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  • Where's the Bottom? Still Anybody's Guess
    The bottom for equities and paper, in dollar terms, will come when people are no longer writing articles asking when the bottom will come, because they are too busy selling.

    The bottom for the dollar, however, does not exist. It will continue asymptotically approaching zero until it becomes inconvenient to quote prices in it, at which time it will have zeros lopped off or otherwise be replaced by something else with indistinguishable characteristics, which will itself promptly begin its own asymptotic march toward zero.
    Sep 24 10:58 am |Rating: 0 0 |Link to Comment |View article
  • Bank of America / Merrill: Shotgun Marriage
    Three possibilities:

    1. BAC is a conduit for covert Fed money, injected either for "systemic protection" or perhaps to help friends (or well-armed enemies?) get out of precarious positions.

    2. BAC has balls of steel and wiles to match and will emerge from the crisis far ahead of all other players.

    3. BAC is recklessly building itself up to ensure that it is deemed too big to fail even if its big bets don't pay off.
    Sep 15 02:06 am |Rating: 0 0 |Link to Comment |View article
  • Is the U.S. Banking System Safe?
    prescient11,

    I'm very much of two minds about WFC. They are indeed making money, at least so far. But they also have a lot of dodgy exposure, and the HELOCs are coming, too. I agree that it's a much better bank than C or WM or WB. But it's hard to make a case for buying it instead of USB, a similarly-priced bank with a more conservative balance sheet. Both did very well after they announced similar earnings at the short-term bottom. But I have more faith in USB's management and loan book than in WFC's, even though USB's payout ratio is somewhat higher and it's slightly more expensive to book. USB just seems the safer pick here. Unfortunately at $30 both are now fairly valued and I see little upside beyond the dividends. At $21, well, that was a nice day to buy.

    Long USB. No position in WFC.
    Aug 03 19:42 pm |Rating: 0 0 |Link to Comment |View article
  • Is the U.S. Banking System Safe?
    The FDIC no longer has $53b. Based on published figures from this year's bank failures, I place their current reserves between $44b and $48b. There are 21 weeks left in 2008. If there is another failure each week of the same size as First National of Nevada, almost half those reserves will be gone. Sprinkle on a few more First Priority sized failures and maybe one or two more IndyMacs and the FDIC will be insolvent. What will the next "FDIC Friday" bring? Ready for RTC II?
    Aug 03 13:01 pm |Rating: 0 0 |Link to Comment |View article
  • Can Cities Create "Foreclosure Sanctuaries?" [Housing Tracker]
    The way forward for San Diego is to buy all the properties in default, then lease them back to their current occupants along with an option to buy at the short sale price good for as long as they live there. This can be paid for with block grants to cities from the Treasury, which in turn will borrow the money abroad for periods of 7 to 30 years. As someone with 31% of his portfolio in short positions on the back side of the Treasuries curve, I think this would be an outstanding way to keep hardworking American families in their homes. Another good financing option would be for the Fed to reduce interest rates further and open the discount window to cities using the money to prevent foreclosure. They could buy the loans from the banks, put them on indefinite forebearance, then borrow against them at the Fed window to repeat the process. As someone with 29% of his portfolio in gold and silver, I am convinced that this dramatic step is essential to the stabilisation of our housing market and the protection of both the banking system and the ordinary American working man and woman and should be implemented as soon as possible.

    Discipline and hard work are unpopular and unpopular things are not done in leaderless political democracies. We will not soon, if ever, return to our founding principles. Instead we will have one bailout after another. The way to profit from this is to make aggressive naked bets against American strength, as shown above, then during a lull between a round of debilitating regulation and the next round of stifling oppression, convert your winnings to gold, put it in a backpack, and GTFO of Dodge.
    Jul 24 10:46 am |Rating: 0 0 |Link to Comment |View article
  • 2 Safe Bets Amidst Big Banks' Worrying High Yields
    The fact that USB is down only 5% is a large part of why I'm not buying. At 2.6x book (2x if we ignore treasury stock), it's just too damned expensive. Yes, it's a great bank. Unfortunately, it's priced like one. If there's even a glimmer of a crack for USB, you'll lose 30% in a day. I wouldn't have that kind of confidence if my own mother were chairman and CEO. I'd rather take small positions in stocks people have thrown in the trash. If USB ever sees 20 again, I'll buy. But a 5.6% yield isn't worth the risk of buying a stock that's priced for perfection and has very little capital appreciation upside. If you want the income, find some preferreds instead.
    Jun 19 23:18 pm |Rating: 0 0 |Link to Comment |View article
  • The Outlook for Financials Failure
    It's hard for banks to raise capital when most of what they offer is yield but the yields, fat as they are relative to other stocks, are below the rate of price inflation while real interest rates remain negative, suggesting strong inflation for years to come. The market is asking itself why it should invest in bank stocks when it could have oil instead. Yesterday, at least, the answer was pretty clear.

    Paradoxically, if the Fed raised rates to 7%, I'd like the banks a lot better: the weakest would fail quickly and the strong would be available cheaply, becoming attractive homes for capital as their much-reduced dividends would nevertheless exceed the rate of price inflation for years to come, with capital appreciation on the cards when short-term rates later ease. Right now it's just an unattractive and overpriced muddle in which, as you seem to be saying, no one fails but no one succeeds either. Oil it is, then.
    Jun 07 14:07 pm |Rating: 0 0 |Link to Comment |View article
  • Big Ben's Credit Card Moves: The Good, the Bad and the Ugly
    There is nothing I can use to predict the future price of V, so there's no way to formulate an exit strategy. Its price is decoupled from its value and there are no technical indicators; it's a new issue and the chart is parabolic. That's not trading, it's gambling. If you need the returns and are comfortable with that, so be it. Good luck to you.
    May 07 12:32 pm |Rating: 0 0 |Link to Comment |View article
  • Big Ben's Credit Card Moves: The Good, the Bad and the Ugly
    No, Visa is not a credit card issuer. But V trades at 40x earnings and it pays no dividend. That's an automatic fail here at the bearfund. If you want to bet on number 23, go ahead. The casino is over there. V is neither a sound investment nor a reasonable trade; you are doing nothing but betting on the greater fool. I'll give you $15 a share for it; that's a bit above its liquidation value but I'm willing to take a bit of risk that it'll someday pay a dividend.

    No position on V. I don't trade the untradeable.
    May 07 00:33 am |Rating: 0 0 |Link to Comment |View article
  • Ten Comments on Housing
    “The prudent will have to pay for the profligate.”

    I refuse, sorry. Their misbehaviour did me too little good, I'm too young, and the bill is too large; stick me with it now and I'll never recover. If you insist, I'll buy more gold. If you keep insisting, I'll put it in a briefcase and leave the country with it. If you can't handle that, I'll arm myself heavily and smuggle it out. A nation of looters has no chance and I'm not going down with your ship.
    Apr 06 21:46 pm |Rating: 0 0 |Link to Comment |View article
  • Hitting the Reset Button On Home Mortgages
    The greatest danger lies not in the handing out money aspect; the government does that all the time. Much worse is the fact that such a bailout actively punishes those of us who (a) didn't feel comfortable gearing up 40x on real estate, (b) recognised that the market was significantly overvalued, and thus (c) preferred to save our money so that we could take advantage of the coming correction. We've already taken it in the shorts from negative real interest rates - our savings not only aren't growing any longer, inflation is eating away at their value. Now you also want to deny us proper pricing? To hell with that; I might as well just quit my job and go live in the park. Why participate in a heavily manipulated economic system that seeks primarily to punish prudence?
    Mar 31 10:58 am |Rating: 0 0 |Link to Comment |View article

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