StockBoySF

Total Rating:
0 / 0

2 Comments

    • Sat Oct 4th 17:56 PM | Rating: 0 0
      Commented on:
      Wells Fargo: Strong and Getting Stronger
      If you want short term gain go elsewhere and don't buy WFC. Wells purchased WB as part of a long-term strategy. Wells is the best at cross-selling products to its customers. I remember when the Wells and Norwest merger was criticized ten years ago. Many thought that an internet bank- the old Wells, would not mesh with the consumer-oriented Norwest, I saw it as the best of both worlds. I was a fan of that merger and the resulting institution is the only AAA bank in the US and one that has retained it's stock value through the turmoil of the past year or two.

      The latest acquisition will allow Wells to apply its conservative lending standards to WB and apply its "high-touch" approach with its customers to cross-sell products. Whereas the old Wells and Norwest merger melded the strengths of two different companies, the WFC/WB merger allows Wells to apply its winning philosophy to a bank the same size (actually a bit larger).

      The conservative lending practices of Wells will be a big area of adjustment for WB's folks... but it is WFC's very conservativeness that kept it out of much of the current trouble. Sure there are areas of concern, but it is fundamentally the strongest bank in the US (with the possible exception of JPMorgan).

      Yes, Wells will experience problems with write-downs in the next couple of years and people will be wondering why Wells made the acquisition, but Wells is willing to take a short and medium term hit (including to its credit ratings which will be downgraded) for long-term growth. Given that Wells is the rescuer here it will be much of the successful Wells policy that becomes the standard in the new Wells.

      I predict two years of troubles (mostly with write-downs or loans and toxic stuff) and another two years for everyone at the new Wells to be trained and buy into the sales culture before solid returns are seen.

      The good news is that Wells knows how to do mergers and, just like the Norwest merger, Wells will take the time to get this merger right.

      If I were Wells I would be very aggressive in writing off the toxic crap as soon as possible. Make no mistake, without taxpayer assistance it will be a HUGE hit to WFC, but one that the bank will survive. Ten years from now Wells will be an AAA bank and just as solid as it is now, weathering whatever the latest financial markets may be doing.
      View article »
    • Sun Mar 16th 02:06 AM | Rating: 0 0
      Commented on:
      The Bailout's Pathetic - Here's Who To Blame
      "They just lack liquidity and no one will deal with them. The intrinsic value of the assets is good for the most part, it's just that people are too afraid to do business."

      These days the market doesn't know how to value the derivative, collateralized obligations and other assets that Bear deals in.

      So it is correct to say that firms are afraid to do business, but only because they don't know how to value the underlying assets. Many financial institutions are terminating their deals with Bear. Because these deals are in-the-money to these other firms, Bear needs to pay large termination amounts. That's why there is a sudden liquidity problem at Bear- financials terminating deals (because they don't want exposure to Bear) and receiving large sums of money.

      But I think the underlying premise- that there is unwarranted panic (and not just with Bear but in the past with the subprime and in the future with other firms), is true. Though no one knows for certain. Lastly, I will say that I do believe these assets are overvalued and a downward correction is needed, but I think most of the downward price pressure is unwarranted.

      You keep investing in equities- a savvy investor can make money whether the market goes up or down. And I think when there are big swings in the market, then there is more money to be made than in a market that steadily increases.
      View article »
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»