value of derivatives in U.S. JPM's notional value of derivatives as of March 31, 2009 stood at 39.0 times its total assets and 959 times its tangible equity.

Company

Notional Value of derivatives

% of Total Notional Value

Implied market value using JPM's actual as template

Implied hedged amount using JPM's actual as template

Total Assets

Notional Value of derivatives / Total Assets

Tangible Equity

Notional Value of derivatives / Tangible Equity

Implied Counterparty Exposure of Derivatives as Multiple of Tangible Equity

JPMORGAN CHASE & CO.

81,161

40.2%

1,798

1,700.05

2,079

39.0x

84.65

958.8x

20.1x

BANK OF AMERICA CORPORATION

38,864

19.2%

861

814.06

2,323

16.7x

65.66

591.9x

12.4x

GOLDMAN SACHS GROUP, INC., THE

39,928

19.8%

884

836.34

926

43.1x

41.91

952.7x

20.0x

CITIGROUP INC.

29,619

14.7%

656

620.41

1,823

16.3x

29.67

998.4x

20.9x

WELLS FARGO & COMPANY

1,870

0.9%

41

39.17

1,286

1.5x

30.33

61.6x

1.3x

HSBC NORTH AMERICA HOLDINGS INC.

3,454

1.7%

76

72.35

402

8.6x

66.23

52.1x

1.1x

Total

201,964

100.0%

4,316.48

4,082.37

*all data as of 1Q09.

** JPM had additional collateral at the initiation of transactions of

18,500

Notice how all of the banks on this list probably have at least 100% of their tangible equity exposed through counterparty exposure to, at the most, 5 other highly concentrated, highly correlated and highly incestuous counterparties. Most of the banks have between 12 and 20 times their tangible equity concentrated into this close knit pool. That, my friends, is excessive risk waiting to implode. I am sure there are some of you saying "Well, you don't know that they are actually using each other as counterparties". Yeah, right! Who the hell else would they be using? Tell me what group of companies will be able to absorb $4.1 trillion dollars (That's TRILLION with a "T" of MARKET VALUE carried on the balance sheet, NOT notional value) of counterparty risk??? These are the top derivative holding banks here in this list. The weekend Lehman Brothers was failing, who was called in to try and sort out the problem? The top Lehman counterparties. What were their names? Before we go there, note that Bear Stearns, Lehman Brothers and Merrill would be in this list, but they are no longer separate or ongoing concerns as they were before this malaise. As per Bloomberg:

The warning was ominous: "Massive global wealth destruction."

That's what Lehman Brothers Holdings Inc. executives predicted before they filed the biggest bankruptcy in U.S. history. "Impacts all financial institutions," read one bullet point in a confidential memo prepared for government officials obtained by Bloomberg News. "Retail investors/retirees assets are devastated."

The message didn't get through. Two dozen of the world's most powerful bankers, brought together by Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Bank of New York President Timothy F. Geithner the weekend of Sept. 13, 2008, to devise a rescue plan for Lehman, were too busy saving themselves to see the larger threat.

"The discussion among the CEOs was ‘How do we prevent the next firm from going under?'" former Merrill Lynch & Co. Chief Executive Officer John A. Thain, who cut a deal to sell his company that weekend, said in an interview. "There should have been much more discussion about the impact directly on the markets if Lehman went bankrupt."

...

For Goldman Sachs Group Inc. CEO Lloyd C. Blankfein, JPMorgan Chase & Co.'s Jamie Dimon and the rest of the financial chieftains who spent a weekend trying to unwind derivatives trades and keep bank-to-bank loans flowing, ignoring the commercial-paper market, the lifeblood of the economy, proved a catastrophic oversight. Within a week, the U.S. stepped in to halt withdrawals from money market funds, leading to a $1.6 trillion industry backstop, part of $13.2 trillion it has committed to beating back the worst financial crisis since the Great Depression.

...

Inviting ‘Catastrophe'

One year later, policymakers haven't learned the lesson of the bankruptcy, said Richard Bernstein, CEO of Richard Bernstein Capital Management LLC in New York and former chief investment strategist for Merrill Lynch.

Rather than break up institutions such as Bank of America Corp. and Citigroup Inc., or limit their expansion, the U.S. has given them billions of dollars in tax incentives and loan guarantees that enabled them to grow even bigger. To protect against a bank collapse touching off another freefall, President Barack Obama has proposed regulatory changes that rely on the wisdom of bankers and government overseers -- the same people who created the conditions that led to Lehman's bankruptcy and were unable to foresee its consequences.

"Designating certain institutions as too big to fail, and not having a thorough regulatory process to match, practically invites another catastrophe," Bernstein said.

...

1 Million Bets

On Sunday morning, shortly before noon, Paulson announced that Barclays wouldn't be buying Lehman on any terms, participants said. By then, the bankers had turned their attention to their own survival. Cohn of Goldman Sachs said he led the charge to make sure the banks didn't lose money on derivatives trades either with Lehman or on Lehman.

Derivatives are contracts whose value is derived from stocks, bonds, loans, currencies, commodities or linked to specific events such as changes in interest rates. Lehman had made about 1 million such bets in the over-the-counter market, according to a person with access to that information.

The unregulated $592 trillion market for over-the-counter derivatives, 41 times the size of the U.S. economy, contributed more than half of some banks' trading revenue and had never been tested by the bankruptcy of a major Wall Street firm.

Unwinding Trades

The Fed had already begun trying to untangle Lehman's credit-default swaps on Saturday morning, calling in a group of experts in derivatives operations from Wall Street firms and asset-management companies. They were given one hour to show up at the New York Fed.

Swaps are a way for investors to gamble on whether companies will continue making debt payments or for lenders to buy insurance against borrowers who stop paying. If the company defaults, one side in the bet pays the buyer face value of the debt in exchange for the underlying securities or the cash equivalent.

In order to unwind the trades, the team would need to do so-called portfolio compression, reducing the number of outstanding swaps by eliminating duplication and combining similar bets made by the same counterparties. The process involves sending the trades to an outside vendor, running them through a software program, reviewing the results and deciding which ones to settle.

It couldn't be done, at least not before trading began in Asia on Monday morning, the person said.

Repo Market

On Sunday, the banks called in their own traders to see if they could minimize any losses from dealings with Lehman. That also proved impossible. One snag was that some corporations involved in the trades couldn't get their representatives to the New York Fed in time, said one participant. Another was that many of the banks couldn't determine what bets they'd made on or with Lehman.

A last-ditch attempt on Sunday to try to resolve some outstanding derivatives contracts between Lehman and the other banks at the Fed had little success, according to two people who were in the room. One reason: The banks were only interested in resolving the contracts in which Lehman owed them money and not those where the banks owed Lehman money, said one of the people at the meeting.

The bankers acknowledged that one of their favorite avenues for borrowing would be disrupted by Lehman's collapse. Making sure the market wouldn't freeze for short-term loans called bank repurchase agreements, or repos, was where the participants had their biggest success -- and their bitterest disagreements.

‘Default Scenario'

In a repo arrangement, a lender sends cash to a borrower in return for collateral, often Treasury bills or notes, which the borrower agrees to repurchase as soon as the next day for the face value of the securities plus interest. When lenders perceived that Lehman might not pay repo loans or be able to post adequate collateral, they required more and higher quality assets from the firm.

The presentation prepared by Lehman employees, titled "Default Scenario: Liquidation Framework," predicted, among other things, that a bankruptcy would trigger a freeze in the broader repo market.

"Repos default," they wrote. "Financial institutions liquidate Lehman repo collateral. Repo defaults trigger default of a significant amount of holding company debt and cause the liquidation of hundreds of billions of dollars of securities."

Repo collateral caused what might have been the tensest moment of the weekend, according to two participants.

Rule 23(a)

While poring over Lehman's mortgage portfolio on Saturday, former Goldman Sachs partner Peter S. Kraus, a Merrill Lynch vice president and now CEO of New York-based AllianceBernstein Holding LP, accused JPMorgan's Dimon of being too aggressive in demanding more collateral and margin from other banks to cover declining values, according to two people who were there.

JPMorgan, as a so-called clearing bank, holds collateral for other banks in what are known as tri-party repo transactions. When the value of the collateral declines, JPMorgan can require a borrower bank to post more or higher quality assets so the lending bank is protected.

Dimon didn't respond to Kraus, the participants said, and the confrontation died down. Both declined to comment.

The Fed was sufficiently anxious about a standstill in repo funding that on Sunday, Sept. 14, it temporarily modified Rule 23(a) of the Federal Reserve Act to allow banks to use customer deposits to fund securities they couldn't finance in the repo market. That change, scheduled to expire in January, has since been extended through Oct. 30.

Loyal readers, the risk of total systemic collapse has not been removed. I know the stock market is going up, and I have been forced to by my SPX calls and sit in cash not to get beat in the head, but that does not mean that I, nor you, should ignore the reality of this situation. Things are not as they should be. I should be releasing a forensic analysis of JP Morgan sometime next week.

An overview of JP Morgan's Derivative Exposure

(All figures in $ millions)

2Q-09

Notional amount of derivative contracts ($ mn)

Total interest rate contracts

64,604,000

Total Credit derivatives

6,813,483

Total foreign exchange contracts

6,977,000

Total equity contracts

1,392,000

Total commodity contracts

672,000

Total derivative notional amounts ($mn)

80,458,483

Gross derivative receivables

Gross value of derivative receivables not designed as hedges

1,787,991

Gross value of derivative receivables designed as hedges

9,546

Total Gross fair value of derivative receivables

1,797,537

Fin 39 netting - offsetting receivables/payables

(1,628,843)

Fin 39 netting - cash collateral received/paid

(71,203)

Carrying value on Balance Sheet

97,491

Less: Securities collateral received/paid

(13,796)

Derivative , net of collateral

83,695

Derivative receivables

Level 1

2,998

Level 2

1,736,643

Level 3

57,896

FIN 39 netting

(1,700,046)

Total Derivative receivables

97,491

Less: Securities collateral received/paid

(13,796)

Derivative , net of collateral

83,695

AAA

16,227

A

5,712

BBB

4,240

BB

6,715

CCC

1,063

Interest rate

33,956

AAA

12,144

A

4,275

BBB

3,173

BB

5,026

CCC

795

Credit derivatives

25,413

AAA

9,008

A

3,171

BBB

2,354

BB

3,728

CCC

590

Foreign exchange

18,851

AAA

3,104

A

1,093

BBB

811

BB

1,285

CCC

203

Equity

6,496

AAA

6,105

A

2,149

BBB

1,595

BB

2,526

CCC

400

Commodity

12,775

Total Derivative receivables

97,491

Less: Securities collateral received/paid

(13,796)

Derivative , net of collateral

83,695

Additional collateral at the initiation of transactions

(18,500)

Derivatives, net of collateral and additional collateral

65,195

% of derivatives transactions subject to collateral agreements

89.0%

impact of a single-notch ratings downgrade

1,200

impact of a six-notch ratings downgrade

4,000

Breakup of Derivative , net of collateral

Derivative receivables

AAA

46,589

A

16,399

BBB

12,174

BB

19,279

CCC

3,051

Total

97,491

Derivative receivables

AAA

47.8%

A

16.8%

BBB

12.5%

BB

19.8%

CCC

3.1%

Total

100.0%

Derivatives gains (losses) in income statement

AAA

A

BBB

BB

CCC

Interest rate

(3,451)

AAA

A

BBB

BB

CCC

Credit

820

AAA

A

BBB

BB

CCC

Foreign exchange

2,348

AAA

A

BBB

BB

CCC

Equity

(62)

AAA

A

BBB

BB

CCC

Commodity

361

Total Derivatives gains (losses) in income statement

16

Derivatives gains (losses) in comprehensive income

AAA

A

BBB

BB

CCC

Interest rate

(317)

AAA

A

BBB

BB

CCC

Credit

0

AAA

A

BBB

BB

CCC

Foreign exchange

27

AAA

A

BBB

BB

CCC

Equity

0

AAA

A

BBB

BB

CCC

Commodity

0

Total Derivatives gains (losses) in comprehensive income

(290)

Gains (loss) as % of avg derivative receivables

AAA

A

BBB

BB

CCC

Interest rate

-8.6%

AAA

A

BBB

BB

CCC

Credit

2.7%

AAA

A

BBB

BB

CCC

Foreign exchange

13.7%

AAA

A

BBB

BB

CCC

Equity

-0.4%

AAA

A

BBB

BB

CCC

Commodity

3.0%

Total Derivatives gains (losses) in income statement

0.0%

Gains (loss) as % of avg derivative receivables

AAA

A

BBB

BB

CCC

Interest rate

-0.8%

AAA

A

BBB

BB

CCC

Credit

0.0%

AAA

A

BBB

BB

CCC

Foreign exchange

0.2%

AAA

A

BBB

BB

CCC

Equity

0.0%

AAA

A

BBB

BB

CCC

Commodity

0.0%

Total Derivatives gains (losses) in comprehensive income

-0.3%

% change in gross value of derivative receivables not designed as hedges

-27.7%

% change in gross value of derivative receivables designed as hedges

-4.4%

% change in gross value of derivative receivables

-27.6%

Derivative receivables (change excl writedowns, purchase)

-25.7%

Derivative receivables (change incl writedowns)

-25.7%

Derivative payables

Gross value of derivative receivables not designed as hedges

1,747,610

Gross value of derivative receivables not designed as hedges

1,694

Gross derivative fair value

1,749,304

Fin 39 netting - offsetting receivables/payables

(1,628,843)

Fin 39 netting - cash collateral received/paid

(53,264)

Carrying value on Balance Sheet

67,197

Less: Securities collateral received/paid

(8,744)

Derivative , net of collateral

58,453

Interest rate

13,583

Credit derivatives

11,861

Foreign exchange

19,237

Equity

12,871

Commodity

9,645

Total Derivative Payables

67,197

Less: Securities collateral received/paid

(8,744)

Derivative , net of collateral

58,453

Debt and equity instruments

56,021

Derivative payables

67,197

Total trading liabilities

123,218

Income Statement

Total Fair value hedges

(1,448)

Total Cash flow hedges

55

Total Net investment hedges

(21)

Total Risk management activities

(4,624)

Total Trading activities

6,054

Total Derivatives gains (losses) in income statement

16

Derivatives gains (losses) in comprehensive income

Total Fair value hedges

0

Total Cash flow hedges

(82)

Total Net investment hedges

(208)

Total Risk management activities

0

Total Trading activities

0

Total Derivatives gains (losses) in comprehensive income

(290)

Collateral posted

67,700

Received collateral

23,500

Delivered collateral

5,700

Last modified on Thursday, 10 September 2009 01:00

7 comments

  • Comment Link NDbadger Sunday, 13 September 2009 20:22 posted by NDbadger

    Is the market really going up, or is the dollar just going down? It's all relative. As long as the Fed continues to print gobs of money, the market will continue to climb. In the meanwhile, the dollar continues to weaken.

    Report
  • Comment Link EdC Friday, 11 September 2009 10:31 posted by EdC

    Great analysis as always. One thing you may not know about is that with the banks controlling the loan process from beginning to end, they can twist things anyway they want. The HVCC allows the banks to own the appraisal managment companies. The appraisal management companies are greed drive and hire only the least experienced appraisers as their bottom line is money. Quality of valuations is absolutely of no concern for them and their bet is that it doesn't matter if a monkey appraises the property, with credit scores of 800 who's going to default. It's another "sure thing" bet. The appraisers valuing homes today are the bottom of the barrel and those willing to work for the low price fixed fees set by the banks (which equate to fast food server wages). This countries market values are being measured and set by inept novices - nice ehhh? Corners are being cut in every way imaginable so that working for the banks set fees can be profitable to some degree. It's that way due to the banks carrying no liability for the loans they write - a carryover from the boom and bust that should have been addressed but somehow keeps getting overlooked. If they have no skin in the game, why should they care. We're screwed until they have to accept liability for the loans they write. Then quality and accuracy will matter and sanity will return to the lending market. We're talking hundreds of billions of new bets.

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  • Comment Link gjk313 Friday, 11 September 2009 09:48 posted by gjk313

    Anyone noticed GS lately? 177?!

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  • Comment Link Mark Hankins Friday, 11 September 2009 09:00 posted by Mark Hankins

    Insider selling way, way up ... deteriorating fundamentals said fueling the selling binge:
    http://money.cnn.com/2009/09/10/news/economy/insider.sales/index.htm?postversion=2009091107

    Report
  • Comment Link Reggie Middleton Friday, 11 September 2009 02:49 posted by Reggie Middleton

    Thanks for the positive words above. The jump on the bandwagon technique (works well if you jump on in front of the bandwagon. The problem is that unless you are a quick trader, there's a strong chance you'll fall off of the back of the bandwagon and get trampled by the horses of the guy following;D;D;D;D

    If I would have thought this would have been a full blown bubble in lieu of an aggressive bear market rally (like the one's we've had over the last two years), then I would have jumped on board as well, alas it was hard to see one coming of this length.

    You see the problem is that when no one (with common sense, that is) can justify why stock prices are going up this far for this long in the face of this much uncertainty, there is a strong chance that they shouldn't be going up. That is dangerous, and that is not investing.

    Just today we have news that:
    -foreclosures are ramping up higher than ever, just short of the highest month on record with the pipeline packed higher than any other month on record,

    -Moody's (the newly informed Mooody's that now attempts to report the truth) has reiterated their negative call on the banks,

    -Geithner admits their will unprecedented volatlity in weaker than expected recovery,

    -The FDIC extends bank assistance (does this tell you that it is needed?) while at the same time government officials say they are weaning banks off of government assisted financing,

    -unemployment at 10% and still rising,

    -and global regulation of banks is now becoming a much tighter reality (although the banking lobby in the US seems to still have much too much power in loosening things past the point of prudence, again!).

    Despite all of this, banks stocks rally again - and this is with all of this risk outlined above still in the system and the pipeline of foreclosures and distressed properties/mortgages increasing as I type this.

    Take notice that the market is rising allegedly due to green shoots in the economy. It was not the economy that crashed the market in the first place, it was the junk in the credit system and the rapidly depreciating levered assets, both of which are still in the system, and both or which are still rapidly multiplying in quantity. Thus, although the economy may be improving (and it is debatable as to whether that improvement itself is sustainable or just a transient effect of massive global stimulus), the root causes of the economies collapse and the market crash are not only still extant, but are more even more "extant" then before.

    That is the major caveat of the admin's current plan of action, they have remedied the symptom's but the patience illness has actually worsened. Think about your having the flu, then overdosing on a bottle of Vicks. Your headache, fever, runny nose and cough have subsided so you go out in the cold of Chicago's February weather to hang out just to find that your Flu didn't only not subside, but you have made things much worse by not tending to the virus in the first place but just addressing the symptoms of the virus.

    The banks ae better capitalized, but their problem assets have also now become more of a problem as well, and the banks have been capitalized on top of a market with bogus valuations built upon government sanctioned deceit in regards to financial reporting and asset values.

    Timing with a position in this crap shoot of a market is notoriously difficult, but it does serve one to know what is going on. Personally, I think the US markets are being ruined more by the removal of the ability to rely on fundamentals more than it is helped by the cheerleading wealth creation effect of rocketing equity prices. What goes up in an unexplainable fashion will most likely come down with quite the predictable explanation.

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  • Comment Link skibummer Friday, 11 September 2009 02:21 posted by skibummer

    Reggie, first of all, your fundamental analysis of the banks rocks!

    2nd, US of A is at the very onset of Socialization. By allowing JPM, BOA, CITI and WFC, etc. grown into "too big" status, the Admin made them part of the government -- think those State-Owned banks in China -- and, will any Admin allow its own government department fail?! No!!! Thus, trading these bank stocks [b]directly[/b] based on their fundamental is hardly a winning strategy.

    If I heard a bubble is being blown, my first reaction would be to jump onto the wagon, because that's the best chance to make quick money. However, reading your blog reminds me that it's only a bubble -- any sign of busting, take the money and run. 8)

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  • Comment Link jpmeia Thursday, 10 September 2009 12:41 posted by jpmeia

    Reggie, thanks for a most excellent blog and fundamental info. All this will be very useful, probably not in the timeframe we would like. It's just a tough and (in the short-medium term) unfamiliar game when the referee has decided that certain players will be winners or losers, even if the ref has to take from you to support the chosen.

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