Comments on: The Bottom for the Banks http://alephblog.com/2008/06/14/the-bottom-for-the-banks/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Tue, 16 Mar 2010 08:39:27 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: Clyde http://alephblog.com/2008/06/14/the-bottom-for-the-banks/comment-page-1/#comment-17812 Clyde Tue, 17 Jun 2008 22:06:18 +0000 http://alephblog.com/?p=746#comment-17812 Banks can't offload loans anymore, either through whole loan sales or securitization, and they just don't have the risk monitoring infrastructure to hold them on their books profitably either. Considering that this generation of bank management was all offense and no defense, I believe it will be quite some time before new sources of revenue growth are created. The originate-and-sell model will never be repaired, so until another model takes its place, no bottom will be found in these stocks. Banks can’t offload loans anymore, either through whole loan sales or securitization, and they just don’t have the risk monitoring infrastructure to hold them on their books profitably either. Considering that this generation of bank management was all offense and no defense, I believe it will be quite some time before new sources of revenue growth are created. The originate-and-sell model will never be repaired, so until another model takes its place, no bottom will be found in these stocks.

]]> By: AllanF http://alephblog.com/2008/06/14/the-bottom-for-the-banks/comment-page-1/#comment-17809 AllanF Tue, 17 Jun 2008 05:00:14 +0000 http://alephblog.com/?p=746#comment-17809 The perenial bottom calling in banks reminds me of something the chartist Gary Smith wrote at Real Money back a few years ago. I forget the precise details and framing of the question, but when amatuer golfers are asked if they'd be interested in something which would allow them to be guaranteed par, but never again hit a hole in 1, they were not interested. The bragging rights that come from a hole in 1 far out-weigh the value of being a par golfer. I think this applies in stocks far more often than many investors admit. The bragging rights in calling an absolute top or bottom in whatever is making the current headlines far outweighs the actual value from staying patient and rigorous and catching the middle 50% of a move instead of the first or last 10%. As for banks and the housing bubble, it took two years before the dot-com survivors were safe to buy. And at the time, you couldn't give 'em away. You'd be laughed at for the mere suggestion. When regional banks are derided like utilities as fuddy-duddy investments for seniors looking for dividend income streams, and when the IB's are universally thought of as incapable of making money for anyone but their executives then it will be time to start looking at financials. We won't get a bottom until they just don't make news anymore. Lehman, Wamu, Citigroup, they are all still making news and headlines. The perenial bottom calling in banks reminds me of something the chartist Gary Smith wrote at Real Money back a few years ago. I forget the precise details and framing of the question, but when amatuer golfers are asked if they’d be interested in something which would allow them to be guaranteed par, but never again hit a hole in 1, they were not interested. The bragging rights that come from a hole in 1 far out-weigh the value of being a par golfer.

I think this applies in stocks far more often than many investors admit. The bragging rights in calling an absolute top or bottom in whatever is making the current headlines far outweighs the actual value from staying patient and rigorous and catching the middle 50% of a move instead of the first or last 10%.

As for banks and the housing bubble, it took two years before the dot-com survivors were safe to buy. And at the time, you couldn’t give ‘em away. You’d be laughed at for the mere suggestion. When regional banks are derided like utilities as fuddy-duddy investments for seniors looking for dividend income streams, and when the IB’s are universally thought of as incapable of making money for anyone but their executives then it will be time to start looking at financials.

We won’t get a bottom until they just don’t make news anymore. Lehman, Wamu, Citigroup, they are all still making news and headlines.

]]> By: TJ Parker http://alephblog.com/2008/06/14/the-bottom-for-the-banks/comment-page-1/#comment-17793 TJ Parker Sun, 15 Jun 2008 13:30:07 +0000 http://alephblog.com/?p=746#comment-17793 The problem is that its not even possible to speculate on where the bottom is here. We do not know what the banks have on their books. We do not know how level 3 assets values are being modelled. We have some confidence that there will not be a global financial meltdown, with the Fed backstop, but there is no promise that any single bank will not fail. Worse, we might expect that the Fed will allow some high-profile failures. The problem is that its not even possible to speculate on where the bottom is here. We do not know what the banks have on their books. We do not know how level 3 assets values are being modelled. We have some confidence that there will not be a global financial meltdown, with the Fed backstop, but there is no promise that any single bank will not fail. Worse, we might expect that the Fed will allow some high-profile failures.

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