Stockmajor

Wells Fargo, JPMorgan and Bank of America: Stock Prices Can Double

I believe, and have all the way through this crash, that are economy will recover just fine. We have our hurdles to overcome, but indeed we will overcome.

It is a glass half full or empty choice right now. There are compelling arguments for pessimism and optimism concerning our collective financial future.

I find it to be an interesting statement concerning us humans that most here on SA, and those I encounter on the street, tend to be pessismists, and they are far more pessimisstic than they themselves realize.

I am long financials...and making great returns. I believe this will continue...with ups and downs...but overall, up.

Oh yes, as for President Obama, I'm a fan who says, "Yes we can", and yes, we will.

Wells Fargo, JPMorgan and Bank of America: Stock Prices Can Double

I believe, and have all the way through this crash, that are economy will recover just fine. We have our hurdles to overcome, but indeed we will overcome.

It is a glass half full or empty choice right now. There are compelling arguments for pessimism and optimism concerning our collective financial future.

I find it to be an interesting statement concerning us humans that most here on SA, and those I encounter on the street, tend to be pessismists, and they are far more pessimisstic than they themselves realize.

I am long financials...and making great returns. I believe this will continue...with ups and downs...but overall, up.

Oh yes, as for President Obama, I'm a fan who says, "Yes we can", and yes, we will.

Caution on Citigroup Due to Regulatory Hurdles - Credit Suisse

Much ado about nothing.

John Paulson's Hedge Fund Position Updates

Citi will earn their way out of current problems. They will also pay back the TARP when they and the government agree it is time to do so. They could do so now without dramatically hurting their ratios. Have you noticed how much cash they have? I bet they will have considerable more in the fourth quarter report in January.

The tax assets writedown is a non-issue for this bank. And I believe Citi will eventually reduce the amount of shares outstanding. What if they simply buy the shares from the government?

So, look for Citi to go to much higher values over the next few years. If it just goes to $12/share, you triple your investment! And I believe it will do much better than that.

The Banks' Real Story

...So instead banks are stalling, in the hope that an economic recovery, coupled with a steep yield curve, would boost their margins and save them. This is not new, as banks have pulled similar tricks in almost every previous credit cycle....

Yes, it is a trick. Yes, these banks are insolvent. However, we had all better hope that the trick works and that most of the banks return to solvency, especially the big ones. I'm betting they will.

Get Ready to Short the Banks

Let's see what the earnings reports say this week. With the very large bonuses being paid out by the big banks, I must assume that they are having very big earnings. I am long these financials in the short term. And I am also long in the long term. I don't believe we will see a big downturn. The big government supported banks are being given the time and opportunity to earn their way out and slowly reduce their bad assests pools. And that is a good thing because I don't think we really want to go through a Great Depression take two. Shorts will have to cover this week.

Time to Call Out Wells Fargo's Balance Sheet

Thanks for the input. Sincerely appreciate it.


On Sep 23 04:16 PM MattZN wrote:

> Hmm. I think I probably come off as rather combative in my posting
> history, because I really hate it when pundits write about companies
> in such a one-sided, non-objective manner. That gets me typing like
> nothing else. But the key here is that I only post (and act) on what
> I think I know with relative surety. I will be the first to say that
> I DO NOT KNOW where the market is going to go short-term from here.
>
>
> I do think Citi is a zombie, but more importantly I do not think
> it is possible to 'invest' in it. Speculation levels are far in excess
> of actual investment so there's no point even touching it in my view.
> Investors often get cornered by speculative names when they see huge
> runups. Citi and AIG are good examples. You get speculators flocking
> to the names but it doesn't mean they are good investment opportunities.
> You would never see me invest OR speculate in Citi. People who play
> that game universally lose in the end, either by paying tax through
> the nose on short term investments, or screwing up on the trailing
> side of the market action by not realizing just how quickly those
> sorts of securities can crash back down.
>
> I'm worried about the Fed action. I think they need to start pushing
> up interest rates. Slowly. Trying to ease much beyond what they have
> done already (which I support! It had to be done to avoid another
> great depression)... but doing it too much longer could result in
> disastrous inflation down the line.
>
> There were many very obvious things going on in both the banking
> and the energy spaces from late 2008 through early 2009... obvious
> to people who actually knew the spaces. The media was not only getting
> their information wrong, they were getting it ass-backwards. I was
> flabbergasted at the number of people who thought the MLP space would
> go bankrupt simply because Oil prices had crashed, or who thought
> they wouldn't be able to raise capital for projects in that environment.
> Anyone who knew the space (and particularly how the space raises
> capital for new projects) would have known that the industry would
> have no trouble navigating it.
>
> Financials had similar issues. All the banks were being thrown into
> the same sink by the pundits, with no differentiation. It was amazing
> to watch Wells get thrown into the same bucket as Citi.
>
> Even now many pundits believe that Wells is playing games with off-balance
> sheet activities. Wells had virtually NO off-balance-sheet stuff
> prior to the Wachovia purchase. They don't believe in crap like that.
> They haven't suddenly switched to a more risky business operations
> profile. They are simply digesting Wachovia, and considering the
> size of the purchase it would be utterly ludicrous to expect Wells
> to be able to clear it all out and integrate it into their financials
> proper in a mere 1 year (or even 2 years).
>
> The reason my portfolio is doing well is not that I predicted the
> crash, because I didn't. I held my DIA and SPY from Dow 14000 to
> 7000. I didn't sell one share (and still haven't). And yet my portfolio
> is fully recovered now. Not from the things I couldn't predict, but
> from the things I could. Being well diversified (and nicely risk-diversified
> too, by not using leverage) gave me plenty of positions I could sell
> well after the crash, positions which had not crashed along with
> the market, to build cash to invest. I then sector-shifted around
> new-years and went from 30% cash to nearly zero. And now I am rediversifying,
> paying special attention to risk.
>
> And yet, those situations were very specific to the market as it
> was in the months around new-years. I CANNOT predict where those
> sectors will go in the current market. I would never go all-in again
> with the market in its current state. Times have changed. At the
> same time I feel quite comfortable, while I am de-concentrating and
> rediversifying, keeping Wells Fargo and numerous securities in the
> MLP space at significant investment levels for the next several years.
> I am comfortable holding my DIA and SPY (I invested more in it once
> it had dropped below 8000 so the DIA position at least is also nearly
> recovered just on its own)... I like the world economic exposure
> that the large-caps have which provides them some protection against
> a falling dollar.
>
> If I can leave people with some advise it would be to wake up and
> realize that most companies these days have some level of world wide
> exposure, and if you don't know what that is or take it into account
> you are going to make some horrible investing decisions down the
> line. The 'dollar' is meaningful to the modern investor about as
> much as the 'yen' is. In fact, my preference is to see the dollar
> further weaken significantly as that would give a huge boost to our
> agriculture exports (something California desperately needs), not
> to mention tech exports, and a weak dollar reduces the prospects
> of inflation. Our heavy industry may be screwed to high heaven but
> we have plenty of things to export in other sectors. A strong dollar
> is the enemy right now.
>
> On Sep 22 11:53 PM Stockmajor wrote:

Time to Call Out Wells Fargo's Balance Sheet

MattZN, I just took the time to read back through most all of your prior comments, and I must say that I'm impressed. You have been spot on in your opinions. You really know what your talking about. I'd like to hear if you still think Citigroup is a zombie or if your more bullish about them now. You can reach me at stockmajor at yahoo.com. Thanks for your time.


On Sep 22 04:40 PM MattZN wrote:

> Heh. Ok, more then a bit exaggerated. I'm trying to be P.C. But extremism
> is something that can work both sides of the equation. It pays to
> take a more practical approach to analysis which removes both emotion
> and preconceptions.
>
> Wells is going to take large losses on their loan portfolios, that
> is certain. If they were NOT going to take massive losses their stock
> price would be north of $100 now just from the revenue flow. The
> concept of Wells taking large losses is already built into the stock
> price. What is not built in, and what people do not really know,
> is how those losses balance against current and future revenue flows.
>
>
> Trying to account for these losses all in a single year is even more
> extreme then what the author is accusing the bank of doing with their
> creative accounting. Interest-only payments on an option-arm can
> be calculated ten different ways. The concept of 'principle' is no
> more real then anything else. There's the cash the bank paid out,
> and the cash the bank got back, the time-value of money, and the
> resale value of the property. Those are the only hard realities when
> it comes to loan portfolios.
>
> From a business standpoint, Wells is sitting on an actual monopoly
> position in ALL of its areas of interest. It is completely protected,
> probably for the next decade at least. Even a government mandated
> breakup, were it to occur, would not have much of an effect on stockholders.
> No other bank has even a remote chance of interfering with Wells
> Fargo's business model now. That might not be a good thing for consumers
> but it's great position for Wells Fargo to be in.
>
> On Sep 22 03:13 PM BSexposer wrote:

Straightforward Answers to Recent, Thorny Investment Questions

In further response to the comments made by "Untrusting" above::

I would like to say that I took Mr. Miller up on his "just ask" policy and he promptly sent me an email detailing the information about his fund. I do enjoy his articles and do not find him to be biased to "the market always goes up". Actually, I believe that he simply gives his interpretation of the statistical data in plain english so that the rest of us can understand it.

And I would like to add that name calling is not a mature or civil method of communicating a differing opinion.

American Capital's Sale of Axygen Should Help Ailing Company

I do now, and have, believed in ACAS. I think they have an awesome business model and fantastic management. And I've made very good returns from their stock since last March. I sold off my stock right after their last earnings report, but I'm keeping a close eye on them for future investment. If they avoid bankruptcy, they will eventually return to being one of the best BDCs running. If not, I would still look to invest in them post bankruptcy as I am certain that they would emerge from that process in a great position moving forward.

Remember, most of their creditors are unsecured and ACAS would not be forced to give them secured positions even in a BK. It would simply be a restructuring of debt.

This company rocks.

Straightforward Answers to Recent, Thorny Investment Questions

I believe we are recovering, albeit slowly. I seriously doubt that we we will have a double dip or W move. We won't go straight up continuously, but we aren't headed down anytime soon. Look at the Dow chart. Most recessions have recoveries in the Dow that last a year or two before sliding back down a bit over several months or even a couple of years. Even then the dip is not so dramatic. Having said that, history is a poor prognosticator when you consider that we are in a very unique situation.

There are very good reasons to maintain a bullish stance for quite some time to come.

Chart of the Day: Wells Fargo's Construction Loans

I"m with Buffet on Wells and I'm long the other large, government supported financials. Yes, it's a shell game. Yes, they are really insolvent. Yes, the off balance sheet game is a sham. However, Uncle Sam has given them the way to slowly earn their way out, and he will most likely continue to do so. These banks will survive and eventually all of this will be history. Citi and BofA, et al, stock values will return to 30, 40, and higher dollar values. It will take years, but it will happen.

Citi: Not Earning Its Way Out of Bailouts

J. Bruun, See my above comment. I've been having a problem with the "reply" function on SA. The last few times I tried I was unable to "publish" what I typed. If you can see this one, it worked this time...


On Sep 17 08:47 AM J. Bruun wrote:

> Stockmajor,
>
> You need to consider the dilution that has taken place lately.<br/>
>
> A price of 40 USD per share with the current number of outstanding
> shares is equivalent to a market cap of 22 bln * 40 = 880 billion
> USD. Even with a high P/E for a bank of 20 they would need to make
> 44 bln USD a year. That really does seem a far way off to me. You
> price of 80 is even more far fetched.
>
> Do you realize this?

Citi: Not Earning Its Way Out of Bailouts

Yes, I do realize that the stock price can't get to big values with as many existing shares as there are today. I don't expect that many shares to exist in the future. When the government disposes of its 34% of shares, I really doubt that it will be in the open market. I bet a deal is done where Citi buys them back in a "sweetheart" deal where the government leaves Citi in a better position. And, in the future, there could be stock buy backs.

I listened to Vikram's presentation last night where he was asked if a reverse split was being planned. His response was that it was the Board's decision to make and that they were not looking at that right now. That's good news.

Citi is one of the biggest world wide remaining banks standing. The government has shown that they will not let this bank fail. The government has made it possible for all of these big banks to earn their way out, and that is what they are doing.

Mark my words, Citi will eventually regain top level status and its stock price will reflect that. This will take years to play out, but not as many as people fear. I see Citi in the teens next year, and yes, as high as 40 or 80 dollars a share in 5 to 10 years. Those kind of multiples are worth waiting for.

Citi: Not Earning Its Way Out of Bailouts

In the long term view, Citi will be just fine. Those who hold their shares will eventually see fantastic returns. This company is not going under. They are global in scope (146 countries). JPM, second runner up in that category (46 countries). Competition has been greatly reduced. Citi is and will be a giant cash machine for a long time to come. Short term will be rocky, but long term Citi stock will be 40, 50, 80 or more dollars a share. The only worry I have at this point is a reverse stock split that could limit the potential upside multiples.