Augustus

Should You Invest in Banking Stocks?

BAC will be lucky to earn money fast enough to pay their legal fees. The problems that are on the books now will bleed them for the next ten years. Investors will be vomiting this stock out of their portfolios. There are clean places to invest in well run banks.

AIG Bonuses Are Just the Tip of the Iceberg

I really like these talking head CNBC hyperventilators discussing the AIG or Merrill bonuses. GE would be down the tubes months ago without the Fed guaranteeing their debt so they can roll it over. What does a CNBC shouter get in pay? Should it be decided by the House Finance Committee?

How About Adjustable Principal Mortgages Instead?

". . . As long as the banks could hedge and charge a rate premium . . . "

+++++

Who the heck will they hedge with? AIG offered that deal and is now gone. Some institution is going to assume the losses of the entire US real estate market declining? Rots of Ruck with that.

The End of the Credit Crisis

The article is hypothetical nonsense.
A mortgage (or any amount) on a house worth $400,000 is worth more than a mortgage on a house worth $300,000. The example is nonsense.

Social Banking: How to Make Bank Shares Worthless

The Indian program has been a financial disaster. Sure, they do not pay for foreign imports of milk. However, look at the size of the budget deficits that it costs them. And they cannot easily quit as they have developed a large and very inefficient group of supplicants for the govt. teat.

Bank of America Facing Mortgage Servicing Losses

You have got the servicing fees jacked up to be about 10X what they really are. Rates are usually 1/4% to 3/8%.

Hedge Fund Sues Bank of America Over Countrywide Mortgage Modifications

My guess is that Greenwidh would be well satisfied if the mortgage originators repurchased the fraudulent mortgages rather than recast them.

A Dividend Primer, You Don't Get Something for Nothing

For the pro or con dividend argument look at DELL.
Profits pretty consistently. No dividend. Little Book Value. Where did the money go? Would they have operated the company differently if required to supply some money to the stockholders?

Schumer Is Way Off

Thanks for the good article and explanation of why this new plan faces the same problems as any other. Schmucker is certainly one of the worst. A dagger at the throat of the economy.

The idea that the banks will run out and lend money is a bit odd. What growing business will be able to pay it back in a shrinking economy? Don't you have to laugh when you hear about the problems at the auto dealers? Hell, they aren't selling any cars. Over leveraged in the first place, low volume for 18 months, finally facing financial reality. Many are just broke in a bad business. So this plan is hurried through to save them.

Can the Banking System Handle Huge New Write-Downs?

The exact same problem with treating everyone "fairly" was what caused the bubble on the way up. Giving everyone the same deal of renegotiating a lower loan amt and rate will kill the lenders on the way down.

Pension Benefit Corporation Rolls the Dice at Exactly the Wrong Time

Muzie,
You have used a flawed analysis.
An example illustrating this is to consider BRK.A as a portfolio holding.

That part of the portfolio pays no dividend, and the portfolio would have no income from it. BRK.A has never paid a dividend.

Would you consider a long term holding of that security to have been a poor investment? Under your example it would have been terrible as it did not generate any "income."

Pension Benefit Corporation Rolls the Dice at Exactly the Wrong Time

This article is normal for the Shedlock analysis. The fund is buying into stocks at a 15% to 20% discount from the October, 2007 prices. They are increasing the allocation from 28% now to 45%. Portfolios as large as the PBGC have a difficult time with market timing. The large reliance upon low bond returns is almost assured to leave the taxpayer with a huge bailout bill.

I would be much more interested in seeing the investment performance of the money managed by Shedlock. Is it possible that the PBGC has had superior returns?

Interested in Bank of America? Consider the Preferred Shares

Yield is the same on the preferred as on the common - but a bit safer.
Premium for the preferred over the conversion price is about 50% or so. That seems darned steep to me, particularly when there is no cumulative div with the preferred. Buying $837 of the common would seem to be a better idea, IMHO.

Bank of America Asks Congress for a $739 Billion Bailout: Who's to Blame?

Shedlock exhibits his complete "buffoonery" by refering to Taylor as one.
Of course the Federal Govt. can repackage it and sell it. GNMA securities are sold every day. Even a Shedlock Buffoon should know that. Well, maybe not. He has been predicting a deflationary crash for years and years.
As to banks "looking the other way", don't fault the banks. Fault the discrimination laws. When you filled out your financial statements for a loan, did you have to give them pictures of your share certificates?
Standard cut and paste butchery from Shedlock.

No Underwriter Support For Failed Muni Auctions

The leveraged Closed End Funds have been funding the leverage for themselves by issueing auction floating rate securities. Very cheap source of funding. If the auctions fail so that the costs go up - and different bonds have very different provisions for that somewhat max rate - then these guys will quit using leverage. To do that the CEF will sell enough bonds to get back to only a 100% long position.

These auction failures really are pretty nutty. Think about the CEFs. They have portfolios of single A to triple A municipals with about zero chance of default. They put that up as collateral to borrow maybe 50%. And then use that cash to buy more AA municipal securities. The very shortest term normal rates are less than longer term muni rates so the deal has made sense on a interest spread basis.

As for the idea that the municipal borrowers were in some sense gambling - it is just not correct. These organizations were and still are good credits. And there are still mountains of cash that need to be invested on a very short term basis so willing to earn small yields. Because the lenders really have not understood very well what they were buying in many cases, they have simply decided to not buy anything other than US Treasury Bills. When these auctions freeze up, whoever was holding the bond last gets to keep it a while longer, earning the much higher rate while doing so. Not a good thing for the lender which really needs that cash today. But most of these are cash management vehicles, so that the size of the cahs pool is probably pretty large.