Rakesh Saxena

JPMorgan Dares Traders To Make Calls On Banks

Dear berloe: Those were pre-government-interve... calls. Just by way of clarification. The fundamental factor in play today are very different. - Rakesh


On Oct 16 04:23 PM berloe wrote:

> Rakesh was also shorting BAC above $6.50; JPM above $26.50...(2/13/09
>
> Funny thing- I agreed with him!

JPMorgan Dares Traders To Make Calls On Banks

Forge88: In my view, a good point to buy puts would be a brief rally in banks today or tomorrow. FYI, I am not impressed with Citi's numbers. - Rakesh


On Oct 15 07:22 AM forge98 wrote:

> Rakesh,
> I'm with you. I'll take my chances buying puts on these co's.

JPMorgan Dares Traders To Make Calls On Banks

Forge88: Puts are a good way to go. The implied volatility on puts should be relatively attractive this week. - Rakesh


On Oct 15 07:22 AM forge98 wrote:

> Rakesh,
> I'm with you. I'll take my chances buying puts on these co's.

Get Ready to Short the Banks

I am looking at a 50% drop, in broad terms; of course timing of specific entry points needs to be ascertained. As far as upside is concerned, let's not forget that there would be no upside without those billions of taxpayer dollars!! Many thanks - RAKESH


On Oct 13 04:14 PM DonFurio wrote:

> I wish the author would be more specific in what he's looking to
> do. Are you going to short the XLF, KBE, or are you going after selected
> companies. Personally, I believe that even if you are right in the
> short term, this is a bad long term play. Look at the potential earnings
> power for the 5 biggest. Even if you're right, what are you looking
> at a max of a 10-20% drop? That's nothing compared to the fact that
> some of the banks have the potential to be up 60% or more in the
> next year or so.

Get Ready to Short the Banks

Dear Ron: Just to clarify, I am not looking for a lower entry point; I am looking to short. My issue with the "specifics" you mention is the extent to which they are shaped by government intervention. In any event, your point is well taken. - Raklesh


On Oct 13 09:40 AM RonB wrote:

> Ahh, another article desparately written by someone who missed the
> rally and wants a lower entry point. Full of broad-brush generatlities.
> Specifics matter here. Wells Fargo is a good example. Wells has pre-tax
> pre-provision earnings power well above $40 billion. It will do $40
> billion this year. In a more normal environment, after the current
> spate of writeoffs has subsided, provisions will be under $10 billion.
> A $10 billion provision level would result in after-tax income of
> around $4.20 to $4.30 a share. At a historically low PE multiple
> of 12, you have a $50 stock price. Wells is now trading at $30. Which
> is why it is the largest holding in my personal and client portfolios,
> and it is why Warren Buffett and Prem Watsa own so much of it.<br/>
>
> Ron Beasley
> Investment Advisor
> rwbi.net

BofA Headed Back Below $10?

Greystone: In my view, Ken's vision was based on an improving economy---so the risks in BofA's balance sheet remain intact, regardless of the CEO. Many thanks - Rakesh


On Oct 06 10:50 AM Greystone wrote:

> I have not looked at BAC's balance sheet so I can't speak to where
> it should be trading or if it is well positioned for the pending
> recovery. However, a big question for the direction of the company
> could lie with whomever takes over as the new CEO.
>
> The direction of the company and vision that Ken Lewis had (to create
> a company that was #1 in 3 areas...lending, deposits, and retail
> banking) could be lost with a new CEO. If the incoming CEO decides
> that they want to focus on other areas it could detract from shareholder
> value (if even for a short while). If the new CEO decides that they
> will pursue Ken Lewis' vision, how qualified is that person to deliver
> the goods?
>
> Should this not be a determining factor in whether or not to invest
> in BAC at this juncture in time?

BofA Headed Back Below $10?

Dave:

I think that ETF-related counterparty risks are minimal since, regardless of the counterparty, the "trust" mechanisms serve as protection.

Beyond the general view that oil is headed lower from current levels, I have can offer no specific insight into price targets at this time.

Many thanks - Rakesh


On Oct 06 10:10 AM David Braunstein wrote:

> Rakesh,
>
> I have a question for you. I have been afraid to use ProFunds ultra
> bear or any other ETF/bear fund because I was convinced that the
> counter-party risk was too great. As you know the counter-parties
> are mostly the major banking and financial institutions. Do you think
> I am being too cautious? My second question concerns the price of
> oil. I have been thinking the price of oil should be around $30 to
> $35 per barrel. It appears I missed the reflation trade altogether.
> Or have I? Looking forward to your answers.

Will the Counterparty/Systemic Risk Relationship Undermine Banks?

Mark, "eating away" was the phrase I was looking for. Thanks - Rakesh


On Oct 04 07:56 PM Mark Bern wrote:

> Excellent article! You have hit upon the question that has been swept
> under the proverial rug by Wall Street, the Fed, and the Administration.
> Ignoring the problem does not fix the problem. However, that is the
> primary action that has been taken by our leaders in hopes that it
> may go away or miraculously fix itself. It is, as you pointed out,
> as systemic risk that won't go away. The web needs to be untangled
> and chips fall where they will so that we can deal with the real
> problem underlying our economy. As long as it is kept hidden, eating
> away at bank solvency over time, it will continue to be a major drag
> on any recovery. Without attending to the root of the problem, we
> will be mired in a slow growth envirionment with inadequate credit
> availability to sustain the level of new business formation needed
> to create positive employment.
>
> We must go through some pain and recognize the losses on worthless
> (or near worthless) assets for the delveraging process to accomplish
> the necessary cleansing of the economy. Without that step, we will
> just continue to hobble along, with the government taking on more
> and more debt against the future, making recovery to an economic
> environment of real growth impossible.
>
> Thank you for trying to keep us informed of what really matters.

Will the Counterparty/Systemic Risk Relationship Undermine Banks?

Thank you Swashbuckler.


On Oct 04 04:29 PM Swashbuckler wrote:

> Rakesh----Welcome back to SA. I always look forward to your posts.
> Here's hoping you are doing well and will be able to continue posting
> here for a long time.

Netting Derivatives: Slippery Slope Marred by Opaqueness

Dear oapoki: FYI I have been working with ISDA contracts for a very long time, and have reviewed hundreds of such contracts when closing derivative transaction, though I am not a lawyer by profession. If you have read any of these contracts with precision you will realize the point I am making: that where the shift in the fundamental nature of the contract towards "insurance driven" coverage did not fully capture the risks involved and the counterparty risk. I am not suggesting that such contracts should be abandoned. - Rakesh


On Mar 07 09:00 AM oapoki wrote:

> It is sad to see you guys commenting on these, admittedly complex
> issues, with no idea what you are talking about.
>
> Has any of view taken a look at an ISDA contract? Has any view used
> an ISDA contract in practices? Has any of view wlaked through the
> process of netting in a bankruptcy?
>
> I would simply state that "action talks and BS walks". It is not
> accidental the the derivatives industry has grown to these levels
> - they add value because they enables participants to hedge risks
> - even if people misuse thes einstruments (like everything else).
> In the absence of the ISDA agreement, with its associated actual
> netting (not imagined as the author contends) benefits (as we have
> seen in the case of Lehman), we would have chaos.
>
> ISDA contacts have proven to be extremely robust in the face of extreme
> conditions, and I hate to see what would have happened intheir absence.
>
>
> So be acreful what you are wishing for!

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear SeekingTruth: FYI, the reason for the term "state capitalism" is that it means big government and strong alliances with big capital (i.e. via the infamous lobbysts). The "socialism" component is irrelevant, since the system does nothing sustainable for workers; we should not confuse the government's alliance with trade unions with real rights and welfare for the poor and underpriviliged. This term, state capitalism, has its roots in pre-War Italy and Germany, and in the Soviet Union under Stalin. I have sent in an article today putting state capitalism in perspective. Many thanks - Rakesh


On Feb 07 10:19 AM SeekingTruth wrote:

> Rakesh, Your term "State Capitalism" strikes me as most apropos in
> describing our current direction. A term I have used for years is
> "Quasi Capitalism-Socialism" but I think your term is more succinct
> and "telling".
>
> Thanks again for a job well done and for a new highly descriptive
> and appropriate term.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear Proximo: In theory, and if rigid accounting standards are applied, the value of private equity in the banks is almost zero. A blanket nationalization is the only logical answer. However, it is apparent that the government will continue developing a trial-and-error policy, in the hope that the stimulus packages will cause an economic turnaround in late 2009. That is the reason why I see a good trading situation, as long as you maintain a bearish bias. Many thanks - Rakesh


On Feb 07 11:39 PM PROXIMO wrote:

> Rakesh--If you happen to see this post--a question for you---Could
> you at some point comment on your impression of the endgame for shareholder
> equity in any of the major banks , if they are nationalized? Total
> wipeout of the equity or something less? Or does it simply depend
> on multiple variables? Thanks much for your articles.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Yes Fitz919: What you are speaking to is a "de-leveraged" scenario where a rational approach is taken to the real business of banking in society. I'm afraid, both of us are simply being left on the sidelines (helpless observers) as the government starts on a dangerous trial-and-error exercise. Many thanks for your comments. - Rakesh


On Feb 06 03:40 PM Fitz919 wrote:

> It's time to create new banks. I mean it...brand new banks. Banks
> that write 4% fixed rate mortgages. Banks that offer auto loans at
> 5%. Banks that have Credit Cards that are permanently capped at 7%.
> Banks that don't have toxic assets, and don't create them. Banks
> that pay interest on savings and checking accounts no matter what
> the balance.
>
> There are lots of unemployed people who have the skills and integrity
> to run these new banks, and with the old banks dropping like flies,
> there will be lots of accounts which will need a new home.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear Seeking Truth: The problem is that since too many analysts, fund managers and traders have a vested interest in keeping the system alive, nobody is asking (demanding) for transparency. As far as "buckling your seat belt" is concerned, yes, you are entering a new era of socialism and state capitalism--you can't bail out over the side. Many thanks - Rakesh


On Feb 06 04:55 PM SeekingTruth wrote:

> This seems a lot like war, where everyone fights for what they have
> in it to fight for, whether it be great or small, and I suspect there
> were very few bankers on the beaches at Normandy.
>
> Listened to Mohammed El- Erian give a very plausible and intelligent
> appeal for massive bailouts across the board, and I couldn't help
> but be impressed by his appeal and well crafted and modulated delivery.
> But this doesn't , however, make it the right thing to do. He clearly
> has a vested interest in keeping the status quo well established
> by all possible means and has the ability and foresight to make any
> adjustments necessary along the way to preserve his and his corporations
> wealth.
>
> So where does that leave the rest of us? In the rumble seat of course,
> where we can be along for the ride but are clearly not doing the
> driving, and if the driver is an idiot and takes it
> over a cliff, we're going along with him. Buckle your seat belt,
> or maybe bail out over the side if you dare.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear David: Yes, you make a key point---nobody appears to have actually read the complete stimulus package, bits and pieces apart; and nobody can offer any cogent analysis of the road map which the stimulus targets. A troubling scenario indeed. Many thanks - Rakesh


On Feb 06 10:59 AM David Braunstein wrote:

> How can anyone expect anything good to come out of a stimulus package
> that no one has read, not even the President. How can we imagine
> that if our lawmakers do not even read the stimulus bill that they
> could possible look at it critically? Yes, I beleive they have good
> intentions, but "the road to hell is paved with good intentions."
> Rakesh, imbedded in your comments is the real solution to our economic
> problems. Hard work, good intentions and rigorous analysis.