User 305589

MBIA and BofA: Thoughts on Litigation

The cruicial point here is the reorganization of mbia. obviously, they want to strip assets off to another subsidiary. Which, if allowed by the courts, could severely impair the value of MBIA's common stock and the MBIA bonds.
Yourt fixation on some adjusted book value is grossly misplaced, imho. Even marty whitman, a long time defender of mbia, is severly dispappointed by mbia's mgmt and sees enormous risks for the surplus notes from the asset-stripping. which, of course, rank far superior to the common shares.

On May 14 11:37 AM Tom Armistead wrote:

> dok tari and Gtarras,
>
> Reason to be long, nonGAAP metric adjusted book value stands at 37.61,
> and does not include any possible recoveries from litigation. In
> the past MBIA traded at roughly 1X this metric, so a successful resumption
> of writing municiapl bonds and a resolution of the questions about
> the cost of their CDO liabilities could entail a recovery to that
> area.
>
> There are a lot of uncertainties but it's a 6 bagger if it works
> out, from 5.90 as I type this.
>
> I have a negative reaction to BAC due to the situations noted in
> the article, whether they can create value from what they bought
> is not something I want to guess at, hence neither long nor short.
>
>

Nothing Is Ever Truly 'Off the Books' in the Financial World

I agree with most of the article - though i can't make any sense of the author's long position in ABK. After taking massive hits from their misguided insurance on cdo and mortgage papers the monolines face a potentially terminal threat from quickly deteriorating municipal finances. No other than Warren Buffet stated just a few months ago, that he wasn't even sure whether the muni-insurance business would really be profitable in the long run. And he talked about his freshly started muni-insurance arm, which has charged far higher premiums than abk and mbia ever did! the common stock of the former monoline insurers are tricking time bombs that could implode anytime. It may pay off, to hold some of their bonds, but the common shares offer an awful risk-reward profile imho.

Citigroup Is Not Increasing Employee Compensation

you really ask , what's wrong with that???
Oh my, i can tell you what's wrong! Total compensation is base salaries plus bonuses. Bonuses, though, by and large only apply when a company earns good money. Put differently, when times are bad, there will be no or little bonus payments in addition to the base salaries.

now, citi is changing the game (as did MS and JPM and BofA before). what was formerly a bonus and dependent on the success of the company, now becomes a base salary and is no longer dependent on whether the company makes money or loses it. it gets paid out anyway now.
that's what is wrong! fat salaries stay, even while the company is on life suppirt by the taxpayer.
and guess what? when times get better, the crooks at MS, JPM, BofA, Citi etc. will change it again. then bonuses will be raised again. it's the classic heads i win, tails i win even bigger. And the taxpayer loses as he subsidises all these banks with his money either directly or indirectly (TARP, TALF, artificially low interest rates etc)

This Rally Smells Fishy to Me

Retailers improving? Just look at the latest redbook!
Hovnonian bullish on housing? Well, they have been bullish all the way till today, at least in their verbal communication. Somehow the Hovnonians sold a boatload of their company's shares along the way into rallies. And given the way they led their company into the housing meltdown with full steam and a ton of leverage, you better do not count on the Hovononians as accurate fortecasters of their own industry. Sort of listening to Citi or Fannie and Freddie and then to expect any useful clues about the coming trends in banking and mortgages.


On Jun 11 07:04 PM texalope wrote:

> I disagree. Banks borrow short and lend long. They are making money
> every day. Retailers business is improving. Housing has improves.
> Check out the recent Hovanian conference call. Looking in the rear
> view mirror will not make money for you. In 2007 the people looking
> through the windshield made money. The same holds true today.

Stress Tests Were Definitely Stressful Enough

Tom, I have high respect for your ability to analyze individual banks and their balance sheets and earnings powers. But your macro judgements are, way off base, I dare to say.
First, unemployment. It is already higher than the Fed's assumptions and that is by already incorporating lots of bullsh... by the BLS. can you spell Birt-Death-model? the latter assumes that thousands of jobs were created over the past weeks in - finance, construction, travel/leisure. Sure that really sounds credible, doesn't it? So the'green shoots' may be wherever they want, but they certainly are not in the unembployment numbers.
Second, you are right that unemployment numbers alone are not enought o forecast banks' stresses. Still, i think you are looking out at the wrong side. Since households AND corporations are still leveraged at record levels, odds are very high that banks will end up with much higher loan defaults than ion former recessionary cycles.
Third, that being said, banks have been invited by Obama, geithner and the Federal reserve scamsters to offload to the taxpayer whatever toxic assets they held. So yes, this will go a long way in limiting losses - to the banks. But they will at one point show up at the Fed's and the govt.'s balance sheet. This in turn will imply higher financing needs, and/or higher taxes and/or lowered public spending - all of which is going to lead to another dip down into another recession. poof! go your and the Fed's stress test assumptions.

Option Spreads With Large Upside and Limited Downside

hm, let me get this straight: you talk of 'large upside and limited downside' - yet when looking at your vertical call spreads that you suggest, you have an upside of 108-150% and a downside of - 100%(!!)
I am myself doing a variety of vertical call spreads as well as calendar spreads, but frankly, your suggested trades look more like a gamble.
Your strike prices are so precariously close to each other and at the same time mostly out of the money and pretty near to expiration. For instance, the SPY calls with 92 strike have only a slightly higher probability of expiring in the money than have the 93s. It's basically a coin toss, imho.

I do like call spreads, though, but I use them either with long term options for stocks that are grossly undervalued imo, and then I go quite deep out of the money for 3.1 or 4:1 upside/downside.
Or I may target stocks which I consider to be a t rock bottom valuations with very little downside left and then chose calls that are in the money while selling calls at or slightly out of the money.

U.K. Spread Bettor Restricts Shorting Specific U.S. Stocks

simply stunning. Almost all the companies on that list have recently made or are going to make pretty sizeable secondary offerings of common equity. I wonder how that can REDUCE availability of shares to short...
More evidence that this market is getting rigged by the powers that be, especially GS, to give the false impression of a strong, fundamentally sound stock market rally.
It wouldn't surprise me if a large chunk of these shares are in fact being grabbed by the trading desks of goldman and Co in order to sell them short into this rally

Stress Test Not Stressful Enough?

Tom, in general I agree with you that this 'stress test' was nothing more than a show forcing a couple of sound banks to dilutive capital raises while sparing others the pain. Is it any wonder in todays united states of goldman sachs that GS which is one of the highest levered banks out there with L3 'assets' in excess of their equity passed the test, as did JPM with its trillions in derivatives time bombs? (Doesn't anyone ask how GS could even survive in such a stress scenario when its almost-impossible-to-v... L3-assets would be enough to wipe out most of its equity - not to speak of 'normal' loan losses, etc.?)

That being said, I think you are indeed too optimistic when it comes to the economic scenarios that most likely are ahead. I do hope that the economy will somehow muddle through, but overall, I have to say, (and I am saying that being a bank shareholder, WFC) I feel better with overcapitalized banks in this economic situation than with possibly undercapitalized ones.

A Summary of Q1 Bank Earnings: World, You Just Got Hustled

Wallstreet has donated a ton of money to Obama's campaign and boy, do they get rewarded. I am quite sure, actually, that Obama doesn't do it by intention, I think he isn't even aware of the multiple scams that the people around him (most notably Geithner) pursue day after day. Still, the depth of the crisis, the levels of fear induced (not to the least by Obama's speeches) and the current president's popularity make people just accept these days whatever is going on. I seriously doubt that under GWB all this could have been pushed through.
That being said, I would not be surprised at all if Walls Streeet after raping the taxpayers like never before will do whatever they can to prevent a second term of Obama. The Moor has done his duty, the Moor can go. It's said, for all the hopes that were and still are hinging on this president and that will be nothing but shattered dreams a few years from here.

Independent Analyst Numbers Far Uglier than Official Stress Test Rumors

hm, let me get this right: None, not a SINGLE one of these analysts that you mention saw the banking mess coming. When they started to revise their numbers and raise the loss estimates in earnest it was already plain to see for almost everyone and the bank stocks had lost between 20 and 70% of their value. NOW these analysts come out with their balooning estimates.
To me banks these days are black boxes and the true state of affairs is anybody's guess. However, I see ZERO reason to now believe that these analysts got it right. I would have, if they had proven earlier that they had a clue about what's going on. they didn't have. What makes you think that this has changed?

Something's Afoot in CDS: The Merrill - Bank of America Decompression Trade

I would go as far as to suggest that there is much more correlation between phases of the moon and stock prices than cds markets and reality. Or wallstreet analyst gibberish and reality.


On Apr 29 08:01 AM Tydown4fun wrote:

> It doesn't mean anything. Just another bit of meaningless data from
> some wall st nerds who believe there is some correlation between
> phases of the moon and reality.

Something's Afoot in CDS: The Merrill - Bank of America Decompression Trade

Sorry Tyler,
but the the CDS market is likely the most distorted of them all - and that for the past 12 months or so. It has become the playing field (or rather the killing field for that matter) for all sorts of hedge fund players and banks to bet on declines and bancruptcies of companies. Since many stocks are overshorted or cannot be legitimately shorted players have turned increasingly to CDS markets as a venue - btw, with very real economic implications. The CDS market has started to actually really bankrupt companies. Imho, this giant , parasitic casino should not just be 'regulated', it should be shut down asap.
Of course, the GOldmans and JPMs of this world will fight this tooth and nail as it is a major source of their revenues and profits.

If the cds market was 'rational' as you claim - how come that a fortress balance sheet company like Berkshire Hathaway was rated riskier than the debt of a country like Vietnam???
Just to name one of a gazillion of similiar examples.

No, Tyler, the CDS market these days would be the last one I would look at to get any sense of rational expectations.

Massive Bank Shareholder Dilution Ahead

Goldman would like, yes. But most likely cannot. I bet they will not be among the first ones to repay tarp. And if i am right, it will spell a lot of trouble for GS equity holders.


On Apr 20 03:33 AM Perry1961 wrote:

> What if the banks don't want or need more funds? Many of the top
> 20 didn't want or need TARP. Regions reluctantly took 3.5B in TARP
> funds,and now has 5B more than a "well capitalized" bank needs. It
> wants to repay TARP ASAP. Goldman Sachs would like to do the same.

The U.S. Banking System's Terrifying Balance Sheet

that is as laughable an 'analysis as is this superficial article about the u.s. banks. there are very legitimate and well-reasoned fears, threats and risks. But it obviously has become sort of a public contest to bring up ever scarier scenarios, throwing some odd numbers around as 'proof'.
the 190k/person is silly - there are so many offsetting transactions that the net risk exposure is far, far less. and a ton of these derivatives, scary as they may sound, are actually very reasonable transactions entered into by insurers, municipalities, corporations, banks etc. that add stability to their businesses, cash flows, asset-liability matches etc. But of course, declaring them all as irrational bets and breaking the numbers superficially down like this makes for a scary headline, at least. Go figure.
As for the banks, since many have already pointed at the extremely low probability of a 75% overall loss, I may just point to the 1 trillion in common stock that supports 12 trillion in liabilities nonsense. That looks scary, too, no? Please!

Btw, how man tax dollars does the Us. govt collect? and these 'support' how many trillions in govt debt and govt expenses and liabilities of all sorts? And your concern are the (private) banks? Really??


On Apr 08 10:42 AM mac123449 wrote:

> +++The One Quadrillion Dollar derivatives neutron bomb+++
> Quote
>
> The Size of the Derivatives Bubble = $190K Per Person on Planet<br/>The
> Invisible One Quadrillion Dollar Equation
>
> by DK Matai
>
> Global Research, March 16, 2009
> siliconvalleywatcher.com
>
>
>

Why I'm Holding On to Citigroup Stock

well, downside 2.65$, yes - equal to 100% of capital invested.
potential upside $40 ??? sure, it can go there. but when it finally does, you will likely have to pay $5000 per ounce of gold and a berkshire stock will have surpassed the 1 million treshold.
don't hold your breath, though.


On Mar 31 08:50 AM Jonathan Christopher wrote:

> The current Citi stock should be considered a Call Option with no
> expiration date. The potential down side is $2.65/ share. The potential
> upside is around $40 a share. No-one can predict the future of this
> stock, There are too many unknowns and uncertainties.
>
> I have a small stake in this stock.