XRTrader

Should Banks Extend and Pretend?

People fail to realize something. Previously the chance of default was somewhat (but not entirely) correlated with the relative value of the asset compared to the total loan amount. I do not think that will be the case as we go forward in this housing collapse. Look around you! How many people do you know who are "underwater" in their loans? I'm a young proffessional and the vast majority of the people i know have underwater loans. Many are considered "credit risks" by their mortgage companies (ARMs, etc). Yet, they continue to pay their loans on time....previously, there were isolated events that correlated to declining assett to value ratios...i think this was a proxy for loan defaults (and to a lesser extent a direct causitive factor). Today this is a more universal problem, and i doubt we will see nearly as high a correlation as historically indicated.

John Paulson: Long Financials

DOES ANYONE ON THIS SITE ACTUALLY TRADE? (kudos to the above posters who actually had smart comments).

Everyone is sooooo bearish (and i was at 12k last summer, but now the downside is limited to 10% in most sectors); i love the counting of failed banks. Yes, 77. Yes, it will reach 100 or even 200. Thats immaterial. those banks failed long ago. This has nothing to do with BAC, GS, JPM....these big boys have been saved by uncle sam, have huge spreads to work with, and are increasing market share as others fail. In 5 years BAC will be at $35 to 40. Good return if you ask me. Have been long since gov bailed them out near 5 bucks. will stay long.

and, for those of you who think a hedge fund like paulsons gets into and out of a 3 billion position in 1Q, try doing some home-work.

Why Pandit Must Sell Phibro

The above poster "al s" shows a complete lack of understanding about the Phibro business. A Hall has been doing an outstanding job for YEARS, and has amassed a formidable trading/profit record going back to the 1980s. I doubt very much "any good energy trader" could produce "nearly identical" profits. Or else, the business would be much less lucrative.

Tuesday Options Update: KSS, HGSI, MOS, AES, NUAN, BAC, & WFMI

Hmm. I respectfully disagree with the above poster. BAC has/does trade at a discount to its peers. We have shown the government will not let it fail. It will recover, as will its profits. Assuming 2010 to 2011 normalized earnings of ~2.5 to 3/share (even after dillution) and PE of ~10 to 13 (around mean), we can expect a 2011 price of $25 to $39 dollars. Note, this is a rough estimate for illustrative purposes.

Call LEAPs as well as other options trades in BAC will prove lucrative. I must disclose that i have been long BAC 2011 calls at various strikes (10, 15, 20, 30) since march/april. They have appreciated significantly, but (i believe) there is much profit still to be made.

Cautious on Banks as Delinquencies Rise

People on this site never fail to amaze me. Why does it seem so many people have an agenda? Who cares that the banks are profiting off of taxpayer money? Isnt our job to make money in the market ourselves??

BAC was a great buy at $5 a share, and remains undervalued relative to its peers at $14. You can grouse and complain about the unfairness...or you can hop on board some of these stocks as they gain another 50% (which, by the way will still keep them down significantly from their 52 week highs).

Its stupid not to realize that the yeild curve, free government money, decreased competition, among other factors more then make up for the credit card losses. Yes, some divisions of banks wont be profitable for years, but as the write-offs decrease, bank profits will explode. Stocks will rise ahead of this expected recovery in 2010.

Goldman Sachs: Profit Dissonance

Why do people always gripe about what caused what and whom to blame? Who cares. Its over. Isnt this an investing site?

Lets face the facts and talk about options/stock plays to maximize profit when these banks do beat earnings estimates!

Friday Bank Failure #37

This is ridiculous!

Yes, another bank failed. There will 100s more before this is over. Although fatally wounded, many banks will limp along, only failing long after the acute crisis is over. These failures tell us nothing about the future (or even the present), only about the past. They also wont help me, you, or anybody else make money in this market. That trade is past.

"There obviously isn't one bank in the US which, on a long enough timeline, won't fail." You concluded that after 37 failures? Hahaha.

News Impacting Bank of America

I think the article and comment above are off the mark. YES BAC has uncertainty, YES many directors will resign (most of the board will be replaced), YES credit loses will crimp earnings in the next 3-4 quarters. The Countrywide case AGAINST Mozilo will have only minimal impact on BAC.

The market price of BAC (between 9 and 12) already factors all this in....with a total market cap of approx 60 to 75 billion [heavily discounted when you consider their assets and earning potential]. Those of us who hold BAC are in for the long term....if the bank can survive (they will, with gov help already provided), and earnings return to 1.5-2 / share by 2011 (or 2.5 by 2012) [which is concievable], then this stock will be near 25-30. Thats a decent year-over-year gain.

Again, investors show that they are very short sited.

Banks' Loss Reserves Can't Keep Pace with Troubled Loans

Interesting point. However, i think we will see a significant decrease in NPL (non performing loans) as the loans as a significant uptick in housing sales begins to clear these from the books.

An Unwarranted Sweet Deal for TARP Repayments

"Given the generally undercapitalized state of the banking system, more capital is better than less capital"

If this is your position, then you should be against any TARP repayments. Paying back billions in TARP will, of necessity, deplete capital from the banking system as a whole.

The Banks' Great Public Relations Hype

Hmmm. I disagree completely. Yes, share offerings have and will cause dilution. But, many aspects of the banks are profitable....for BofA consider columbia management (worth billions), china banking assets (residual portion worth >10billion on the open market), the steep slope of the yeild curve (billions in profits for BofA), the performing loans, retail banking, market operations at Merrill. Then consider the capital cushion that they have raised. Now, will there be losses from CRE? Yes. Will there be further residential losses? Yes. But, this is an issue of magnitude at this point....ie. will the losses swamp current equity. And, if BofA (and the other banks) survive this recession, the prices of these stocks will multiple several fold even with conservative PE ratios...

Chasing the Diminished Marginal Buyer

I find this continued commentary from Tyler interesting.

I shorted the banks for a long time, and made money. However, that trade is largely played out.

The fed has shown it will bail out and/or absord the toxic assets. Thus, at some point, the sheer size of these institutions, their actual profitable assets (anyone who thinks no portion of these banks are profitable has yet to look into them), and ability to generate cash flow takes over.

TARP Warrants: Follow the Volatility

I agree. Great article. And again, for those who claim the goverment should extract every penny from the banks at the back end of the TARP cycle, keep in mind that bailing them out only to fleece them now (and render them under-capitalized) would be stupid. Lets be happy if and when the tax payer gets their money back...they dont need windfall profits. The goverment, after all, was doing this for the common good.

A Crippled iPhone: Very Bad Idea

If even ONE (net) individual is compelled to buy the phone because of the $10 per month reduction, then this will be a net gain for AAPL and T (notice, i say "net" as there will be a small number of people who would have bought the phone anyway, but will instead go with the reduced cost plan). While i agree that most will opt for the regular plan, there is a market out there for lower priced limited data plans...T should begin to fully explore it to continue/maximize this growth story. As long as they do it right, the risk of canabalizing their own business and reducing margins is limited.

Monday's Closing Update

DavyJ, i think your question is great; it would not make sense if they planned to issued debt at interest rate x, and then sit it in their bank account on top of a pile of cash making less then x in return.

the simple answer must be that they have a plan for a substantial portion of this money (for which they think return will be good)...if not now then soon.

I would bet on M&A activity. Perhaps a peripheral hardware player for netbooks or a group of internet companies (thats my bet) with yahoo at the core.