Menachem Ben Yakov

Five Best and Worst Global Financial Stocks, YTD

It looks like a case of fraud to me when six weeks ago Lloyds TSB management could issue the following statement- " Against this backdrop, Lloyds TSB continued to deliver good growth momentum in all its core businesses and is well positioned for a lower growth environment.
Given this strong performance and our confidence in the Group's future earnings performance, the board has decided to increase the 2008 interim dividend by 2 per cent to 11.4 pence per share. This increase demonstrates the strength of the Group's business model, balanced with a level of caution on the outlook for the UK economy.'"
Now holders of common shares are in jeopardy. Lloyds it seems needs a government bailout that will suspend dividend payments to holders of its common stock for a minimum of five years. However the government, for its largess, will realize a 12% p.a. return on its investment.
Shareholders of Lloyds would be INSANE to vote yes on the proposed merger and I, for one, am looking for a good lawyer!

By How Much Have Foreign Bank Stocks Fallen?

This news item, just reported , is exactly the type of growth I was talking about in my last post...

www.guardian.co.uk/bus...


On Sep 02 11:13 AM Menachem Ben Yakov wrote:

> HSBC hit a low on Feb.11th and I doubled my position on that date
> at $69.50/ADR. The low on that day was $69.25/ADR. Those shares have
> subsequently paid dividends totaling $3.75/ADR. I do not expect the
> share price to return to those levels ever.
> In my opinion the ADR share price will close the year at or about
> $120/ADR. That price may seem overly optimistic to some but the fundamentals
> support my analysis. I also expect new revenue streams out of Korea
> and China as ventures in those areas begin to show results. It is
> also quite possible that there will be an announcement in the second
> quarter of 2009 that no further provisions for write downs will need
> to be made as they have been fully accounted for.
> Just my opinion of course and folks should do their own homework.
>

By How Much Have Foreign Bank Stocks Fallen?

HSBC hit a low on Feb.11th and I doubled my position on that date at $69.50/ADR. The low on that day was $69.25/ADR. Those shares have subsequently paid dividends totaling $3.75/ADR. I do not expect the share price to return to those levels ever.
In my opinion the ADR share price will close the year at or about $120/ADR. That price may seem overly optimistic to some but the fundamentals support my analysis. I also expect new revenue streams out of Korea and China as ventures in those areas begin to show results. It is also quite possible that there will be an announcement in the second quarter of 2009 that no further provisions for write downs will need to be made as they have been fully accounted for.
Just my opinion of course and folks should do their own homework.


On Sep 02 10:42 AM andyn wrote:

> with Britain weak, HSBC should go down to less than 70

Playing the Market as Delinquencies Continue to Rise

Heres the definition of a derivative from investopedia.com ( a great site by the way )....
" In finance, a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.
Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Because derivatives are just contracts, just about anything can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region.

Derivatives are generally used to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using American dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into euros. "

When analysis of derivative positions held by institutions is performed one cannot make a judgement on its true value without knowing the underlying article of value. Is it a sub-prime mortgage or ton of gold? Is it based upon bonds from Exxon or Washington Mutual?
The word " derivative " has been used to scare investors like the word " bogeyman " was used to scare children.
I have been buying HSBC and LLoyds TSB. My analysis is correct.
Folks should do their own homework.

Playing the Market as Delinquencies Continue to Rise

Those who fail to discern that not all derivative contracts are created equal are investing with their eyes closed. In fact a short position is also a derivative contract. Interest rate swaps and derivatives based upon AAA rated municipal bonds for instance have risen in value across the broad market. When opinions regarding derivative exposure are offered without detail the reader should beware. Those that suggest a bank is " over exposed " to derivatives ( such as HSBC, which I own ) based simply upon the cumulative value of outstanding contracts have failed to do their homework.

Islamic Banking in America?

I have been a shareholder of HSBC for ten years. I have no objection to the banks determination to open markets further in the Middle East.
In fact while HSBC does a great deal of business in the Arab world it is also a member bank of The Tel Aviv Stock Exchange and maintains offices in Israel.
One can only wish that those involved in the diplomatic process were as astute as HSBC in bridging the gap between cultures.

Dividends Show Differences Between Financials

To Lesers' on the money comment I would add the following factual information-

Since 1927, dividends have
contributed over 44% of the total
return of the S&P 500 Index,
with pure capital appreciation
accounting for less than one
third of total return and if those same dividend
payments had been reinvested, dividends would
account for over two
thirds of total return over the
same time frame.


On Aug 31 04:11 PM Leser wrote:

> I agree with jimsep and Menachem Ben Yakov.
> When purchasing a stock, look for the reasonable payout of -- what
> 25% or 50%, ballpark figure -- profits to the stockholder in the
> form of dividends (not so much buybacks, which I suspect may be to
> makeup for all the stock thrown at the executives of the company
> to cover their raiding the profit cookie jar.)
> It's old fashioned fiscal responsibility at running the business
> the company says it's in. Buying other companies should be judiciously
> done, not in a greedy way to spend the shareholders' money, as if
> the shareholder doesn't know what to do with it. He or she should
> use the dividends to buy more of the same stock. If the company is
> that good, the shareholder probably would.
> Of course, companies with high dividends and high debt--well the
> debt washes out the benefit of the current dividend, I would say.
>
> Yes, if we went back to the traditional high dividends--even after
> a 15 (or 20% taxation in the future?), it would be one way to know
> the executives of the company are really working for us. What a
> novel thought.
> Dividends, dividends, dividends. The proof is in the pudding.<br/>
>

Dividends Show Differences Between Financials

Both HSBC and Lloyds TSB have committed to a progressive dividend policy and have adequate capital to maintain that policy. I applaud the write as the fundamental truth regarding any stock, that its worth increases regardless of market conditions if its dividend increases, is often ignored.
Great article and should be read by every investor.