Which financials emerge as leaders when the dust settles

Discussion in 'Economics' started by Poole, Nov 16, 2007.

  1. Poole


    OK, so stuff is getting POUNDED

    and the pounding looks set to continue, because as more people default, the banks will have more problems to report....

    so, back to the initial question, WHEN the dust setttles, who is left standing and who stands to gain the most?

    Citi? BSC? wells? Goldman? or the 100s of others out there?

    share your thoughts with reasons.
  2. td bank

    focus on retail profitability, back to basics with banking
  3. I just posted about Wells. Buffett just increased his holdings. Few CDO exposure.
  4. Why not Canadian banks? They're big, well managed, and have little to no exposure to sub-prime mess. TD (Toronto Dominion), RY (Royal Bank of Canada). They all trade on NYSE.

    They're dropping in sympathy right now, but when the dust settles...

    Then again, the banks are all interrelated; the whole sector may be in for an extended drubbing, Buffet notwithstanding.
  5. Dollar rebound play would mean US financials without foreign exposure would be my choice.
  6. Been wrestling with the OPs question for months with no real answers yet (just a few trades) but here’s where I am:

    1) At the height of it, some 40-45% of mortgage lending was by non-depository bank lenders which have all gone bust. Who does this benefit?

    Caveat - Throughout the boom the spread between cost of funds and what you could loan at was quite narrow due to the competition.

    I like C and CFC (if it survives) and some local listed banks I know well for the long run. I personally hate Wells but the fact is they have come through this remarkably well so far - so that is my pick for somebody other than me. WAMU yield is 10%+ now also, I believe, and not to be scoffed at. I am also watching HSBC closely. My call remains that UK is the next housing train wreck.

    2) The crux of the ABS mess for the big banks is (a) they got stuck with supply they couldn't pass off to final bagholders because of the securitization blowup and (b) securitization and their profits from it are not coming back to the levels from before until the specs for the securities are rewritten or the way they are rated and marketed becomes palatable to buyers. The scam may well never recover.

    Caveat - IB earnings show that they still have SPECTACULAR trading desk performance, plus access to nearly interest free carry trade financing I presume, plus deal activity (particularly ex-US) intact as well as anything else they relied on before.

    I like C and GS in the long run with the nod to C because of the yield and the value of its real estate/offices worldwide.

    3) Few realize yet what was really securitized and where the big money went this last decade with virtually no lingering risk. The answer is it is not the ABS's or anything else the Street was involved in. The real estate itself is what was really securitized - each and every parcel of property in the nation now meets certain minimum requirements of the secondary market such that it can support a loan as collateral. Fundamental to that is that the title to the property is good and marketable and that an insurer will promptly guarantee it. Compare a few hundred or thousand ABS issued @ 500M each times maybe a 5% fee with outrageous risk for the end holder (what the IB’s were playing with) with the value of all parcels in the nation being assessed a percentage fee based on loan amount or property valuation (what the title insurers play with). So it's definitely the title insurers and lawyers who collectively slithered away with the Hope Diamond. Plus the risk is confined to something being wrong that is peculiar to the parcel itself so hurricanes, credit crunches, this debt bond insurer turmoil, and every other catastrophe we are seeing now is not a factor.

    Caveat - This type of insurance is a far different bird than any other insurance line. It can only be procured through heavily regulated and licensed agents who skim off 60-70% of the premium dollars. Still that leaves plenty for the stock exchange listed carriers.

    I like FAF in the long run BUT I have yet to have a successful trade gaming this industry sector.
  7. Paliz


    It's too early to predict, we will be seeing more losses being reported. Plus, we would have to see how each company reacts to the current matter at hand.
  8. If the Bond Insurer's go down, as someone else posted from Briefing I believe, won't that take down this sector even further? Maybe even the whole market?
  9. Poole


    yeah I agree this aint the bottom

    I friend of mine (successful investor) 6 months ago put in some orders for citigroup GTC at $5, when it was trading at like $50

    I was laughing at him

    now im not so sure, maybe he will get his fill within 24 months
  10. Mine's @4.865 GTC

    'course I'll have to move it some now.:mad:
    #10     Nov 17, 2007