gwinner

The Next Leg up in Financials

I called E*Trade the first day they started offering mortgages again and the call demand was already high, with no promotion. Jason's analysis is sound, but it is a mixed bag. Most posters still don't seem to understand that E*Trade got rid of the ugliest problem, the "subprime" CDO's, to Citadel in 2007. My understanding is that most of the mortgages E*Trade originated were of reasonable high quality, with an average FICA of around 720. And E*Trade is reserved for losses into the future. However, assume that most who are refinancing now are those who "can" and only those loans will transfer off the E*Trade books (deleverging) and E*Trade will earn origination fees. That's all good for E*Trade. However, it stands to reason that the worst case mortgages won't be able to refinance and will remain on E*Trade books to either weather the storm or croak. So, a higher percentage of the remaining mortgages will be "at risk" when the great refi of 2009 is done. Worst case, E*Trade will be in a first lien position. Unfortunately, the second biggest problem after getting rid of the CDO's has been the HELOC portfolio. They've done their best to close untapped lines, but the portfolio is still nervously large. BAC has a much larger problem with the CountryWide portfolio, but is a cash generating monster. That's another reason why Ken Lewis still smiles.

Long on ETFC and BAC.

Why Is Everyone Blaming the CEOs? It's the Government's Fault

We need Mad Max's Thunderdome. If nothing else, the entertainment value would provide temporary relief from reading the dismal outlook at Seeking Alpha.

Put Ken Lewis in with Barney Frank first. Two men enter, one "man" leaves. I know who my money would be on.

John Thain Called Out by the President

If this is the way wire line brokers managed their own houses, why would anyone want them to manage their money. I'm looking for E*Trade, Schwabb and TD Ameritrade to benefit in two ways: 1) More investors are taking control of their own portfolios, 2) Brokers with trust relationships are leaving the wire lines to form their own boutique firms that use the discount trading platforms to execute trades for their customers.

High publicity stories of abuse like this by a wire line CEO can only accelerate this process.

Buying Up BofA: Booyah!

Beware of the analysts for their feet abide not in their houses! When BofA was in the 50's only a year ago, it was on the GS conviction list for a rise to $70-$80 in 12 months. An analyst at Citi threw E*Trade under the bus, yet held back on Citi, which was even more vulnerable. Now E*Trade, because they marked to market their CDO's last November (which may be why Citi threw them under the bus) and have a loyal and growing customer base, are looking to be one of the first financials to emerge from the cloud of doom caused by direct involvement in CDO's, subprime, ALT-A/Option ARMS.

The money engine at BofA backed by the US Treasury will weather the storm. CountryWide was bought at a fire sale price. The US tax payer has funded and backstopped the Merrill acquisition. The question in my mind is can they retain the Merrill customer base and integrate the cultures? If yes, both of these acquisitions will ultimately be accretive.

We may not have seen the bottom for their stock, but there is money to be made selling puts at $2.50 and $5.00, which lowers the downside risk of buying right now.

Can Cities Create "Foreclosure Sanctuaries?" [Housing Tracker]

Michael Aguirre is a joke, this is another attempt by him to garner press and try to bolster his campaign for re-election. If we re-elect him in November, we're fools.