helplessobserver

ICE Makes for a Hot Combination Play

These short strangles on high quality shares is an excellent way to either make a sizable gain on your investment or get shares at a sizable discount. I say go with the pros, collect premium and prosper.

General Growth Properties: Trouble at the Malls?

I do not know about the Malls, but BAC has big trouble with two large office buildings and associated retail and Condo buildings in the Buckhead section of Atlanta. Already overbuilt BAC funded construction of two of four new buildings. Now it is really overbuilt. WSJ says the Condo projects alone fills Atlanta's needs for the next 10 years. This huge mistake will hard to sidestep in the up coming annual meeting.

BBT Reports Better than Expected Earnings

You need to revise your last statement to read: As the only large solvent bank in the southeastern US with a strong capital structure and experienced and prudent management we maintain our Hold recommendation on the shares.

I Liked GE in March; I Don't Like It Now

Let me see, a fellow comes to you and wants to borrow money for his business. He has $348,000 borrowed already and lent out questionable borrowers and in his wallet he has 26 crisp $100 dollar bills which he has to repay you and all his other lenders in case his borrowers default and he sustains losses. Well I do not think any man on the street would loan him any money, would you?

The Banking Time Bomb Test

How in the world can C pass any test, let alone a test that supposes credit conditions worse than in the current economy? The stress test is only one of the huge mistakes the government has made trying to paper over the huge amount of debt that has to be liquidated. The only reason most banks have not collapsed is the FDIC deposit guarantee. Recessions end when assets wind up in the hands of the rightful owners. This occurs at low prices where a reasonable rate of return is possible causing investors to return to investing. Until the debt is gone the recession will continue.

Earnings Preview: BB&T

I find it interesting that one of the best bank in America, BBT, gets kicked around by analysts while junk banks like Fifth Third get treated like slightly tarnished Knights in Shinning Armor. In 2008 the bank, after paying 28% taxes earned, repeat earned, $1.5 billion dollars. That is enough to write off all of its $1.04 billion of unpriced securities and $380 million of only partly collectable "sub prime consumer loans" it has on its books. 2009 earnings are pegged at $1.50 per share adding another $750 million of retained earnings to its already substantial cash hoard. I expect is $0.47 quarterly dividend will be cut by year end as CEO Kelly King observes the worst banking enviroment he has ever seen. They report tomorrow, maybe they will report $0.50 to cover the $0.47 dividend already declared.

Wednesday Options Recap

Cetin is right if you buy them, but dead wrong if you, like the pros, write them. A May strangle written on FCX if called yields 9% in a little over one month. On the other hand if the stock is "put to you" the premium collected gets you FCX at a nice discount to its current price.

Bank of America Punishes Customers Who Dare to Have a Balance

Every once in awhile I hear that BBT is gaining market share and now BA is throwing customers their way. Their latest 10K shows only $1.0Bn, 1% of loan assets, that cannot be marked to market. This is a small load for a bank that will earn over $500 million this year while paying an above average dividend. This $500 million is net after paying a 28% federal income tax. I wonder how much federal tax BA will pay this year?

Buffett's Bank Buys Beat Back Downgrade

Little by little BRK's shopping for discounted goods will have to be reflected in its share price. Its GE and GS stakes will earn Bernie Madoff type returns of at least 10% or more per year. While I always thought you wrote "puts" when the market is rising somehow things got foggy in Omaha and they wrote at the top of the market. High premiums, no collateral requirements and a long time frame were obvious decision factors.

CNA Financial: 25% Option Opportunity

No doubt about it Jim Tisch and his managers at Loews are among the best on Wall Street. His father Larry took a movie chain and built it into a monster money machine. Jim is wisely moving Loews into the energy business, but he knows fortunes in America are anchored in the cash cow banking and insurance industries. He like Warren Buffett is busy searching for straw hats in the winter of this economic slow down.

Will the PPIP Bankrupt the FDIC?

They had better be careful how they handle the FDIC. It is the only thing that is keeping us from complete financial collapse as it is preventing a $5T - $10T run on the banks. If the public loses confidence in the FDIC and starts pulling money out of the banks capitalism and rule of law is doomed.

Unwinding AIG’s Derivatives Exposure: Loomis and Buffett

In the coming financial "emergency" all swap derivatives contract settlements will be handled like the Tulip Bubble option. All contracts will simply revert to their initial conditions where premiums will be returned to buyers and collateral will be returned to the sellers and all contracts are cancelled. A super Force Majur will be declared.

House of Cards: How Bear Stearns Came Tumbling Down

I enjoyed this post.

America's Banks Saved Already? Not Quite

The problem with bankers is when they get outside they walk around golf courses instead of touring foreclosed and distressed properties carried on their loan book. Years ago Ross Perot toured GM dealerships on weekends and met poor quality face to face. This led him to encourage GM to buy out his stake, which they did. If bankers had to view the trashed homes they hold paper on a whole new sober attitude would emerge.

Leverage: Still a Problem

Despite all the turmoil very little debt has been extinguished. The function of a recession is to return property to its rightful owner; debtors "i.e. pretend owners" must be stripped of their property and assets so those who have real assets can begin investing to start the recovery process. Think of it, all most all commercial real estate, is still in the hands of the pretenders. The bank lenders must convey this property to a class of real owners at a big, big discount.