macroguy

How Warren Buffett Is Smarter than the G20

I have been lending to, and investing, in middle market companies for over 25 years and started to worry about deflation in the late 1990's. I am convinced that: a) the "Treasuries" and "Feds" around the world know how to print money (it is probably one of the easiest
skills to master in the monetary tool kit) and avoid deflation, and b) that they are inherently biased toward over shooting inflation targets as
inflation reduces the real value of national debt.



On Nov 08 03:48 AM Gary A wrote:

> I still think deflation is a big threat, in which case Buffett's
> railroads will remain empty and the United States will be Japan.
>
>
> Only, in Japan the people themselves are solvent. I would say US
> deleveraging will outlast Buffett's days on this earth. I hope I
> am wrong.

CapitalSource: Tremendous Opportunity or Value Trap?

Good start. Looking forward to the rest of your analysis

FDIC Anoints Superbanks - Cramer's Stop Trading! (9/26/08)

Why do we need 2800+ banks in the US? We don't. The numbers will drop but the regulators will become even more important.

Lehman Brothers Take-over: Implications for Financials

LFI = latest financial information? Agree with majority about difficulty of comparing apples and oranges and notions that no outsider (and very few insiders, if any) really knows the real values of the assets (i.e., book value).

Market Not Buying Forward P/E Estimates

It would be great to revive this discussion.

When Will Fifth Third Bancorp Turn Around?

Stewie,

Valid point but it doesn't apply to most banks (save trust banks like Northern and Mellon). The problem with fee based revenues is they are volatile. This is why investment banks consistently trade at weak p/e ratios. When fee based revenues became difficult to project (i.e., investment banking fees from securitizations, IPOs M&A, etc.), investors tend to revert to assessing price versus book. Take a look at where the top 10 banks are trading today (JPM less than book, etc.). The more things change... the more they stay the same.


On Jun 22 05:15 PM Stewie wrote:

> That's a valid point for sure but about a dozen years behind the
> curve. Today commercial banks rely far more on fee revenue, than
> the loan portfolio as a their primary earnings engine. That's why
> many banks are now trading at multiples of tangible book that would
> have seemed insane in 1990. Just look to some of the recent bank
> mergers (last seven years) as evidence. In 1990 the market would
> have punished a bank who paid more than 125% of book, now deals of
> 3 to 4 times book are standard. I am not saying all of it is prudent
> but that's the way it is.

When Will Fifth Third Bancorp Turn Around?

U.S. bank stocks are heading for a “dead cat bounce,” says RBC Capital Markets analyst Gerard Cassidy....he says many banking stocks are still not cheap. The top 100 banking stocks are now trading at up to 190% of their price-to-tangible book value, his preferred metric, and predicts they will eventually to fall to trade at 125% of tangible book value.

When Will Fifth Third Bancorp Turn Around?

I don't follow FITB. I am a presently retired CEO of a commercial finance company and watch the stock prices and announcements of many of my old peer group members who are either banks, commercial finance companies or BDCs. This is cycle # five for me.

Revenues and earnings are complex, at times misleading and some times just wrong. Tangible assets values also have issues as they too can be overstated. But, I look first at price to tangible asset value to assess the attractiveness of a stock and am curious as to where FITB trades in this regard.

Capital Source: Analysis and Valuation

truth is... none of us can know what the portfolio looks like without insider access. your bet, should you choose to buy or hold on to what you have, is that management and the board (many of whom are large investors) have made, and are making, prudent investment decisions and capital allocations. if they are, and i suspect they are, the assets are worth par. if the assets repay per terms, and if they can continue to generate a mid teens roe, the stock will rise to about 1.5 to 1.75 times book value.... in 12 to 24 months. if they are hiding stuff and the assets can't meet terms....

JPMorgan Boosts Bear Bid to $10 - NY Times

If the gov't needs to back $30 billion of debt does mrtaxx think the shares have material value (other than hold-up value)? And if the shares are essentially worthless, does he dismiss the moral hazard?

Market Not Buying Forward P/E Estimates

It is not far fetched to envision GDP (that is US revenues) dropping 1.5% over the next year and earnings as a % of GDP dropping
from 11% to 8.5% (that is earnings). Given the Fed's potentially excessive stimulus, after the flights to safety subside it is not inconceivable to imagine the 10 year bond going to 6% and an overall stock market p/e of 16.5x (versus around 15 as of today). If all of that happens, you should expect to see the market drop by down to almost 10,000 or by as much as 18%. That said, if the 10 yr bond goes only to 5.5% all else equal we only have another 10% to go. If earnings go to 9.5% then we would have another 8% to go. So...how far is the bottom? Best guess is down 8% to 20% from here.