Reggie, you've influenced a lot of thinking. I've been spreading your research on GGP, it was so dead on. It's like reading the Supreme Court's decision on the D.C. gun ban case, only a fool or a liar could have voted against the majority, yet 4 did. Unbelievable.

In any event, I read your piece on WFC, and all of your comments and I've studied their Q in some detail. I see you put them fairly in the high teens. Name alone probably gets them to the $30s.

Aren't we missing out on one big thing though, WM and WB might be done, but the government just injected $300B of capital into our banks. Ain't that gonna do it man? Maybe it won't save the worst of the worst, but for most I think that it will. These fools forgot rule numero uno, make the proles slaves to their loans, and force them into their houses. With these f'ing option arms and everything else, it's like renting with a tax deduction for most. More pain to come, but I think we'll move through it, the housing bill is a bigger deal than most people realize, imho.

Why no more Seeking Alpha posts by the way?

That is absolutely ridiculous regarding Seeking Alpha, your type of analysis is the very reason I love reading some of their pieces. I feel one can always separate the wheat from the chaff but I love hearing from all sides just to get all perspectives. Harsh comments and spirited feelings is what makes this damn country great, I can't believe they'd be so thin-skinned especially given the quality and volume of your work.

Although I think you are too uber-bearish, at least you present it in an acceptable form with solid analysis, I especially enjoyed your piece on the anatomy of a sick bank.

My thought is this, there is no way that they (govt.) are going to let the massive failures happen, I just don't think so. If WFC's reporting teaches us anything, is that they are simply going to change the rules of the game and allow them to delay taking losses on their books so they can spread the pain out over time. Or, they'll change the damn accounting rules, etc., etc. At the end of the day, WFC is MAKING MONEY, and they have some of the real questionable crap going on, HELOCs, construction loans, commercial loans, etc.

So, I guess we can agree to disagree there, hell if everyone agreed with each other all the time what would we talk about. I agree a few big ones may be done, but consider how much BAC alone is going to get back to the balance sheet. I mean, cut 10% of the loan and, right there, you have the immediate infusion of capital because you can package the damn loan and sell it to FNM or FRE, since it's government guaranteed for the new par value, it's basically a risk free proposition. I think that's going to save a lot of institutions - $300B spread around. Thain said there wasn't a put-back option on the CDOs, but I don't think that guy has a clue about what he's saying.

By the way, I wish I was not such an idiot stubborn long on Etrade, I was telling all my friends to short GGP at $40 after reading your in-depth analysis on it. Already an awesome return, but unfortunately did not take advantage. I'll be holding that stupid Etrade stock for a year more looks like.

One question, I saw your post about England's issues and the inflation problem. I wonder what U.K. bank had already gotten its ass kicked by holding a lot of bad U.S. assets and is going to get by the inevitable second wave in England. Now that would be a good stock to short, don't you think. Like the ultimate double whammy.

Last thing I thought you would appreciate, WM is boasting its $17B in liquidity, where $10B of that is FHLB borrowing. Unbelievable, isn't that something they should be embarrased about, rather than boasting about it. Boat ride looked fun man. see ya.

GS makes money by trading their own book and considering Q3 has been very, very volatile, I would not be surprised to see GS book large profits from trading this quarter.

Talk about hiding, the Japanese refused to take their losses for years on end. So far we've written off about $500-600B in charges (they miss a lot of companies that have written off substantial figures in that $500B figure), and then we get $300B in cash back from the housing bill.

How much more pain is out there? That's the question. My biggest area of concern is WM and the option arms a la WB, etc., because those are probably as bad as the subprime, it is just taking longer to recognize it. WM had just about every piece of garbage loan you can find on the B/S, it's as if they were collecting them.

That's one of Bove's interesting comments though, aside from WM and several others, the Texas ratio of a lot of banks is actually not that bad, compared with the S&L crisis. I really can't speak for the IBs, as even they don't seem to know what's on their books, but it appears that the message is out -- they, as well as you, obviously recognize the counterparty risk that's the elephant in the room, it happened with BSC, but we saw what happened -- they were not allowed to fail.

I actually read somewhere that the GSEs will probably be allowed to suck up even more garbage as long as the borrowers are not delinquent now that they have the blank check from the Treasury. Is there more pain, of course. Am I advocating buying financial stocks, aside from Etrade, absolutely not. All I'm saying is that I do not believe there will be massive failures that will threaten the American financial system. The wheels are already moving to head that off, and even if they're lying, how many people does it take to believe the lie before it becomes the truth, especially in investing.

Talk about bad calls, Citi's recommendation to buy LEH at $40 after BSC is so obvious a reminder. LEH will not fail. However, it does not mean their stock is a good investment. I would be worried to hold common equity in any of these institutions. MER just screwed all their shareholders, but MER will survive, I am pretty confident in that statement. Are their earnings going to come back the way things were, absolutely not, but it does not mean they will be boarding up the doors either.

Do human beings ever learn from past mistakes, hell, why are we in this situation now? A dishwasher owning a $400k house, even though I was not paying attention to the financial markets several years ago, it was always a nagging question in my mind watching those "Flip this house" shows. Some fool in Cali would flip a house in a questionable neighborhood and some dude would end up buying it who worked changing oil or something. I have a great job and worry about paying the mortgage. I always asked myself, how can this fool make the payments? Obviously he couldn't.

I guess, wait to invest your money for those high yielding assets and good luck, you must be making out like a bandit now. I'm sure you'll get this opportunity in the next 15-20 years...

Humans always are doomed to repeat their mistakes, the frigging English voted Churchill out of office AFTER the Nazis, imagine that. If this is a baseball game, we're in the bottom of the sixth, in my opinion. Two more big shoes to drop probably, be it a big time failure/forced marriage of WM or WB - $122B in option arms, how are they going to deal with that?? Economy comes back in 2009 though and although we don't return to bubble levels obviously, housing and everything else comes back to sustainable levels IMO. As an aside, if I was to be executed I would pick a firing squad over anything else. Seems to me the most humane for the condemned and the executioner - five guys fire a weapon but four have blanks so you never know whether your shot killed the prisoner (at least in theory).

Prescient11,

The only way the housing market will return to normality in 2009 is if home prices settle at a new, permanently higher level for the foreseeable future. Even after the current decline the Case-Schiller index stands at around 170. It has stood at around 100ish for most of the last century. If house prices settle at current level it means future generations will be forced to pay a subtantally higher part of their income for shelter as older generations "hoard" the housing stock.

http://www.burbed.com/2008/05/04/case-schiller-graph-thanks-readers/

Many (most) real estate market are very far away from achieving anywhere near rental parity, aka it is much cheaper to rent than to own in many areas, even when taking tax deductions and "normal" price appreciation into account. From Roubini's site:

"By way of additional background, at the end of the housing bubble from 2000 to 2006, home prices had risen nationwide by 74% while median incomes across the nation had risen by only 15% during the same period. Rental income from the portion of the housing market that is not owner-occupied, grew only slightly more than the rate of inflation. The resulting divergence in ownership vs. occupancy costs of residential real estate created a situation in which, for the first time in modern American history, it became more expensive ? on an after-tax basis ? for someone to carry the costs of owning a home, as compared with the cost of renting one."

The "housing bubble" took many years to develop - it seems doubtful that it would resolve itself in just two years.

Banks are going nowhere soon. I don't think banks need to go bust for their stock prices to actually get more depressed; the simple realization that their income will actually be piss-poor for the foreseeable future could be enough to let them slide away.

I agree, the housing market will neither resolve itself, nor rebound in 2009. However, I sincerely believe it will bottom in 2009-2010, and that's what's needed. It was created in 4-6 years, by then the bubble essentially will have burst or deflating for at least 4 years by then.

The housing bust is far from over, but some locations are at or near bottom while others are still many years away.

The financial engineers who created the mortgage backed securities, thought that by mixing mortgages from all areas of the U.S., they had contained risk as ?housing does not decline everywhere at the same time?.

They were proven wrong, but as some locations do hit bottom while others continue to decline, some of these securities should start to look better. However they will also contain loans against real estate in areas that continue to decline.

While in 2009 or 2010, we may get a turn-around in certain locations, we must remember that we will still be working through the process for years to come.

This may look more like the "end of the begining" rather than the "begining of the end".

Reggie,

some rather off topic issue: I am trying to read 13F SEC Filings. Unfortunately I see only long positions. Either Stock, Calls or Puts but the report does not say if long or short? Thanks

Peter