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.

What, If Anything, Are CDS Spreads Telling Us?

Fabian hug: You obviously don't read English very well. I am not suggesting that you base any strategy on the CDS marketplace; I am only pointing to what signals you can derive. Ignore them at your own peril. But do try to upgrade your writing skills so that you can write something sensible. - Rakesh


On Mar 10 09:48 AM fabien hug wrote:

> Sorry Sir but this is a load of crap. No volumes, no counter party,
> no disclosing of participants, no nothing and we should base our
> investment strategy on that! Great.
> Now, some of these non-disclosed geniuses are willing to pay money
> to protect themselves against a default of the US gvmt or even a
> default of GE! Did you ever thought about who is going to fork the
> bill when such default occurs? AIG or UBS or Merrill-Bofa?
> To me it sounds like oil $ 200 before Xmas, nothing more.

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!

The 'Stress Test' Challenge: Transparency and Intellectual Integrity

Dear No Free Cake: I will comment on the stress test in a bit more detail shortly as I get more information on the components of the test. Many thanks - Rakesh


On Feb 26 12:01 PM No Free Cake wrote:

> Isn't the stress test basically a new regulatory system for banks
> - although implemented without the normal comment and review periods?
>
>
> The concept of this test implies that the current valuation methods
> for regulatory capital don't work. If they did, there wouldn't be
> any doubt as to which banks were sound.
>
> In the longer run, the stress test will either completely replace
> the current capital regulations or be a partial overlay. It will
> only add clarity if it becomes permanent and fairly rigid - the administration
> has so far not ascribed it either of these attributes

The 'Stress Test' Challenge: Transparency and Intellectual Integrity

Dear Seeking Truth: While I think that a valid stress test would entail a high degree of detail, I don't believe that it would be unduly "complex"--but, in any event, public diclosure of the underlying methodology would make the regulatory authorities more accountable (hopefully!!!). Many thanks - Rakesh


On Feb 26 12:17 AM SeekingTruth wrote:

> Rakesh, a well reasoned article, and I am at least as skeptical as
> you are.
> A major problem , is , however, a truly valid stress test is so incredibly
> complex, that with even perfect transparency, few, except the most
> advanced experts would understand it and be able to certify it as
> legitmate and valid. A major dilemma to be sure.
> This means that we would have to trust our officials and experts.
> I do not trust Bernanke or Geithner, although I think they are basically
> good people by most standards, I think their politically (and corporate)
> motivated pressures and tendencies outweigh their prime objectivity
> in these matters.
> So it looks like more of the same 'ol same 'ol relative to ever knowing
> the truth. Wonder how much of the taxpayers TARP money etc. will
> end up in Swiss bank accounts, and elsewhere overseas?

The 'Stress Test' Challenge: Transparency and Intellectual Integrity

Dear Trading to Win: This policy of insuring bad assets is becoming an integral component of rescue plans everywhere. Essentially, taxpayer money is being put to risk. And the bet of course is that a turning tide in the economy will restore value to the bad assets. In my view, this is a dangerous, mathematically untested and trial-and-error policy. But where is the public outcry??? - Many thanks - Rakesh


On Feb 25 05:30 AM Trading to Win wrote:

> Hi Rakesh
>
> Any chance you could do a piece critiquing the UK's policy of insuring
> c.£500 billion of rubbish assets - will it work or fail?
>
> Thank you

Citigroup's Derivatives Reduce Bailout to a Non-Event

Yes mr freddo, your views have merit, particularly when considered in the light of a shocking lack of disclosure, even at this late stage. Many thanks - Rakesh


On Feb 20 12:21 AM mr freddo wrote:

> Thank you for an excellent article and also thanks for some great
> follow-up comments.
>
> I have always believed that what is different about this recession
> are the derivatives that now link all of the major financial institutions.
>
>
> Rumbles in "real" finance like sub prime, alt-a, arm, Eastern European
> currencies, commercial real estate, create their own serious losses
> that then tears through the derivative market magnifying losses to
> unheard of levels.
>
> That is why if there is one more bankruptcy, the entire system will
> fall like a house of cards, even with the netting effect!
>
> As Sugardaddy says 3% of $640 trillion is a lot of money.
>
> This financial crisis is a forest fire that will burn everything
> to the ground. I don't believe that it can be saved. The losses will
> be too large for the government to bail out.
>
> A year ago, I predicted that the banks would have to eventually write
> off $1 trillion. That number seems quaint now. European Banks are
> sitting on $24 trillion of toxic assets. US banks may eventually
> lose $3-$4 trillion.
>
> There is no saving this system. It must be destroyed and built from
> the ground up. Any money that is thrown into these institutions now
> is throwing good money after bad.
>
> I have believed for some time