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Zanalyst

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  • Banks fines: How much and where have they gone? [View news story]
    So Yoel, if it's been "More than seven years after the global financial collapse", what date are you using?

    To my recollection, the seven year mark will not occur until near the end of September 2015.

    It would be more meaningful (and more actionable) to know the amount of fines AND legal fees paid by individual banks relative to their net income during the period from Q3 2008 and Q4 2014.
    May 1, 2015. 10:13 AM | Likes Like |Link to Comment
  • Why The Fed Won't Save You From The Next Bear Market [View article]
    The article applies a historical perspective to today’s equity market trends; and, although well-presented and thoughtful, if in fact we are in a “new normal”, I’m not as convinced as many are that buying dips will be the way to go in response to the next significant market correction.

    Obviously, there are many metrics to consider in determining proper equity allocations, entry and exit points – to each his own. Since I’m not smart enough to call tops and bottoms using either technical or fundamental analyses, I plan to be “under-weighted” equities when (not if) clearing houses are designated as SIFI’s (TBTF) by the Fed, et al in the near future.

    At the next inevitable financial crisis, “clearing house” will take on a new meaning for market participants.

    Also, for those who rely on “stop orders” for protection, they need to ask their brokerage firm, asset manager, etc. how effective SO’s are in a “fast market”.
    Mar 11, 2014. 05:25 PM | 1 Like Like |Link to Comment
  • An interesting exercise in the always dangerous practice of extrapolation: A look at this week's H.4.1 update shows the Fed holding $1.583T of outstanding 10-year equivalents or, a record 30.32%. By extension then, only 69.68% remains for the private sector. Currently, the figure is rising ~0.3% per week as Bernanke and company snap up Treasury bonds (TLT, TBT). Were that pace to continue until 2018, the Fed would be in possession of virtually the entire market. Food for thought from ZeroHedge and Stone & McCarthy. [View news story]
    "Were that pace to continue until 2018, the Fed would be in possession of virtually the entire market."

    Actually, that's been part of the plan all along - acquire all of the UST debt - then forgive/cancel it - and nobody loses and everybody's happy!

    The TBTF/J banks (finance guys) have known this all along (which is why they are always there to "buy the dips") while the academics (econ guys) refuse to acknowledge this;

    firstly, because the econ guys need a perceived crisis so they can feel relevant and justify their totally, completely and utterly useless research grants; and,

    secondly, because they didn't think of it - notwithstanding the millions upon millions given to them in totally, completely and utterly useless research grant money.
    May 23, 2013. 10:50 PM | Likes Like |Link to Comment
  • More on the HSBC (HBC) loan portfolio sale: The package has a book value of $3.4B vs. the sale price of $3.2B, so the bank won't book too much of a loss. Newcastle Chairman Wes Edens said just days ago this could be the year when banks really start to unload non-performing loan portfolios, and the buy makes a nice addition ahead of the spinoff the company's residential business. [View news story]
    The latest headline should read:

    HSBC Loan Portfolio BV Magically Drops 20% In 6 Hours To Avoid “too much of a loss”

    • Tuesday, March 5, 9:03 AM ET
    “Newcastle Investment jumps 3.1% after inking a deal to acquire up to 50% of a $4.2B UPB portfolio of consumer loans - home and unsecured personal - from HSBC.”
    • Tuesday, March 5, 3:26 PM ET
    “More on the HSBC loan portfolio sale: The package has a book value of $3.4B vs. the sale price of $3.2B, so the bank won't book too much of a loss.”

    Now that’s efficiency – in just over 6 hours HSBC can reduce the BV of its loan portfolio it’s selling by about 20% ($4.2B to $3.4B) “so the bank won't book too much of a loss”.

    Cool – just think of the magic they can work when they have a whole quarter to play with the numbers! And it's all legal, too!

    Actually, bank regulators love it because not booking actual losses mitigates capital erosion - which is bank management's mandate don't you know.

    Once the banking industry learns to manage its regulator, then credit risk management is a snap!

    That's why I just l-o-v-e bank stocks!
    Mar 5, 2013. 09:36 PM | 1 Like Like |Link to Comment
  • Is A Perfect Storm Coming To The U.S. Grain Market? [View article]
    Thanks for publishing your well-supported analysis.

    Thoughtful, timely and actionable - can't ask for more than that!

    This trade prospect is definitely worth further consideration; and I also look forward to your future articles.
    Feb 21, 2013. 08:56 PM | Likes Like |Link to Comment
  • Reserve Releases At Banks: More Scrutiny Required. What Are They Thinking? [View article]
    Of course it's "rules based", but someone has to interpret and implement the rules; and to do so requires a high degree of subjectivity.

    Regulators are charged with the responsibility to determine (also subjectively) whether or not a bank's risk model and methodology adequately reflects the risks of loss within a bank's loan and investment portfolio.

    Bank examiners are very competent in identifying risks; however, if their regional directors will not support them, then the risks are not properly identified.

    Bank regulators are delaying loss recognition, HOPING that the economy will improve sufficiently for credit quality to improve or that the weaker banks will be absorbed by the better capitalized banks.

    In 2013, bank regulators will learn first hand what bankers have always known - HOPE is not a strategy for success.
    Dec 17, 2012. 10:38 AM | Likes Like |Link to Comment
  • Reserve Releases At Banks: More Scrutiny Required. What Are They Thinking? [View article]
    Excellent article and observations.

    Large bank CEO's are much better at managing earnings, regulators and politicians than they are at managing operating risk.

    In the current regulatory environment, reserve releases are progressively discretionary; in that, the larger the bank, the more subjective the risk model.

    But "looking at the larger picture" so to speak, the "loan-loss reserve release" phenomenon, leading to overstated banking profits throughout the financial services industry for the last 3 years or so, has materially distorted the industry's reported earnings results, as well as earnings capacity going forward.

    Most market observers are focused on the effects of "quantitative" easing. But, unprecedented "qualitative" easing within the financial industry will have a much more severe market impact, once regulators stop allowing banks to excessively release loan-loss reserves.

    "Qualitative" easing is essentially regulatory forbearance; which has never been more prevalent in the history of the modern financial services industry and will likely trigger (or at a minimum, greatly exacerbate) the financial crisis, Part II, due to arrive in 2013.

    Professional and "willfully ignorant" fund managers who place other peoples' money into financial industry common stocks, based on earnings with a material "loan-loss reserve release" component are betraying the trust of their clients - and they know it.

    But, that's "okay" as long as the greater fool theory remains in play!
    Dec 16, 2012. 10:13 PM | 1 Like Like |Link to Comment
  • Investors Take Heed - ADP Fiasco Betrays Meaningless Character Of Economic Reports [View article]
    "The data don't matta"
    Nov 2, 2012. 10:07 PM | 1 Like Like |Link to Comment
  • Einhorn Slams QE: Is The Fed Destroying The Economy? [View article]
    DidDeep: “I don't trust a small group of planners who's primary function is to ensure the health of banks and secondarily, the health of the economy.”

    You are absolutely dead-on correct. When the Fed refers to “financial system stability”, they mean “accommodating the recapitalization of TBTF banks” – period. No need to go any further about the Fed's impact on employment, inflation, economic growth - it's all secondary to the condition of the TBTF banks.

    Therefore, those (including brilliant hedge fund managers and Buttonwood economists) who continue to obsess, pontificate and put forth meaningless arguments and theories regarding the economic impact of the Fed’s monetary policies are missing the point - which is first and foremost about the TBTF banks.

    And, the TBTF banks remain grossly under-reserved (therefore under-capitalized) relative to their balance sheet and operating risk profiles. Non-TBTF banks are also under-capitalized, especially in view of a stalled economy – at best – for the foreseeable future.

    And, the FDIC’s Deposit Insurance Fund is also grossly under-funded, so they have drastically slowed the pace of bank closures until after the election. The FDIC could not close one medium-sized regional bank without accessing its Treasury line of credit – which it will likely do for the first time in its history sometime in 2013.

    (I have devised a politically and economically viable monetary solution, which does not involve further federal spending or so-called quantitative easing; but neither Buttonwooders nor policy-makers will accept any solution that does not originate from within their ranks. Oh well…)

    DigDeep: “BB has said they'll have an announced unwind of their balance sheet, at some point. The implications of an unwind will hammer bonds.”

    No need to fret about this at all. As I have stated for some time now, the “unwind” will be the cancellation of the UST’s on the Fed’s balance sheet – guaranteed. It’s quite stunning to me that neither the hedge fund managers nor the Buttonwooders have gotten the memo on this yet – or maybe they have, and they promised not to tell…
    Oct 27, 2012. 10:37 PM | Likes Like |Link to Comment
  • Are Housing Stocks Priced To Perfection? [View article]
    "So, why did management not repurchase any shares in 2H:11 if they knew the cycle was turning?"

    Even if management wanted to, their lenders would not allow it, per loan covenants.

    The bankers see all the "housing turnaround" hype for what it is - more hope and change. And neither hope nor hype can repay the banks' builder loans.
    Oct 22, 2012. 12:20 AM | Likes Like |Link to Comment
  • Banking 101: How To Play This Risky Sector For Profits [View article]
    There is no such thing as "smart bets on banks" as long as accounting fraud ("opaque accounting" - as this article and many others frame it) is an accepted practice among banking and securities agencies charged with the responsibility of enforcing relevant law and regulations.

    Pari-mutuel betting at a thoroughbred race track is much more fun and presents the likelihood of much higher returns on investment than investing in the publicly traded common stock of banks.
    Oct 21, 2012. 02:08 PM | Likes Like |Link to Comment
  • JPMorgan And Citigroup Earnings: Gimmicks And Obfuscation [View article]
    The article is dead-on.

    Large bank CEO's are much better at managing earnings, regulators and politicians than they are at managing operating risk.
    Oct 19, 2012. 08:53 PM | Likes Like |Link to Comment
  • Ghoulish Bank Financials In Time For Halloween [View article]
    Thanks for the insightful article.

    The "loan-loss reserve release" phenomenon, leading to overstated banking profits throughout the financial services industry for the last 3 years or so, has materially distorted the industry's reported earnings results, as well as earnings capacity going forward.

    While most market observers are focused on the effects of "quantitative" easing, unprecedented "qualitative" easing will have a much more severe market impact, once regulators stop allowing banks to excessively release loan-loss reserves.

    "Qualitative" easing is essentially regulatory forbearance; which has never been more prevalent in the history of the modern financial services industry and will likely trigger (or at a minimum, greatly exacerbate) the coming financial crisis, Part II.

    Professional and "willfully ignorant" fund managers who place other peoples' money into financial industry common stocks, based on earnings with a material "loan-loss reserve release" component are betraying the trust of their clients - and they know it. But, that's "okay" because everyone's doing it - right?
    Oct 12, 2012. 09:47 PM | 1 Like Like |Link to Comment
  • Financial Sector: Earnings Estimates Starting To Improve - Can Revenues Follow? [View article]
    Bank execs are much better at managing earnings and their regulators than they are at managing risk.
    Oct 11, 2012. 04:19 PM | Likes Like |Link to Comment
  • More on the BofA (BAC -0.9%) settlement: The $2.43B payment will be covered by existing litigation reserves and Q3 litigation expenses of $1.6B. Additionally, the bank expects Q3 pre-tax earnings to take a $1.9B hit as improving credit spreads force a DVA. The bank also tosses in an $800M charge thanks to U.K. corporate tax changes. All told, the expected hit to Q3 EPS is $0.28/share (the bank earned $0.19 in Q2). Previous (I, II). [View news story]
    "Note in the last quarter, the reserve release was....$1.9B. Will another reserve release offset much of this?"

    Why stop at $1.9B? Why not release $5B, so BAC can pay dividends and buy back stock?
    Sep 28, 2012. 05:46 PM | Likes Like |Link to Comment
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