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Kurt Kendis

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  • Dividend Reservoir: Reconsidering Bank Stocks [View article]
    Dilution has to be considered when discussing dividends. One result ofthe crisis and government intervention was the issuance of new capital and quasi capital. By example Citi went from about 6B shares to just under 30B shares. Sort of negates the effect of a payout rate from the investors point of view.....
    Mar 13, 2011. 09:32 AM | 5 Likes Like |Link to Comment
  • Greek Default And Devaluation: Would It Even Matter? [View article]
    James, I second the 'thanks' for good, efficient writing and thinking, but I have pause with your focus on a 'hard default'. Haven't we witnessed a very well orchestrated dance to redefine the events in Greece as something that 'may or may not' trigger the insurance? It will, as you observe, set a precedent -- but I get the feeling that this wiggle room on the definition of the event combined with infinite accounting nuances will leave things muddier than ever.
    Feb 19, 2012. 07:47 AM | 3 Likes Like |Link to Comment
  • The Negative Implications Of The Fed's Secret $7.7 Trillion Bank Bailout [View article]
    You may have passed over the implications of the work 'secret'. Since each 10Q is now 700pages long, I cannot verify the opacity but it appears that this clearly material use of the discount window was never included in the financial statements, the notes, or most certainly an 8k by any of the insitutions large or small. Sure, as Josh remarks, they use the discount window all the time, but disclosure should be real disclosure. Don't all the execs sign the statements now?
    Dec 6, 2011. 06:42 AM | 3 Likes Like |Link to Comment
  • America's Big Bank $244 Trillion Derivatives Market Exposed [View article]
    Andrew --nice compilation, thanks, but the future issues should be of concern: 1) I have read a lot without conclusion about future netting arrangements and the complexities of the new ISDA agreements -- but ii is certain that a lot of netting occurs which is not 'clean' and has risk attached; 2) These notional volumes are growing and with it the reliance on the revenues for each of the participants in very high RWA businesses, hence requiring capital; and 3) there is a lot of noise in the blogs about the increasing levels of operational risk and 'failed clearing' data that I have not been able to validate -- but it is a flag.

    We can all agree the essential nature of the sectors, but call me silly, I cannot fathom the need for either the scale or the complexity in the face of low tranparency.
    Sep 16, 2011. 08:24 AM | 3 Likes Like |Link to Comment
  • Why Banks Shouldn't Trade [View article] many of the banks' legacy burdens fall into the catagory of 'the inexorable logic of marginal thinking' ? (wonderful line....I hope everyone who steals it gives you attribution!)
    Oct 11, 2012. 08:09 AM | 2 Likes Like |Link to Comment
  • The Derivatives Myth [View article]
    If I may chime in on your discussion....there are two additional elements to consider. First, ISDA is (reportedly) rewriting the netting rules to tighten up the gaps. This reminds us that the netting is not always clean. Second, the exposures to these (notional or netted) amounts are not clearly reported . They still can be found in VIE's and other off-balance sheet vehicles. Your arguements seem to skirt around my two favorite questions: Why so large? Why so opaque? Since we know that the politicians on both sides of the Atlantic will not go very deep as they create new regulations, I believe the industry is inviting draconian politics by continuing activity at this scale. Alas,the lobbyists and influencers continue their narrative promoting scale.
    Dec 20, 2011. 07:01 AM | 2 Likes Like |Link to Comment
  • The Negative Implications Of The Fed's Secret $7.7 Trillion Bank Bailout [View article]
    I am certain that the details are and will be debatable -- the point is opacity and failure to disclose on the part of both the Fed and the borrowers. Combine this with the revelations of the detailed use of the window by all banks domestic and foreign that was discussed extensively by Donald van Deventer (www, ) in October and November and the case can be made for more (much more) disclosure. Lest we forget that government officials are still permitted to do insider trading.
    Dec 10, 2011. 08:24 AM | 2 Likes Like |Link to Comment
  • America's Most Inflated Balance Sheets Belong to Banks [View article]
    Doctor Oz , you are merely opening a giant can of (pick an anology). For starters, ther is a possibility that pending IFRS rules will dramatically INCREASE those balance sheets, which now have netting of apples and oranges under ISDA. And on the other side there is the new rules on purchase accounting accretion which threaten to DECREASE all ofthe balance sheets for those with lots of goodwill. But your conclusion is half correct -- do not just check the financial statements, but do a thorough side by side of all the notes from the past few reporting periods if you wish to sort it all out. Why more than one period? Because even the SEC does not require (yet) detailed tracking of period to period changes. For those of you not agonizingly familiar with bank accounting is not for the faint hearted. And all the rules might change this year.....
    Apr 8, 2011. 09:48 AM | 2 Likes Like |Link to Comment
  • Too Big To Value [View article]
    Well done Michael, but the forces of the trading world probably won't listen (they are too busy flipping warrants) and so the news streams are polluted with optimism. How did you avoid using the term 'opacity' until the last paragraph? Given the events of the past month we also can include 'partial transparency' as a sin of commission. Someone clever will have to conjure a 'complexity discount', because abandoning the sector seems impossible. A few sources look at things like audit intergrity and negative news flow, but perhaps the academics can look at the 'tone and intensity'(see NYU research) of all these revelations to give us a discount algorithm.Meanwhile I offer you a one page overview
    Mar 24, 2013. 07:50 AM | 1 Like Like |Link to Comment
  • Ghoulish Bank Financials In Time For Halloween [View article]
    You may appreciate the data in "How Much Longer Can Banks Utilize Reserves to Manage Earnings?" 1 October 2012 by Todd Hagerman at Stern Agee. The charts and tables provide details I have not seen before.
    Oct 13, 2012. 07:51 AM | 1 Like Like |Link to Comment
  • Citigroup's Q3 Earnings: Surge Or Break Even? [View article]
    The 3Q12 published statements for Citi and all the big banks are (still) polluted with accounting items. You mentioned a few, but there are also litigation costs($350m), putback charges($150m), negative CVA/DVA hit($1.5b), and the MSSB transaction hits both OTTI and non cash earnings. There are more,and some offset (every back still releases reserves) so for all these companies 'fools rush in...'.
    Oct 9, 2012. 08:01 AM | 1 Like Like |Link to Comment
  • Citigroup Is Undervalued [View article]
    Chris....Citi is still impossible to value if you consider the items on the balance sheet that are legacy assets or liabilites with no currently available market, or the enormous number of items in the P&L that are a product of accounting policies and not core earnings.
    Aug 27, 2012. 07:48 AM | 1 Like Like |Link to Comment
  • Mega Banks Must Shrink: Great For The Country, Better For Shareholders [View article]
    One of these arguements where everyone is correct! The giant banks must rightsize on a)scale b) complexity, and c) opacity. The accounting is not transparents since it is still dominated by material and sometimes wierd accounting nuances (DVA is best example), but the complexity is making the valuation problematic. Translation: there are many reasons to discount the large financial institutions until all the effects of a decade of excessive scale complexity and opacity are worked out (or regulated out) of the system.
    Jun 19, 2012. 09:57 AM | 1 Like Like |Link to Comment
  • Bank Stock Risks Mount: Sell In May And Go Away [View article]
    Financials are overloaded with what you refer to as 'one time' items and are actually non core incomes and expenses. Financials are also loaded with still-difficult-to-value assets and risks. Your views seem unaffected by financial statements and although the Q's are just coming out a little (actually a lot) of homework will reveal that you are correct in your conclusion but focused too much on the markets. If any of several events (rate increases, property value deterioration) occur the entire portfolio of second lien assets (consumer and commercial) will have much less value than they are currently carrying. The reserve releases are dominated by 'balance sheet repositioning' -- the selling of risky assets and the acquisition of anything with a government guarantee and these releases cannot go on forever.
    This blog space continues to emphasize trading trends and not fundamentals, but here is a conclusion where both agree. Investors in financials' should only move towards solid 'core' earnings and a fortress balance sheet, just like we learned decades ago.
    Apr 27, 2012. 08:04 AM | 1 Like Like |Link to Comment
  • JPMorgan Reports Strong Revenue, Income; Mortgage Risk Looms [View article]
    There are still too many accounting items of very large proportions for straighforward analysis. Hits: $900m DVA hit ($0.14), $2.7b of total litigation costs, $302m of mortgage repurchases, and $200m of other servicing costs. Positives: $1.7b of loan loss reserve release, $1.1b gain related to the Wamu deal, $536m securities gains, $191m of MSR gains. These are all material and not part of core earnings IMHOP.
    Apr 13, 2012. 03:04 PM | 1 Like Like |Link to Comment