User 305589

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)

Citigroup Is Too Important to Fail, Which Is Why It's a Great Long Term Investment

''Total compensation will not change, just the mix between bonuses and monthly salaries. Therefore, the current initiative to retain talent is cost neutral.''

oh, cost neutral - based on what? On the bonuses for the year 2007 (paid out in 2008) when huge bonuses were granted everywhere for paper profits that by now have turned into huge losses amounting to hundreds of billions - with more of the same to come?

If it really were cost neutral - then why any change at all? the industry is in a severe downturn (except for Goldman) after yerars of excessive profits and yes, that means cuts in compensations, especially when a company teeters on the brink of bk. That other banks, namely JPM; MS, BofA etc raised their basic salaries to retain ''irreplaceable talents'' is outreageous! It is all paid for by the taxpayer, ultimately, because without TARP and the ultra low interest rates granted by the Fed (which in essence are subsidies paid for by the taxpayer for the banks) these compensation hikes won't be püossible at all and in fact all of these banks, including Goldman would long be bankrupt!
And don't tell me about all the ''irreplaceable talent'' that has to be retained at any cost. This is as laughable as it gets. Working in bankinfg and asset management myselves, I have met very, very few people in the industry who are truly ''irreplaceable'' and need to be retained no matzter what. It is just a complete farce where overpaid bankers continue to get taxpayer-subsidised fat paychecks for providing - what added value to society??



On Jun 25 09:42 AM Angry Banker wrote:

> Check out my latest article regarding the salary increases. Total
> compensation will not change, just the mix between bonuses and monthly
> salaries. Therefore, the current initiative to retain talent is cost
> neutral. And don't start on about how Citi's "talent" caused this
> mess in the first place. Almost every single senior executive who
> commandeered the ship through Q4-2007 (when the company started posting
> its losses) is gone. Pandit started his job in December of that year
> and has been working his a$$ off ever since to right the ship. Oh
> and by the way, he's currently taking $1 a year until the company
> returns to sustained profitability. Is that bad for expenses too?
>

Citigroup Is Too Important to Fail, Which Is Why It's a Great Long Term Investment

provided, of course, that citi doesn't need to make another conversion of preferred stock into common. The risk that such event will occur down the road is way too high for my taste.


On Jun 25 01:58 PM tedstr wrote:

> Citi preferreds is the way to play it. 11%-12% while you wait for
> things to improve. 11% is just fine with me for the next 10 years.

Citigroup Is Too Important to Fail, Which Is Why It's a Great Long Term Investment

Hm, and I guess the same logic applied to fannie and freddie. they haven't failed, too, sort of. Just the common shareholders lost pretty much everything.
As for Citi's return to profitability, I guess the recent hike in salaries of upto 50% will not really help the bottom line.
good luck with that citi gamble. i prefer investing, though, and that's why i won't touch this stock for quite some time to come.

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.

Citigroup 2007 Disclosure: Why It Bothers the SEC

the bigger the crime and the nearer the crooks are to the ruling elite - the lesser any enforcement or punishment. This isn't just a matter of culture, it is a matter of deeply entrenched corruption and nepotism that has developed over the decades. Americans used to point at some third world banana republic in earlier decades where this stuff occurred. Nowadays, the USA has gotten to the same state of affairs. If history is any guide, the real economy and the living standards of the people will follow suit. If the economy and the financial system and public finances(!!!) are increasingly run for vested interests everybody suffers big time. except those vested interests, of course.
It will be most interesting to watch whether Obama DOES anything about that - or whether he just prefers to make a couple more 'historic' speeches.

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

Michael Mauer Leaves Citi for Icahn

sorry, it should read: at about 25-30% BELOW book value currently, the stock looks compelling


On May 14 12:37 PM User 305589 wrote:

> of course, icahn had his fair share in doing dumb things. Buying
> a soon-to-be bankrupt homebuilder near the top of the market (luckily,
> mgmt of the company was even dumber and rejected the offer or else
> icahn would have paid more than 6 times the amount he finally spent).
> Motorola, yahoo. I doubt that any of these three will ever really
> come back. that being said, his overall track record remains excellent
> and at about 25-30% of book value the stock looks compelling

Michael Mauer Leaves Citi for Icahn

of course, icahn had his fair share in doing dumb things. Buying a soon-to-be bankrupt homebuilder near the top of the market (luckily, mgmt of the company was even dumber and rejected the offer or else icahn would have paid more than 6 times the amount he finally spent). Motorola, yahoo. I doubt that any of these three will ever really come back. that being said, his overall track record remains excellent and at about 25-30% of book value the stock looks compelling

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?