thomast2

How High Leverage Has Brought Down the Whole Banking Industry

Thank you all for providing your wonderful comments here. I really appreciate your thoughts and your time.

Amm, book value and market cap are two different things. Market cap usually is higher than book value but not in LEH’s case here. I also used the same approach as used by the WSJ article that the potential future writeoff could wipe out both book value AND the market cap.

Helplessobserver, I also agree that S&P will fall below $1,100 which is only my intermediate target. See my previous article of seekingalpha.com/artic..., my ultimate target is actually $800, as indicated in my article.

Thanks to Bob Gary and stockguy456, those are good links, especially the video on Fed which I watched before and now watched again. It is a cartel of the banks, by the banks and for the banks.

Charlie, you can read my previous article of seekingalpha.com/artic..., which has a brief discussion on the CDS risk exposure to JP Morgan. This is also the 2nd most popular article I have written next to my 10 predictions for 2008. By the way, what is the link to the Bloomberg article you were referring to?

Pescayolas, this is a long report, let me read through it, especially the derivative portion. Thanks for the link.

Kinabalu and Charlie, what I meant was for those CDOs with AAA rating, which the recovery rate is around 50%. It is more conservative that way. I am aware that anything below AAA rating is pretty much all wiped out. But at the same time, LEH may have written some of them off already.

Foreclosure Versus Delinquency: Either Way, Financials Will Pay

Thanks both for your comments. I think when seekingalpha moving my article over from my blog site vestopia.com, it made a minor error. What I said was "Foreclosure has already caused bank's recovery rate at 50%". What I meant was due to the increasing foreclosure with fire sale prices, lack of bidders, further deteriorating of real estate market, banks and mortgage companies can roughly recover 50% of their loans. So Zhang Fei, your interpretation is correct.

My Ten Predictions for 2008

I don't know much about HSBC, never read its FS reports. My impression is they don't have a lot of subprime or CDS, and they have a strong presence in Asia. So I hope that they will survive.

Will Citigroup Go to the Teens?

No position in C now. No long, no short, no option. If you want to see my portfolio holdings, you can go directly to vestopia.com/thomast All my trades and holdings are transparent.

My Ten Predictions for 2008

Thank you all very much for providing comments to my article.
The response has been overwhelming. I put this article together originally for my blog website more for fun and didn't expect so much feedback. I won't answer all of you one by one, but overall here.

For those criticizing my views as subjective, I fully respect your opinions. But here I only point out one fact, many of my predictions are merely continuation and extension of trends from 2007 (gold, oil, banking sector, real estate, US dollar, etc.), so unless you have your eyes closed or your head in the sand, you are as subjective as mine, but at least my views are based on real data and real trends in 2007. For those don't believe any of these things will repeat 2 years in a row in 2008, just look back in 1970s, it is just a super normal cycle of business and financial market. BTW, I never heard of Dr. Enzio and Trader Mark.

For those who agree with me, please also exercise caution. If at the end of next year, 6-7 of them (2/3) become true, it is already record breaking against any wall st. masters. I personally will be very happy even if 3-4 (1/3) are true.

Elliot Miller, I am talking about nominal USD, but $2,500 gold who knows might eventually happen but probably many years down the road. For general equity market, I am actually more careful by saying range bound since I factor in what Fed can do by lowering fed fund rates very aggressively, down to 3% if they want to. Also the rate lowering this year will help and see impact next year. I also only point out banking and retail will be under pressure, it is possible some other sectors mentioned by nomadine will offset to provide a trading range for overall equity market. Yi Yi, I am neutral on solar and wind, but feel too much hype in solar already. I feel they are not that different than water hydroelectric power utilities with stable income, don't see anything so "high-tech" or super growth like ipod there. Hugh, I agree with your comment on labor and real estate, especially with labor cost. Darrell, I only said 10% for 2008, then I see a rebound, then I agree with you, I see more falling much worse than 10% but will take a few years to play out. But anything is possible in the market, USD could drop much >10% next year too.
Thanks again to you all. It will be an exciting year next year.