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News Flash to BofA's Lewis: Demand Isn't Problem - Supply Is
"If you can’t stand the idea of seeing another, say, 20% on the downside, please stop reading at once and head back to CNBC.com."
Tom said this on 7/22/08, when the XLF was at $22.49. As of today, the XLF is 32% lower than when Tom made that call. THIRTY TWO PERCENT LOWER!!!
This thing is a mess, and Tom continues to avoid the heart of the matter. People who have listened to Tom have lost money, when 'smart money' was pulling out of financials. How can one be SO wrong, and not own up to any of it?
Tom, we would respect you a lot more if you would at least own up to your bad advice.
There is a real risk of failure in the system. It may be a small fraction of a percent, but the risk is still there, and it has increased over the last 3 months. It would be nice to hear Tom acknowledge this risk and issue a cautionary note.
Look at the SEC website to see what second curve capital owns. If Tom had thrown in the towel 3 months ago, it would have avoided MILLIONS OF DOLLARS OF OTHER PEOPLE'S MONEY down the drain. That is reckless.
Paulson even said today that there is more pain to come.
That is all.
/rant over
News Flash to BofA's Lewis: Demand Isn't Problem - Supply Is
Coming Bull Market in Financials: A Few Items Portending the Turn
MBIA's Momentous 2Q: Need More Evidence That the Turn Has Arrived?
www.businesssheet.com/...
What is your YTD? Based on your SEC filings, not so great.
Financials: Bottoms Happen When Everyone's Convinced They Won't
Your thesis hinges upon the theory that the market is a "Discounting Machine". This writeup questions the validity of that theory:
seekingalpha.com/artic...
Next: www.marketwatch.com/ne...
Financials: Bottoms Happen When Everyone's Convinced They Won't
www.reuters.com/articl...
"IndyMac is in a stronger position now because so many of its competitors have left the business, said Tom Brown, a former top-ranked bank-stock analyst who now runs hedge fund Second Curve Capital LLC. The New York-based fund has raised its passive stake in IndyMac to 5 percent from 2 percent, representing a total of 3.7 million shares"
Financials: Bottoms Happen When Everyone's Convinced They Won't
hf-implode.com/ailing/...
www.businessweek.com/b...
"I think we're really close, if not at the bottom, for the financial services industry," - Great call Tom, way back in November of 2007!
www.reuters.com/articl...
Way to read the tea leaves Tom:
“ Mr. Brown, whose hedge fund had owned 5 percent of IndyMac late last year, described Mr. Perry as an “eternal optimist.”
www.nytimes.com/2008/0...
And my favorite: Your recommendation to buy FMD on 11/30/07 when it was at $30.01/share. It is now at $2.90/share.
vinvesting.com/vic-nyc...
Please explain yourself.
Wake Up America, You’re Sinking
This is a story about the future, how people interact in the future, and how we become dependent upon technology to survive. At some point, things aren't so great & mediocrity and decay set in.
It was written in 1909, and it may take you a day or two - so print it out.
Canadian Oil Sands, Penn West Energy Protected on the Downside
Who can't claim the 15% credit back in the US? I was unaware of that. Considering that MOST investors get the 15% back, and are not double taxed, then this is apples to appples vs. some other tax advantaged cash flow/dividend investment.
Second, how is the theoretical net lowered by a match in DUG? Would you please explain the numbers? Are you saying that the opportunity cost of the 50% position is eating into yield? I don't see how the yield gets knocked down to 5.5 or 6%.
Matching your investment with a 50% position in DUG (i.e. for $100K invested in the basket, 50K goes into DUG - which yields ~2%) would cause the investment to be market neutral - extracting dividend yield. At that point, your yield is contingent upon whether or not the trusts lower distributions.
thx for your input.
Canadian Oil Sands, Penn West Energy Protected on the Downside
Canadian Oil Sands, Penn West Energy Protected on the Downside
What Can Go Right for the Financials? Quite a Bit, Actually
U.S. Dollar Shaking Off Risk Aversion
- New home sales were up, but so are foreclosrures (defaults) www.bloomberg.com/apps...
- The dollar strengthens as the velocity of money slows down (liquidity leaves the system)
- Inflation may drive the fed to raise rates, which will strengthen the dollar but kill banks.
- I believe the dollar was beaten down by the assumption that the Fed would continue to write blank checks. Once the FNM/FRE bailout happened, the fed's language implied that they would not bail out other institutions down the road. This gave dollar bulls clarity, considering that each bailout = weaker dollar in theory. Also, when the obligation of the Fed in regards to FNM/FRE was estimated to be 26B (and nowhere near 5T), the dollar continued to strengthen.
- Oil is a wild card. Iran tension will push oil up, wheras deflationary pressures (lack of demand) will send it down (strengthing $).
- Why isn't the market rallying more with such 'great' economic news today?
- Within the last 6 weeks, 4 major institutions have issued dire warnings for the US Banking system, and the government has taken extreme measures to prevent collapse. Is more to come? The dollar bottomed this year on the day BSC went belly up, which tells me that the Dollar is also correlated to the health of the derivatives market.
At the end of the day, there are several things that push the dollar around - including foreign monetary policy & macroeconomic events such as the amount of liquidity in the market, oil prices, and Gold. Not all of these are good things, so I wouldn't necessarily correlate dollar strength with overall economic strength.
News Flash: Major Market Turns Aren't Announced In Advance
Poof, there goes your theory about defaults not rising. I'll see your Sean O'Toole quote, and raise you a Rick Sharga:
"Falling home values, led by states such as Nevada and California that have the biggest default rate, have prompted RealtyTrac to almost double the projected number of foreclosures this year to about 2.5 million, said Rick Sharga, executive vice president for marketing. "
----------
"Even so, there’s been no shortage of signs lately that the worst of the credit crunch is past, or soon will be. As we’ve talked about here for awhile, new delinquencies among the loans that make up the ABX subprime mortgage index have been declining for months, while delinquency roll rates have been improving. Lower delinquencies now mean fewer defaults down the road. Bingo! End of problem in sight."
News Flash: Major Market Turns Aren't Announced In Advance
I agree 100% that you can't simply wait for an "all clear" to call a bottom. At the same time, when there are so many atypical risks to the system, you would need a time machine to make the call you did on Tuesday. I only know one guy with a time machine. Najdorf, "Trying to get ahead of them exposes you to huge market risk and prediction risk" is right on the money.
Tom, in my opinion - the real risk in our markets is unknown. We will know more when we have more data, however, things like WFC extending it's window for delinquent debt before it has to report the loss suggests (to me) that there is a lot that we still don't know about the current rates of defaulting debt. In the last 5 weeks, 4 major financial institutions have warned that the US Banking system is in severe distress (and to take cover). In the last 2 weeks, there has been a ban on short selling certain financial stocks, BAC has decided to allocate $3.6B (of taxpayer money?) to support their share price, and Jamie Dimon has said that prime losses could triple from here. (ap.google.com/article/...)
Your logic is sound in a vacuum, however I feel that you are ignoring several inputs to the equitation that affect your thesis, and that the risks associated with these inputs must be taken into account.
Is the risk/reward tradeoff "worth it" at this point, even if valuations are great & the rate of defaults has slowed down? What about commercial defaults as small/medium businesses leave their spaces?
Have the banks written down enough? That is the Trillion dollar question.