Fd

Should You Invest in Banking Stocks?

Sorry, it should read: Reaches $2


On Sep 30 09:19 AM Fd wrote:

> "If you want to invest in Citi, I would buy half of the position
> around $4.25 and buy the other half around $2."
>
> Sorry, but this is one of the most idiotic articles ever written.
> To suppose Citigroup once again reaches pre-supposes a complete return
> to the financial crisis and all the accompanying uncertainty combined
> with terrible loans, unknown govt response, etc etc. Even a return
> to recession would not put us in this boat, with Citi already having
> a backstop n place, etc etc.
>
> Never listen to a purely technical chartist

Should You Invest in Banking Stocks?

"If you want to invest in Citi, I would buy half of the position around $4.25 and buy the other half around $2."

Sorry, but this is one of the most idiotic articles ever written. To suppose Citigroup once again reaches pre-supposes a complete return to the financial crisis and all the accompanying uncertainty combined with terrible loans, unknown govt response, etc etc. Even a return to recession would not put us in this boat, with Citi already having a backstop n place, etc etc.

Never listen to a purely technical chartist

Break Up the Big Banks

Also, paying back TARP by banks that indeed do not need it frees up that money for those that do.

Expect Some Citi Fireworks

You're right, he is saying that index funds will be forced to buy C shares.I think not to make it equal weight but because the index is value weighted (by market cap). Since the conversion will make the stock increase market cap 4 times compared to currently, those matching the index (many mutual funds etc must do so) are forced into increasing their position, as close as possible to the time the market cap change occurs.
IMO, this will have an effect like short-covering - short term but strongly positive.

Accepting the Realpolitik That Killed the Bank Shorts

it seems to be that is is easy to blame others when a mistake(i.e. the govt) is made. Even if your story is completely true (which really is open to debate at a minimum), you really led your "subs" to follow a gamble, betting on the vaguaries of a test upon which you really did not know the details of. I think you should accept your own portion of the failure for misleading them , and in the future try to adopt more long-term positions if you can't handle the consequences of speculation.

Chart of the Day: Common Capital vs. TCE

This is poor journalism - putting fears into the readers rather than explaining the merits of TCE and Tier 1 individually. Buffet, the CEO of Wells Fargo, and others have already strongly discredited this TCE ratio, which by the way is NOT how things have always been done (rather according to the Basel Accord, Tier 1 is most important).
I don't think it is paranoia at this stage to suggest that such analyst demand for this ratio comes from a desire to appease the shorts.
I would like to see an honest comparison of the pros and cons of each ratio.

Predicting Stress Test Outcomes

Actually, I believe it was the Basel accord that found that a tier 1 ration of 6 % was well-capitalizd; perhaps we need a higher % in our situation. But to suddenly demand a new ratio (TCE) which, conveniently for shorters, decreases as perception in the banks decreases, and then say that banks own the govt, is more than a little weird. Let's stick to the standard (Tier 1) and increase it's intensity (8%? 10%?) rather than give in to the doomsayers who appear to have packed together and refute any arguments to the contrary.

Stress Test Plan: How to Make a Loser a Winner

"Citi needs only $5 billion in new capital, while basically everyone out there believes the amount is actually quite a bit higher than that."

The real problem appears to be that most journalists are unwilling to be objective about bank needs and assets, swept away in the multitude of pessimism rather than crunching the numbers themselves from official sources. Similarly, virtually nobody talks about the games hedge funds played with CDs to weaken the value of "toxic" assets beyond "fair value " (see Andy Kessler's blog).

I say let's see the numbers on Thursday before manipulating the public to take a stance.

Can the Stress Tests Breathe New Life into PPIP?

I think everyone is missing the point - "toxic" assets are not so toxic anymore - the hedge fund speculation attack (started by purchasing credit default swap insurance to make toxic assets appear riskier and therefore worth less) revealed weaknesses , but these are largely over now imho. How many hundreds of billions can homeonwers really lose? The hedge funds manipulation has completely distorted true pricing. And then everyone yells about TCE, but the numerator is common equity which (due in large part to hedge fund shorting) is distorted lower, causing fire sale of assets, again pushing share values lower and the process continues. And everyone yells that mark-to-market accounting is bad.
There has been a recent report tht the PPIP program will start by June 1st, and if you allow for a minute that "toxic" debt is not so toxic in actuality (rather than according to manipulated spreads), this program should work.
I think investigaative journalism should look at the hedge fund's rols at marketplace distortion by the hedge funds rather than repeat everyone's asserttions that "banks are bad". Here's a start:
www.andykessler.com/an...