Chris B

Preview from Europe: The Train Wreck Continues

The Europeans are heading for disaster. Like the Japanese in the early 90's, they lack a cultural history of a deflationary depression, and therefore only know to watch for inflation. Again like the Japanese, their response to the crisis has been slow and insufficient. Meanwhile, a wave of Eastern European defaults are about to collapse the Western European banks. I'm not yet sure how this will affect the US or the Euro, but my European equity exposure has been minimized to a few ETF cross-holdings. Yet with systemic risk, that might be too much.

Irish Banks Continue Riding the Roller Coaster

If I was going to speculate on high-risk European banks, I'd probably buy National Bank of Greece (NBG) before AIB. The risk of government default is similar, but NBG has actual earnings at a single-digit PE, was not involved in a California-scale housing bubble as the Irish banks were, and has a better balance sheet. Future Irish writedowns are both unpredictable and inevitable and nationalization looms as an equity-destroying possibility.

Ten Top Value Traps with Unreasonably High Dividends

Be careful. This is how many dividend investors rationalized purchasing banks one year ago. Lehman, Bear Stearns, and BAC all looked good from that hypothetical 50% dividend cut perspective. However, they turned out to be on the verge of massive losses that were certain to wipe out both equity and dividend. That's why their investors were bailing.

Analyze these stocks with the assumption of zero dividend for the next 3 years and only take a gamble if they are still attractive. Business models and financial condition matter more than a hypothetical payout. Also consider that many stocks that don't pay a dividend today will after the recovery, and vice versa.


On Jan 15 10:44 AM notsosmart wrote:

> this article is nuts.take the yields cut them 50% & you still
> have a great return.NAT & FRO are still giving good returns.i
> have no agenda.own both happily.

10 Most Interesting Stocks for 2009

As an alternative to VZ, S, or T, you could take a look at AMX - American Movil. The cellphone market in Latin America has much more growth potential than in the saturated US, and check the valuation!



On Jan 12 05:36 AM bjohn13 wrote:

> S is a company that appears to me to be in trouble. They could be
> next asking for a bailout. Seriously, anyone look at their profit
> margin for Q3? -83%, and you want to know why? Because they have
> lagged way behind their competition. I have to believe that a company's
> product has some semblence of an ability to compete before I'll invest.
> Right now, Verizon is the far superior product. That said, I'm not
> about to invest in Verizon either. They have a debt load that is
> staggering, but at least they are turning a profit.
>

Allied Irish: Too Good to Be True?

"the company made $5.98 in profit [per share] in fiscal 2007"

-and it is safe to say that every cent of that was lost two or three times in 2008!

"Furthermore, the company’s balance sheet shows a current tangible book value (excluding goodwill and other intangible assets) of about $25 per share!"

-and we must be careful not to confuse value with a delay in write-offs. Book value is usually price paid, not market value.

"Some estimates are telling of 50% loss in the value of housing in Ireland..." "But even in a worst case scenario, where AIB’s book of assets has to be written down 50%, the company’s book value per share would be more than double the current share price."

-The assets are mortgages, not the real estate itself, so the assets could depreciate much faster than the collateral. As any banker will tell you, the foreclosure and resale process is so expensive (over $50,000 in the US) that the eventual auction sale of the house only recovers a fraction of the amount loaned out. What are AIB's loans at nearly twice the current value of the real estate worth in a severe recession? Possibly much less than 50% of "book value."

Anglo Irish Bank Even Worse Off Than its Peers

Good analysis. Anglo is sitting there like a time bomb waiting to go off on the Irish / British economy. I wanted to get into AIB someday, but the fact that Anglo could crash at any moment gives me pause for now.

Torpedo Dry Ships - Cramer's Lightning Round (10/8/08)

I should start a mutual fund that does the exact opposite of what Cramer says. I'd be the next Peter Lynch.

Torpedo Dry Ships - Cramer's Lightning Round (10/8/08)

It will be sad to see millions of impoverished baby boomers who sold at the bottom on the advice of a shouting head on TV, digging through trash and resorting to prostitution and petty theft. But then again, what should we expect from the generation that gambles on stocks with one hand and pay 15% credit card interest with the other. You know... the folks who bought GMC Suburbans in 2003 expecting that Bush's war against Iraq would lower gas prices. You know... the folks who ship thousands of dollars each year to communist China and jihadist Saudi Arabia buying too much junk and oil, and then slap a patriotic magnet on their car (a sticker would be too hard to remove I guess).

Ireland's Ailing Banking Sector

I am underwater on AIB. I bought it cheap and it got cheaper. Yet at a PE of something like 2, and at less than book value, I'll stay aboard. Low prices, after all, are not a good reason to sell anything.

A leading and profitable bank in one of the world's most educated and developed countries, with assets in Poland and the US that it could sell to raise emergency cash if ever needed, and with government backing of deposits that has caused a flood of deposits has got to be worth more than that.

Allied Irish Banks: With 9% Dividend, This Bank Could Thrive

You have to ask at this point, what would the ideal bank investment look like? Probably a lot like AIB.

But if your answer is "not like a bank, given this volatile financial environment," then the question changes to: what does buying near the bottom look like?

Sometimes, when a stock becomes too unpredictable for the short term traders to make their 1 month investments with any confidence, that lowers the price enough for us long term investors to swoop in. Here we are, in such a scenario.