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Modeling Bank of America's Share Price

I guess management has nothing to do with it?

Securitization Groups as Financial Slaughterhouses

It was thought that geographical diversification within mortgage pools would address the risk of one area suffering an economic downturn. Afterall, real estate is impacted by the local economy and reflects the strength of local incomes. The problem is that real estate prices overall were grossly inflated by the availability of easy loans. It was no longer was an issue of local economic strength, but a reflection of easy money placed in the hands of the most inept asset buyers. No amount of Wall St quant modeling could reflect the resultant human behavior. All their modeling was based on historical data, but rules to how the game was played were changed. It changed from being an issue of estimating how many subprime borrowers would default, to counting how many borrowers would default when they were upside down on their home in the face of increasing mortgage payments on a home they never had any equity in from the outset. You don't need a model to predict that result, the borrowers simply hand back the keys in droves.

Back to an Almost Record Curve

Watch, the rise in treasury yields will allow the banks to play the carry trade game and earn themselves out of this mess. They did the same back in '94.

The Final Hours of GM?

Unions are nothing more than an artificial restraint on the supply of labor. In a world economy, labor reliant manufacturing is easily exported to regions of lowest cost, thus defeating the geographically local artificial restraints imposed by unions. In simple terms, labor unions kill themselves. Figure it out or die.


On May 22 07:44 PM Larry M. wrote:

> A year ago .... before Wall Street Collapsed GM was I believe about
> $40 per share. Obviously the Collapse (Combined) with all the Wall
> Street GM Bashing by it's Investment Bank Ratings Agencies has Crashed
> the Broader Economy and took the Auto Industry down the Tubes.<br/>
>
> I Charge that Wall Street has Successfully Bashed GM into the dust
> for the Express Purpose of Destroying the Last of the great Manufacturing
> Labor Unions. This WAS Deliberate as such is Criminal to Deliberately
> Damage and Destroy the Economy of The United States of America.
>
>
> And that my Fellow Americans Deserves Prison Time for Economic TREASON
> agianst The United States of America by Several Wall Street Banks
> and their Ilk the CFR, the TC and the (Private) Fed Bank.

When Will Banks Start Lending Again?

People in the banking world I'm talking to say they're doing renewals and admin work. Pretty tough to find qualified commercial borrowers in this economy, so no one is tripping over themselves to extend loans to new borrowers. Basically, we're now looking at a Fed constructed earn out for the banks: short term rates next to zero, lend out longer term to known high quality customers at interest margins close to 4%, or buy Treasuries.

California: Trailblazing the Road to Insolvency for the Rest of Us?

Legalize and tax marijuana. Maybe it would jump start munchy sales, allowing Mother's Cookies to exit from Bankruptcy and start producing them beloved icing covered animal crackers?

Is the State of California Broke?

Yes it's true and the voters are pushing back because they resent the fact that Sacramento continues to punt on making the hard decisions. Private sector people are tired of paying ever increasing taxes for the inflated salaries and generous retirement plans of police and firefighters. On the other hand, when the issues are parsed and presented to the voters directly, few turn (vote) down benefits for the firefighters, police or teachers. Those factions all have strong unions that spend millions each election to sway voters. They're spending like crazy on the current initiatives, but this time it looks like they're going down. The last initiative, 1F, is nothing more than an uptick rule. So they can't increase pay in an economic downturn, but they'll catch it up when things turn around.

Pimco's Gross: Looking at the New Capitalism

Obama can try all he wants to redefine capitalism. He may even succeed so within the U.S. on an interim basis, but the long term result will be that capital will flee to the areas of highest return. It's like unions can place an artificial restraint on the supply and price of labor, but if they aren't competitive in the long run, those jobs flee the U.S.

Stress Testing: What's Your Bank's AQ?

That's the first thing that struck me: why is Wells on the Good Bank list and yet the leaks on the Stress Test results are saying they need to raise $10 bn of capital?

Is their rank being distorted in the AQ by the recent run up in their share price? Is there something about their underwriting standards that is not being capture by the inputs to the AQ test? I think it's a combination of the two. I personally think that Wells pretty much ring fenced the potential damage from acquiring Wachovia. I think the stress testing done by the government was probably skewed towards further downside cases on real estate, particularly commercial, and Wells is and has been primarily a bank focused on commercial real estate. However, Wells has traditionally been a conservative underwriter on commercial real estate and may be getting painted with the excesses in lending that went on in this area. It's a tough call to make unless you had access to the details in their books.


On May 04 12:00 PM Vikingblood wrote:

> Wells Fargo is under your Good Bank list ... last time I looked,
> they were asked to raise an additional 10 Billion in Capital.

Treasurys Are Getting Crushed

When the Treasury has the printing presses running at red line 24/7, you can be damn certain there will be some "crowding out" in the market. Yields will have to rise to absorb all these IOUs. Just sayin.

BTW I had a private discussion with the devil. He said "wear two condoms and a surgical mask and dive in. You'll be fine."

Buffett: I Wouldn't Buy Newspapers 'At Any Price'

Just canceled my local paper. Their local coverage had dwindled to nothing. They got rid of their guy who covered fishing and he was replaced by some pudgy surfer chick. All the front page articles have been on-line the day before. They cut their business section to 2 pages and include that at the back of the front section. The only remaining use I had for the paper was to cover spills while doing oil changes on the cars.

Evidence That End of Housing Price Collapse Is Not Far Off

He3re In Orange County, CA, they're reporting consecutive month-over-month price increases in housing. Not so for inland Riverside and San Bernadino. Still, it's the early sign of a bottom. Coastal properties are most desirable and recover the quickest. Least desirable is the stuff much further inland. That's where people who could not afford coastal bought. That stuff is still spiraling downward.

SEC Exploring Remedies for Short-Selling Manipulation

Bravo!

1) Reinstate some form of the uptick rule.

2) Eliminate naked short selling.

3) Suspend mark-to-market accounting for financials.

This more than any capital injection or stimulus, will stabilize the markets. Then they can go in and sift through the wreckage to determine true asset values in a normal market. In the absence of these changes, they are merely attacking the next hotspot that flares up in a huge firestorm.

FASB: The Damage Has Been Done

Take mark-to-market accounting and add in naked short shelling in the absence of the uptick rule and you get.....the disastrous current market downtown fueled by speculation as what underlying asset values CURRENTLY are.

Is Windows 7 Just a Vista Service Pack?

I've heard reviews on the radio for Windows 7 and they were saying it is the best Windows since NT2000. It's what Vista should have been. Based on that, I'm holding off a laptop purchase until it's available.