Comments for 0 at http://boombustblog.com , comment 1 to 27 out of 20 comments http://boombustblog.com Tue, 02 Dec 2008 09:22:36 +0100 FeedCreator 1.7.2 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1800 I call it the one-two punch. First a bank declares it will cut or eliminate it's dividend with the resultant haircut to the stock price. Then after the stock price has fallen substantially, the bank announces that it must raise capital, comes up short, and the stock craters. BKUNA was a perfect example of this. I think STI and RF could be setting up for the one-two punch. I'm adding CMA to your list of 32 banks since it looks like it will need to cut its dividend. I've also added HBC. - Brett Fromme Thu, 10 Jul 2008 01:26:55 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1731 Aristotle: here is a [url=http://boombustblog.com/content/view/288/34/]bit on Jeffries [/url]. They have raised some cash since then, but are still in trouble, trying to ride the prime brokerage wave past its peak. I haven't had a chance to take a look at that bank yet, time is sparse... I really do appreciate and condone the exchange of trading insight and strategies. I cannot participate due to the potential of running afoul of SEC regulations, but I think the beginners and professionals alike can gain from the discussions. Be sure to see my latest opinion on the Golden Boys. - Reggie Middleton Sat, 05 Jul 2008 12:30:10 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1730 You may want to check out JEF puts. (I currently hold some $15 Oct) JEF had been holding up better than other investment banks/brokers, but starting June 30 it appears to have broken down (do a comparison chart with MS starting 6/30). Don't know if recent weakness was insider trading in preparation for JEF's recent press release regarding significant drop in deal volumne, or something bigger. If you have looked at it would appreciate your thoughts. - Reed Harvey Sat, 05 Jul 2008 12:06:41 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1729 I know that everyone is looking for this oversold rally, but I'm not 100% sure that we get it. In fact, Monday could potentially be very nasty in the banks with the UBS disclosure that they are facing more write offs and are being investigated for the Wealth Mngt Tax issue and now the CDS issue. At some point the street and the public are going to wake up and realize that it isn't just UBS pulling shennanigans (like LEH's off balance sheet R3 ala "Enron's Nigerian Barge Debacle". I am waiting for a little spike in UBS to put on shorts there. As far as some of the more traditional picks from Reggie's list, two in particular have really held up (PNC & STI) and I've been in and out and have made some money, but certainly not like my other shorts in LEH, BAC, MS, MBI, & C. Pricing action in PNC & STI is beginning to look weak. Remember when STI came out and said their dividend was solid and they had a strong handle on write downs and loan loss estimates? Then Dick Bove wrote the article that they were a good take over candidate? We'll STI is back down about 20% from when I started focusing on it and it looks like it is accelerating to the downside. Second, PNC has really been the one with relative strength and frankly a bit frustrating for me. First, the puts have less liquidity and therefore the bid/ask has been wide. Also, the stock has traded steadfastly around the $57.50 area and because the liquidity has been poor, I haven't been able to take advantage of being nimble to trade the gyrations like I have on LEH, BAC, and MS. Having said all of that, from a downside direction, I think that when PNC goes, it is going to be the one that really blows and will deliver great downside returns (if you're short). I will probably watch the action closely on Monday and Tuesday and reenter with a larger position. Finally, for those out there that have had some of the liquidity issues with options on some of these regional banks (I don't short simply because I only trade in my IRA), I have been buying puts on the XLF. I was buying SKF but felt like it was not tracking as well as it should have and required me to spend a lot of money as a percentage of my account to get up to 400 or 500 shares. I like the narrow b/a on XLF puts and now have a significant position size in varying strikes px and dates (with the longest the Jan 09's). I think like everyone else I've been anticipating a bear rally here, and I know many folks just don't like to be in on weekends or holidays, but I have some significant gains and am willing to stay in and risk some losses of those gains not to miss the gap down on the open on one of these days when a news story breaks that brings the market to its knees. Any thoughts from the crowd regarding pivot points and action would be greatly appreciated. Last, Reggie and others - Barclay's continues to be one to examine. They too continue to state they don't need capital, but then come back to the well. When I was trading asset backed stuff, CDS, and HY, they were often the guys I did repo with that would give me the most aggressive terms and would let me lever up 100x (I worked for a private company that have $2B cash with them and AAA rating for whatever that was worth). Anyway, other banks wouldn't touch the aircraft leases we we're trading much less let us lever em up and Barclays was more than willing to give up repo on all we could handle.---- we ended up making huge money on them as UAL reaffirmed those leases, but I think it is indicative of their appetite for risk when no one else had any. - Jason Bohmann Sat, 05 Jul 2008 09:56:06 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1726 Corporate bonds are usually classified as Level 2 assets since they do not trade every day and so are matrixed priced. This true for good solid companies with operating earnings and investment grade ratings. Foreign sovereign debt is also classified as Level 2. Below is a link to a PDF where one pricing service (Reuters) classifies the securities prices it provides. http://about.reuters.com/productinfo/datascope/material/FASB_Statement.pdf Please don't go into a panic about Level 2 assets. Unless their portfolios are limited exchange traded stocks or US treasury securities, they should have a lot of Level 2 assets - Norka West Fri, 04 Jul 2008 21:51:45 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1725 Hi Reggie, Whar are your views on this Bank.(Information from Yahoo website) Shares outstanding:- 137.99 mil- Float- 136 Mil. (Insider's hold .08 % only) Current assets 31 Mar 08:- 3.15B current Liabilities:- 48.3B (Cash flow problem)?? Longterm Debt & other Liabilites:- 4.8B And Share Capital net- 4.3B In first Qrt increased the loss provision to 80 mil from 5 mil in 2007. "As the level of uncertainty in our principal portfolio segments and, in particular, in our homebuilder portfolio has increased, we provided a total of $80 million for credit losses ($72 million for loan losses and $8 million for losses on off-balance sheet commitments) in the first quarter of 2008. The provision increase was primarily due to negative risk grade trends in the homebuilder portfolio and weakening operating conditions in the homebuilding industry coupled with strong loan growth But nowhere have they mentioned how much are the off balance sheet commitments. It looks like a good candidate at $40.Your expert guidance is sought for as I think this can be a DOO Doo bank in your list. Thanks Anil - Anil Goyal Fri, 04 Jul 2008 21:31:07 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1694 Jarret, sorry for the delay in responding. Short term bounce plays..... Going to ride the indexes via options and see what companies are in play. Also, near the height of the next rally, I'll move to a bearish position and start shorting the banks all again. Pay me twice!!!!! To ensure a little more stability I'll use the August expirations. Yea, I'll throw a few quick July contracts on for a trade. Don't see the S&P going too far beyond 1330-1340 range, but anything can happen. It's kind of hard to put that trade on until we get some capitulation in the marketplace (Mass Selling with a VIX spike). Despite the market being technically oversold, we're still seeing sell-offs. This week had some decent news..... sorry less than expected bad numbers - (must be listening to too many pundits) as we could get for now. I think we'll know where this market is going by tomorrow (Thursday) or Monday. We've been in oversold and overbought territory before and yet the market still continues in that direction. Same here. The move down from the May highs have been fought all the way down. Eventually, the market does what it's supposed to and I think Paulson and the Gov finally figured that out. NOTHING they've done will stop this. Cut the Dollar.... nope, Add Liquidity.... nope, Spend Taxpayers Money..... nope but we'll be paying for the mess, Raise Rates.... nope. Just let the companies fail.... "in an orderly fashion", let the mortgages go into foreclosure, let the CDOs, VIEs, etc get the value disclosed so people can actually buy them, let the ratings fall as they should to the investments and companies....... YES, it will be a mess, but a washout is needed. Most people are unprepared for what's been written on the wall for a long time. Sorry, back to your question.... I know last Monday was Hedge Fund Redemption Day. I've read in the WSJ a while back that lines were deep for suckers, sorry.... hedge fund investors... who wanted to pull money out. Since the Hedgies, to use some Aussie Lingo for any down under blog readers, have invested in CDOs, etc.. they'll have to start selling any equity positions to ensure cash in the bank. The last few redemption days have triggered some market sell offs. The Hedgies will liquidate equities with large gains. Hence, you've witnessed the sell offs of POT, MON, & FSLR. High Beta stocks will be sold off and others, which have had a large run up. These are great short plays. I've been in and out of Put and Call options in POT for the last two days along with my regular MS, WFC, BAC, MER, LEH, QQQQ, PNC, DIA, GOOG, WB, STI, and RF Puts and Calls. One set up for myself that I've mapped out for tomorrow..... I'll see where POT opens. POT should be down. It hit a $207 target I set two days ago. The $207 was hit in the after hours today. POT should rise back up to around the $219-$222 level before falling back down to the sub $210 level. The $219-$222 level is the linear regression level on the time view I look at with POT. Tomorrow's market is open for limited hours, so this may not play out exact. I'll also take a look at what's going on with the market and the possible rate hike in Europe. I've worked this play two days in a row using July Call and Put options. Add this Hedgie sell off to the typical Wall Street sector rotation and trading should get even more interesting. I have searched for the amounts of redemptions the Hedgies may be facing, but have come up empty. If you try the POT trade, please use caution. I am familiar with the movements of POT from a monthly, weekly, daily move. This helps in trading. You've got to know where your target is. I am using a disclaimer here for anyone reading... execute any trades at your own risk. I think this is implied when reading an entry from somebody dropping a note in the comment section, but just incase..... I am not responsible for anyone's trades except my own. Hope y'all have a great weekend! Kip - Kip Coon Wed, 02 Jul 2008 22:51:06 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1690 Thank goodness the Fed opened the window for investment banks, so that the people that created the problems can get taxpayer money to fund their bonuses and obtain more wealth. That giant sucking sound is the parasitic Wall Street sucking on your wallet. (Not that I am a cynic) SAN FRANCISCO (MarketWatch) -- Lehman Brothers (LEH:Lehman Brothers Holdings Inc LEH 22.36, +1.40, +6.7%) is awarding its employees with mid-year stock bonuses to reward them for sticking with the bank, The Wall Street Journal reported in its online edition Wednesday. Employees will get the equivalent of 20% of the stock award they received in 2007 as a down payment for their 2008 compensation, the newspaper said. Because of Lehman's low share price, which recently dipped to levels not seen since 2000, employees will end up owning a bigger share of the bank. They already own about 30% of the company, according to the Journal. Shares of Lehman were up 7.4% to $22.50 - Reed Harvey Wed, 02 Jul 2008 17:21:39 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1677 All of these financials face counter-party risk. The cross liabilities through "Weapons of Mass Financial Destruction" (Warren Buffett's term) forced the rescue of J.P. Morgan Chase via its tax-payer subsidized purchase of Bear Stearns. They collectively have us by the short hairs. We face the choice of "play along" or suffer another Greater Depression. Small fry face bankrupcy while large fry enjoy bail-outs. As "ex-post facto" laws are forbidden by the Constitution, "holder in due course" protect the holders of mortgages, and size trumps small fry - the many will suffer while the few enjoy the Bahamas. We must accept that hard times are ahead. There is no silver bullet. And watch Congress as these 'financials' write one 'bail-out' bill after another. - Ed Ryan Wed, 02 Jul 2008 02:04:45 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1676 What is the real reason BofA is trying to bailout Country wide? I think they had no choice, there is a long rope from BofA to Country Wide, if Country Wide went down BofA would have went right down with them.BofA funded Mozilo's monster. - james jimenez Wed, 02 Jul 2008 01:17:54 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1675 War??? after all the bailouts and hand outs by the fed, who is going to pay for it? Iraq has been paid for by United states credit card. If Iran is attacked oil will go to $250.00 barrel if were lucky, You Need to Wikipedia Weimar Republic. - james jimenez Wed, 02 Jul 2008 00:54:55 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1674 Not only that we really can't afford it this time. - a b Wed, 02 Jul 2008 00:53:19 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1673 War is a very bad solution but historically has been taken. We must tell our 'leaders' that we do not want it and will vote them out if they take it. - Ed Ryan Wed, 02 Jul 2008 00:13:01 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1672 War is a fine solution. Stab yourself in the gut so you don't feel your aching tooth. - a b Wed, 02 Jul 2008 00:02:46 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1671 As a semi-retired member of the boomers, this credit crisis appears orders of magnitude greater than what has preceded it. In the late 80's and 90's problem banks could be swallowed whole by stronger banks who had learned their lesson. Security Pacific by Bank of America, and First Interstate by Wells Fargo, etc., etc. But now the problems are much larger and are the result of two decades of financial mismanagement by all players. We are in the early stages of a massive de-levering process. More appropriate action might have been taken if we were not in a presidential election year. The next president will have his hands full of this problem. Nationalization of the banking system may be the final result. A major depression in North America would be felt by all economies, thus greater coordinated actions by all Central Banks is in order. Stocks in all financial institutions will continue to decline. The process will be long and hard short of war. Thus, the war talk on the web is a natural outgrowth of ‘solutions past’. This is not good as the price of oil shows. The sooner house prices bottom and investors can buy homes to rent at reasonable rates, the sooner we will be on the long path of recovery. The toxic waste in level 3 and level 2 assets is not worthless, but only impossible to price. When it becomes possible to assign reasonable values to these assets, we will be on the road to recovery. However, in the interim, the money supply will contract as loan default and recovery in the order of 50 cents on the dollar plays out. Now many of these assets are estimated at 25 cents on the dollar, but will yield more. California real estate is the most overpriced. While the Central Valley is near a bottom, Silicon Valley, L.A. County, and Orange County have a long way to go. So the 'bottoms' in real estate will be local and appear from 2009 thru 2012. The game must be kept afloat as it is the only game we have. - Ed Ryan Tue, 01 Jul 2008 23:46:26 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1669 "Unfair deceptive practices" Now now. That's not nice at all. Lawyers will have a LOT of fun with this. Love the cancellation part. That will be fun. - Marc Authier Tue, 01 Jul 2008 22:49:48 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1668 Any one seen this yet today? 'Mortgage ruling could shock U.S. banking industry' http://www.reuters.com/article/newsOne/idUSN2634924420080630 A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when their lenders violate a federal lending disclosure law. The case began like hundreds of others filed since the U.S. housing boom spawned a rise in sales of adjustable rate loans. Susan and Bryan Andrews of Cedarburg, Wisconsin, claimed that lender Chevy Chase Bank FSB (CCX_pc.N: Quote, Profile, Research, Stock Buzz) had hidden the true terms of what they believed was a good deal on a low-interest loan. In their 2005 lawsuit, the couple said the loan's interest rate had more than doubled by their second monthly payment from the 1.95 percent rate they thought was locked in for five years. The interest rate rose well above the 5.75 percent fixed-rate loan they had refinanced to pay their children's college tuition. The Andrews filed the case seeking class action status; and in early 2007, U.S. District Judge Lynn Adelman ruled that the bank had violated the Truth in Lending Act, or TILA, and that thousands of other Chevy Chase borrowers could join them as plaintiffs. The judge transformed the case from a run-of-the-mill class action to a potential nightmare for the U.S. banking industry by also finding that the borrowers could force the bank to cancel, or rescind, their loans. That decision was stayed pending an appeal to the 7th U.S. Circuit Court of Appeals, which is expected to rule any day. The idea of canceling tainted loans to stem a tide of foreclosures has caught hold in other quarters; a lawsuit filed last week by the Illinois attorney general asks a court to rescind or reform Countrywide Financial Corp (CFC.N: Quote, Profile, Research, Stock Buzz) mortgages originated under "unfair or deceptive practices." -cont'd in link- - Ry Mill Tue, 01 Jul 2008 20:13:32 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1667 Short term bounce I mean - Jarret Pazahanick Tue, 01 Jul 2008 19:48:13 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1666 What type of investments do you have in mind for the short term bounce as I agree very much with your comments that we will get a short correction before some more pain. - Jarret Pazahanick Tue, 01 Jul 2008 19:47:37 +0100 http://boombustblog.com/index.php?option=com_myblog&show=Even-the-most-bearish-amonst-us-fail-to-see-the-risk-that-walks-among-us.html&Itemid=92#comment-1665 The call on GS is right on!!! I just finished pages of a document handed to me on GS. Too bad I didn't read it months ago when I received it. GS uses image, contacts, regulations, and who knows what else for their "proprietary trading gains". Let's add risky leverages, too. I've never bought all the hype on GS. Their mutual funds stink! How can a company that's SO GOOD, be so horrible - as compared to other iBanks on these investments? Hhhmmmmm..... ? They can't be that great if returns on products like this are not so stellar. So just how do they get those "trading revenues"? They've got a lot on the books that's starting to rot. AND - yes, they've not been touched, much. However, it seems as if the Wall Street games are back on. With major indexes near oversold status (from a technical trade only.... we all know there's more downside to go), companies strapped for cash, more writedowns on the way, etc.. Whatever needs to be done to "buy time" will be done. I just hope it finishes with a few more getting hauled off in cuffs as this is BS!!! Regardless, it is what it is. Indexes along with the media pumping and Wall Street tossing out overweight and buy on valuation crap all day long, expect a rebound. Hey, it's just a chance to re-group and re-short. Nothing better than making money two or three times on the same play! I'm just planning on making some on the way up too. The next rally which is about to start, won't last too long. That is, as long as governments don't give more taxpayers money away to delay the inevitable. A possible Europe rate hike on Thursday, could make this very interesting. Kip - Kip Coon Tue, 01 Jul 2008 19:23:04 +0100