District Banker

Barclays, BNP Roped in by K1 Group Hedge Fund Fraud

thanks for another insightful comment, jackie.
>noonecaresaboutyou...


On Nov 01 08:50 AM john s. gordon wrote:

> so hedgie fund fraud is not only in the u.s.a.

Commercial Real Estate: We're Just Kicking the Can Down the Road

the way Westcoaster thinks, I'm fairly sure he's a regulator...

Hedge Fund Fees: Is 2 and 20 Fair and Appropriate?

Your second paragraph makes much more sense than your first. Most hedge funds have "claw-back" provisions, where (for example), if they lost their investors $ in 2008, they would need to make it back in 2009 before charging a performance fee.

Further, if you want performance measured against an index - buy a mutual fund. When you measure a manager against an index, he tends to mimic that index in his portfolio, adjusting weightings here and there for his favorite/least favorite positions. This is what mutual funds do, and why they get so big (managers become incentivised to make $ on AUM, not performance).

Finally, if you measure a hedge fund against an index - how do you pay that fund when the index is down? I work at a hedge fund that was up better than 30% last year. We took our performance fee based on the 30%+ returns we generated - not our 30% + the amount (insert index here) was down.


On Oct 05 04:50 AM Moon Kil Woong wrote:

> Personally, I'd be more concerned with the 2% when I loose money.
> Furtnermore, like all other hedge funds, the bonus should only be
> paid upon beating a given index. Otherwise they just sit around and
> dream about volatility. Last year they only took 2% because this
> year they can book 20% on their making some portion of their money
> back (not the 20% they have to pay doing it). Then also the taxman
> cometh to collect their share. In almost every way possible, this
> is bad for the investor.
>
> Needless to say, I don't buy hedge funds. But I suppose, if you are
> dense enough to pay for them under these terms I suppose they have
> the right to charge you what you are willing to pay. Most likely
> if you weren't losing your equity with them you'd be losing it with
> someone else. You just can't protect a fool and their money from
> being parted. The financial market has known this for centuries.
> Just ask Bernie Madoff. Most likely he would just laugh.

Have Thrifts Outlived Their Usefulness?

I agree - the thrift charter has become mostly obsolete. I would be interested in hearing your thoughts on credit unions converting to savings banks, and ultimately going public.

The Hard Truth, Courtesy of the FDIC

Reread my post - you still dont understand the difference between when an expense is PAID and INCURRED. This is basic accounting and has been around for years.

I agree, it is not a good sign for either the FDIC (obviously the DIF is hurting at best, and likely insolvent), or banks (who are incurring higher insurance costs because of the increased number of bank failures).

We are in 100% agreement on this. However, nothing in the above paragraph suggests that banks should simply take this massive hit to equity all at once, immediately. GAAP accounting allows for the recognition of this expense as it is incurred - NOT PAID.

Similar to a deferred tax asset, there is value in this prepaid expense line. There are circumstances where the prepaid expense line may be accelerated - for example if the FDIC comes with their hands out yet again. However likely that may be (and I agree that this almost certainly will happen), it has not happened YET, and thus - GAAP accounting should be applied.


On Sep 30 08:31 PM Kid Dynamite wrote:

> yes i understand the theory of accounting for expenses - but you
> guys are crazy if you just nod your head and apply it here.
>
> Thanks for the comment District Banker - but your first sentence
> is my point: the expense is incurred NOW! not over the next three
> years - it's incurred NOW because the FDIC - aka the "Banks' Insurance
> Fund which allows them to operate" is insolvent! The hit should be
> taken now - and if the FDIC does not need more money in the next
> few years, then future earnings for the banks (without FDIC fees
> for the next few years) will look better.

The Hard Truth, Courtesy of the FDIC

You need to brush up on your Accounting 201, Kid. This is a fairly simple (and common) ledger line, and prepaid expenses like this one are recognized as they are incurred - not paid - as standard practice.

I realize that C will have $1 b less today (not $333mm less) - but this is a balance sheet item, not a cash flow statement.

Further, while this isn't a great deal for the banks (because they will have a zero-yielding asset on their books), at the end of the day it is still better than paying MORE in deposit insurance premiums via special assessments.

Finally, it's not a bad deal for the FDIC because they're essentially getting an interest-free loan/advance.

Finally, this is not an attempt to "hide" the insolvency of the bank industry, but rather give the deposit insurance fund the necessary capital to work through today's bank failures.

I am as negative as anyone on the US Bank & Thrift sector, but this idea is definately not the worst to come out of Washington DC in the last few months.

It's Time to Call a Housing Bottom

you understand that the CaseShiller numbers you are referencing do not include foreclosures, right? Do you think that foreclosure sales are a bigger or smaller part of the market today than they have been historically? If they are a larger portion of home sales today (they are) - then isn't the CaseShiller data missing some important (negative) data points?

What’s My Payment?

The name of the song is just "Beverly Hills." Get your Rivers Cuomo straight

M3 Funds: U.S. Banking Sector Remains Undercapitalized

At the time this idea was presented, FNB was at $9. Now it's at $7.

Thanks!


On May 08 06:07 PM sethmcs wrote:

> Funny I am up 45% on FNB and want it to go down to buy more. I feel
> the same thing about FNB that Warren Buffett feels about Wells Fargo.
> FNB is a good regional customer oriented bank. I will buy more between
> $6.50 and $7.00 for a long-term dividend investment. I am a very
> satisfied customer of this bank.

Five Midget Banks I'm Watching

I realize that you post a caveat saying, "I have not done enough work on these 5 names..." - but how could you post this article without a single piece of fundamental analysis??

The closest piece of relevant info you posted is P/Book - which no bank investors look at (we all look at P/Tangible Book). If you have to ask the difference, you shouldn't be investing in any financials, and certainly not banks.

On what basis would you say that FITB was the riskiest buy?

The Case for Shorting Bank of America

Yeah - real tough to remain nimble in BAC.

Please.... bandwagons abound on this thread.

The Case for Shorting Bank of America

Since when is the "smart money" decided by what the masses do? These are the same people that got toasted in 2007 and 2008.

As for your comment on Lewis, I agree that it could actually take some overhang off of the stock - but that's difficult to quantify/measure. Could go either way.

Bear markets never (EVER) go straight down, and banks are renegotiating CRE loans at a furious pace. You keep loading up... I need someone on the other end of my short sells!


On Aug 19 10:34 AM JosephN wrote:

> Actually, its because of BAC's exposure to california real estate
> that I believe it is a buy. Its one reason I think BAC, JPM, and
> WFC have all had nice runs. Exposure to california home real estate
> is now a positive rather than a negative in my opinion.
>
> I live in Orange County, CA. Probably one of the 'worst' areas of
> the housing bubble pop and I'm telling you it is over with here.
> People are buying or refinancing and the banks exposed to the market
> here will do very well on fees. I've even heard people are flipping
> foreclosures after only a few weeks from buying them at auction for
> 20-30% profits.
>
> If Lewis were to go I suspect there would be a pop up in price rather
> than a pop down. So I'm not worried there either. Commercial real
> estate so far has been a red herring for keeping people out of the
> financials while others (like me) loaded up, but so far so good.
> Only the closing of the car dealerships really has me worried on
> that front, as these dealerships often occupy large amounts of prime
> land in central locations.
>
> In any case, if you think 'insane to short BAC' is a little over
> the top that certainly is your opinion. Short interest in BAC looks
> to be around 1%, so maybe we could just agree that it looks like
> the smart money isn't taking the short side on BAC here.
>
> On Aug 19 10:10 AM District Banker wrote:

Property Values - Eight Key Charts

Wrong. Case-Shiller data excludes foreclosure data.


On Aug 19 10:29 AM nym wrote:

> It seems to me that the affordability chart reflects: large turnover
> in certain states (CA, NV, AZ etc.), mostly of in the bottom half
> of the market on distress (foreclosure et al.) sales. Your results
> may vary. Also, note that the source is NAR, National Association
> of Realators: guess what butters their bread.

The Case for Shorting Bank of America

I don't know where to start with your post, Joseph.

I agree, on a TBV basis, BAC is not that expensive. (As an aside to the author - TBV multiples are how bank investors look at these animals today - NOT P/E multiples.) But let's think about WHY BAC might be trading at a discount.... could it be CFC and the exposure to CA real estate that it added to the balance sheet? Could it be the toxic waste dump that was MER? Could it be constant rumors of Lewis being pressured to resign? Could it be the other shoe that is looming: commercial real estate?

In any case, while I agree that when looking at a short, you MUST focus on fundamentals, (and WFC is many attributes of a potential short) - I reject your statement that "you'd be insane to short BAC."

That's just a little over the top.


On Aug 19 08:24 AM JosephN wrote:

> Shorting on technicals is like russian roulette. You have to look
> at the fundamentals.
>
> On fundamentals, BAC is still trading below tangible book value and
> being a huge multinational bank there are money managers that will
> have to buy this bank as the economy turns as they are required to
> match this or that index. Throw in the fact that housing has bottomed
> and the fees from refinancing mortgages for some real earnings power
> and you'd be insane to short BAC.
>
> WFC does look weaker though, trading above tangible book value and
> being USA centric with little overseas exposure. There is also a
> Buffett halo with WFC for what that might be worth. Maybe you could
> squeeze a small profit here on the short side.
>
> Really though, shorting banks was last year's trade. This year's
> trade is to buy and hold the financials tight.
>
> (long BAC)

Property Values - Eight Key Charts

Both the author and Andrew (below) are missing the KEY point with the S&P/Case-Shiller Index: IT EXCLUDES FORECLOSURE SALES DATA.

In normal times, this is good practice, as foreclosures are driven by personal events (divorce, loss of employment, etc) - and are not necessarily indicative of true pricing trends.

Today, however - foreclosures are driven by massive price declines, and aggressive borrowing (I-O, Pay-Option ARM, etc) that only works when prices appreciate. Ignoring foreclosure sales today is ignoring meaningful data from numerous markets across the US: CA, FL, MI, GA, Phoenix, Las Vegas & so on...


On Aug 19 05:57 AM Andrew Butter wrote:

> Nice clear article.
>
> Don't agree 60% peak to trough the extrapolation (red line) on the
> Shiller chart is not correct, the correct extrapolation is roughly
> the line of nominal GDP per housing unit.
>
> My analysis says 40% peak to trough, nearly there.