Wells Fargo: Being Bearish Paid Today

I have written here various times about my bearish take on Wells Fargo (WFC) -- see here and here -- so today's WFC wreckage isn't exactly a surprise. Nevertheless, a crushingly bad day –- including a head-butt from CIBC analyst Meredith Whitney near the close -- for what had been the strongest banking stock.

Comments

[tshk1221:]

Due to the unprecedented and historic real estate and credit bubbles built up massively for the last 5 years, bank stocks are still expensive in consideration of their earnings and risky business nature. My guess is their stock prices should drop by another 50% at least to attact buyers, which translates into P/Es of 5 - 6 with a lot higher EPSs.

2008 Dec 01 06:31 PM

[traderboy:]

On the same token if the banks clean up their mess soon then
suddenly they start making LOT $$$ than u think.

They are already increasing the credit card fees, interest
to unprecedented levels.

By the time people realize they may shot up to the roof.
(Not in a day or week or month though :(- )




On Dec 01 06:31 PM tshk1221 wrote:

> Due to the unprecedented and historic real estate and credit bubbles
> built up massively for the last 5 years, bank stocks are still expensive
> in consideration of their earnings and risky business nature. My
> guess is their stock prices should drop by another 50% at least to
> attact buyers, which translates into P/Es of 5 - 6 with a lot higher
> EPSs.

2008 Dec 01 06:40 PM

[tshk1221:]

Dear traferboy,

You're absolutely correct.

However, the problem is no one knows how bad their loan assets are because the reale state and credit bubbles were so severe for the last 5 years. I know this well because I have been in the lending industry for the last 10 years. Man, you can say that the last 5 years were the craziest lending environment you can imagine in US history. Loans, loans and loans! Banks just poured in their capital to produce loans in unbelievable quantities. If banks kept their loan asset quality, they will survive. If not, they will die during this crisis. But, I learnt a very important lesson: Know that when banks report record-breaking earnings and profits, credit bubble and real estate market / stock market crash are the ones coming next. We'd better prepare ourselves to sell our stocks when banks report those record-breaking earnings!


On Dec 01 06:40 PM traderboy wrote:

> On the same token if the banks clean up their mess soon then
> suddenly they start making LOT $$$ than u think.
>
> They are already increasing the credit card fees, interest
> to unprecedented levels.
>
> By the time people realize they may shot up to the roof.
> (Not in a day or week or month though :(- )
>
>

2008 Dec 01 06:57 PM

[JohnniePhenom:]

I recently had the opportunity to be offered a position with Wells Fargo. Through the recruitment and interviewing process I was very interested in learning how they planned to be profitable in such an environment, and thus what the positives and future potential of taking the position with the company would be. No one would want to be hired into a failing company. What they could tell me is that basically they were more conservative and protective with the subprime lending they took part in. with WFC you didn't see massive surges in profits like with other banks, and you (until recently) haven't seen a great decrease in their value. With the aquisition of Wachovia they've increased they're business footprint and will be able to off a more diversified portfolio of products and services to existing and potential clients. I see JPM, BAC, and WFC emerging as some of, if not the best, banks when we come out of the other side of this crisis. Maybe w/ WFC my opinion is some what biased by my new association w/ the company, but I wouldn't have seeked employment w/ them if I did not see them emerging on top of the banking industry at the end of all of this...down the road people will look back and see that certain financial companies were among the best investments at the bottom IMHO

2008 Dec 01 07:18 PM

[Plumber 250:]

Dear JohnnyPhenom,
I own quite a bit of stock in WFC so I'm hoping the position they gave you isn't too high up the ladder or I'll have to rethink my position. You sought employment there, you didn't "seeked employment" there.

2008 Dec 01 07:53 PM

[tshk1221:]

Dear Johnnie,

It could be your great career opportunity if you get a firm position with Wells Fargo. Probably, it is the most highly regarded bank in US with an affluent historical background. The bank is well known for being quite conservative in its lending. Well, actually, I heard they apply a lending concept known as "reverse lending", which basically means lending more aggressively in times of like this and lending conservatively during bubble periods like the last 5 years. No wonder Wells Fargo stands out among the peers now.

The real problem with banks is that when banks try to stay healthy and lean by doing only quality loans, they cannot grow by volume and cannot satisfy directors and shareholders. When banks try to achieve more volume by gaining weight through doing riskier loans to satisfy directors and shareholders, that's the time when real risks kick in.

I guess that's the most daunting task bankers in the US must solve to preserve the US financial system and prevent any future financial crisis.

On Dec 01 07:18 PM JohnniePhenom wrote:

> I recently had the opportunity to be offered a position with Wells
> Fargo. Through the recruitment and interviewing process I was very
> interested in learning how they planned to be profitable in such
> an environment, and thus what the positives and future potential
> of taking the position with the company would be. No one would want
> to be hired into a failing company. What they could tell me is that
> basically they were more conservative and protective with the subprime
> lending they took part in. with WFC you didn't see massive surges
> in profits like with other banks, and you (until recently) haven't
> seen a great decrease in their value. With the aquisition of Wachovia
> they've increased they're business footprint and will be able to
> off a more diversified portfolio of products and services to existing
> and potential clients. I see JPM, BAC, and WFC emerging as some of,
> if not the best, banks when we come out of the other side of this
> crisis. Maybe w/ WFC my opinion is some what biased by my new association
> w/ the company, but I wouldn't have seeked employment w/ them if
> I did not see them emerging on top of the banking industry at the
> end of all of this...down the road people will look back and see
> that certain financial companies were among the best investments
> at the bottom IMHO

2008 Dec 01 08:13 PM

[Income Tax:]

According to SalaryList.com (only bank business, if you search you can find their other business)

Wells Fargo $90K
salarylist.com/all-rea...

JP Morgan $79K
salarylist.com/all-rea...

Bank of America $80K
salarylist.com/all-rea...

CtiBank $87K
salarylist.com/all-rea...

2008 Dec 01 08:35 PM

[Mr. Supervisor:]

First I would like to welcome you to the fold if indeed you accepted the position here at Wells. I have been an employee with Wells for the last four years and must say it was the best thing to happen to my career. Over the past 4 years we have preached being conservative in the lending market to limit our risks on default. This has positioned us to capitalize during a time of bank failures and financial crisis. Wells will come out of this crisis stronger than ever and with our recent outright purchase of Wachovia we are now going to be a National institution. Remember Wells Fargo is the only and I repeat ONLY Triple A Rated lending institution in the US. Congrats on the Job.


On Dec 01 07:18 PM JohnniePhenom wrote:

> I recently had the opportunity to be offered a position with Wells
> Fargo. Through the recruitment and interviewing process I was very
> interested in learning how they planned to be profitable in such
> an environment, and thus what the positives and future potential
> of taking the position with the company would be. No one would want
> to be hired into a failing company. What they could tell me is that
> basically they were more conservative and protective with the subprime
> lending they took part in. with WFC you didn't see massive surges
> in profits like with other banks, and you (until recently) haven't
> seen a great decrease in their value. With the aquisition of Wachovia
> they've increased they're business footprint and will be able to
> off a more diversified portfolio of products and services to existing
> and potential clients. I see JPM, BAC, and WFC emerging as some of,
> if not the best, banks when we come out of the other side of this
> crisis. Maybe w/ WFC my opinion is some what biased by my new association
> w/ the company, but I wouldn't have seeked employment w/ them if
> I did not see them emerging on top of the banking industry at the
> end of all of this...down the road people will look back and see
> that certain financial companies were among the best investments
> at the bottom IMHO

2008 Dec 02 07:44 AM

[chinooking:]

and where the hell is the up-tick rule?

2008 Dec 02 09:55 AM

[archie01:]

Had to give Meredith Whitney credit, she didn't even crack a smile when Bartilomo gave her the chance to tank WFC. Why do these talking heads give air time to someone who clearly is shorting a stock ... WFC was a prime candidate for Meredith Whitney to slam.

WFC has beaten the S & P growth rate for the last 25 years.

2008 Dec 02 02:03 PM

[JohnniePhenom:]

Dear Plumber 250, Sorry for not running spell check before posting my comment, God forbid you ever make a mistake. And if you're basing investment decisions on gramatical errors then maybe you should rethink your investments.

tshk1221 and Mr. Supervisor, thank you for the positive comments, they are much appreciated.

I was only giving my 2 cents, and that is all.

2008 Dec 02 09:50 PM