Jeff Cross

Talk Me Down From the Wells Fargo Ledge

You are correct in that WFC is substantially overpiced for the current environment by any rational analysis (just like JPM). However, you do ignore several highly positive factors, particularly the quality of WFC underwriting and the "Buffet Halo" effect. I wouldn't short WFC at the present (if it were legal), but I already sold my JPM and WFC in the recent run up, due to price/risk ratio. I'm only holding a couple of non-US banks and some extremely well capitalized regionals and I'm quite nervous about them. Given a comparable WFC risk adjusted price I'd love to swap, but it's just way too expensive.

Lloyds Buys HBOS: Good Deal or Bad?

The leverage ratios presented in the article are not comparable to US accounting. They include all off balance sheet financing, which US firms do not if (as is the case for LYG) they do not include residual risk for the firms. Taking out the on balance sheet securitizations for LYG (which do include some counter party risk, which, I understand, the UK government has now quietly assumed for both banks if the deal closes - this may not be the actual fact, it's not officially disclosed) and making a few other comparability adjustments the LYG tangible leverage ratio is about 12 to 1 (similar to JPM on the same basis). I don't know what the US comparable ratio is for HBOS (LN) but it's a lot less than 37. We should also note that on a common shareholder tangible equity basis the exchange ratio works out to LYG paying 39 cents on the dollar for HBOS's tangible equity (this is based on equating LYG and HBOS tangible equity). We should contrast this 0.39 ratio to banks normally trading at 2 to 5 times tangible common equity (though we see a number of banks trading below 1.0 today in the US). It might also be worth noting that both these banks were profitable in the first half even after write downs and mark to market charges, unlike the bulk of US banks.

What's the BofA / Merrill Synergy?

Paying $29 for Merrill is the stupidest thing I've heard of since the government destroyed the value of the agency pfd stocks and thereby cratered the regulatory capital surplus of the US small banks (which were, until this week, the most active lenders, having not immolated themselves with all kinds of fancy products they didn't understand). I suppose one act of colossal and egregious idiocy is the weekly standard now.
Of course, the $29 is no doubt based on a stock swap and if BofA opens down 50% tomorrow and stays about there (the first seems more likely than the second, but niether seems unreasonable), what Merrill shareholders get will really only be a reasonable $14.50; what the BofA shareholders get is best not discussed.

Online Advertising: ING Direct vs E*Trade

You idiot! It has nothing to do with the format wording or any other bullshit, Etrade was offering 15 bps more than ING! It's like comparing the adds of somebody offering a much larger discount on a product with a smaller discount or regular price! Of all brainless poop I've wasted my time reading....