Reggie Middleton

Why I'm Short So Many Financials

I'm sorry, I meant Citibank - not Bear Stearns. Anyway, we shall see how this plays out. I have release strategies on my blog that detail how I apply short strategies on the financials that allow me to participate on the downisde without getting burned if the stocks rally. The SA editors require the term "short" in their disclosure policy. Let there be no mistake, though. I am thoroughly bearish on many financial companies.

Why I'm Short So Many Financials

The government is not (directly, at least) backstopping the share prices, they are backstopping some of the entities. Hey, the government backstopped Bear Stearns, was that a good short?

Many a layman has a much, much too rosy outlook for the financials. I strongly suggest one takes a much closer look at that their balance sheets and prospects. Japan unconditionally backstopped their banks in the '80's after it let its credit and real estate bubble blow and pop, and of all of those banks backstopped, I can only find one that has survived intact, and it appears to have survived in name only.

Why I'm Short So Many Financials

I forgot to mention in the post above, that the point of the article has nothing to do with shorting financials. The point is that the systemic risk posed by the biggest banks in this country just got riskier after all we have been through. The banks are bigger, the risks are more concentrated, and apparently the political will to do something about it has effectively been stymied by the ever-so-effective Wall Street lobbying machine.

Why I'm Short So Many Financials

Shorting financials are risky due to the explicit and implicit complicity in the government's hiding these bank's true liabilities and financial weaknesses, not to mention the multi-trillion dollar support system that was set up for the larger banks. That being said,these liabilities and weaknesses have been hidden, NOT cured, thus still must come home to roost at some time.

Much of the big banks earnings that I have analyzed are illusory. GS skips a bad quarter to produce a winning Q1. They get a regulatory exception for their VaR reporting to mask the extreme increase in risk necessary to produce the trading profits that have masked weak business lines in nearly every other franchise that they had - and VaR still shot up dramatically. JPM took an economic loss last quarter, yet for some reason nobody seems to have taken notice.

Yes, the banks are making money due to ZIRP and government subsidies, but if you mark assets realistically, they are losing on thier legacy assets even faster.

More importantly, the money that the banks with brokerage/IB arms are making is primarily non-interest income. They are not making money conducting traditional bank business, they are making money pursuing activities that caused the collapse in the first place: speculative trading,

As stated in the article above, the small and medium banks should be up in arms and increase their lobbying pressure, for they are subsidizing GSs risk activities through their FDIC fees, yet when it is time to get bailed out GS gets well over $50 billion of direct and indirect support while lenders such as CIT and/or Indymac get shown the door.

More Reasons to Short PNC

The Blackrock ownership was carefully valued and added back to PNC using the sum of the parts valuation method. We are not perfect, but we are pretty good at what we do, which you can tell by looking at my track record. It is highly unlikely an error such as the one you propose would slip past the analyst , the QA review and me, not to mention several hundred professionals who subscribe to my opinion.

Well, to each their own. The markets have said to hell with the fundamentals anyway, at least for the time being. When reality hits, we will see what becomes of PNC.

More Reasons to Short PNC

Instead of going back and forth, why don't you read the report? I made it free...

the hole is inclusive of the Blackrock equity. PNC has signfiicant issues born from the NCC purchase.

More Reasons to Short PNC

You obviously didn't read the links in the article. We meticulously accounted for the entire blackrock valuation, at cost basis.

Central Banks, Commercial Banks, and Lies: America Has Been Bamboozled

Thank you, dcb. I'm glad I'm not the only one who noticed the lack of love from the editors. I suppose my content is not what the editors consider most appetizing to their core constituency. I have recently updated the mortgage loss model behind this report and made it available as an open source project. After input from the community (isn't open source grand) it is actually more dire than even I and my team have originally calculated. See boombustblog.com/Reggi...

The 'Doo Doo 32': Receipt of the TARP

I'm glad you like my work :-)

These 32 Commercial Banks and Thrifts May See the Dung Hit the Fan

You guys are funny. This is one of a 15 part series, and each and every point you have made has or will be covered in complete detail. Do you guys mean to tell me that you have read all of the links and text in the article before you posted these comments?

There is much to learn. Be sure you come by the blog for the last five installments.