Banks

[JamesVU2000]

Is anyone baffled by the weakness in the banks and the shrug by the rest of the market?

Does the market assume the fed is on it?

 

[scriabinop23]

Quote from JamesVU2000:

Is anyone baffled by the weakness in the banks and the shrug by the rest of the market?

Does the market assume the fed is on it?

It looks like especially the regional banks are in total liquidation mode. Might be a good knife catching opportunity on the long side. Bought some RKH (regional bank ETF) 100 July calls right now...

 

[JamesVU2000]

I would prefer much much more panic for a decent buying opportunity.

This market needs something like last august in order to get a decent 6 month bounce.

 

[Arnie]

Why should anyone panic?

The Fed has already set a precedent for bailing out co's that got in trouble.

Congress is getting ready to pass legislation that will allow lenders to transfer their worst performing loans to FHA.

What's not to like?

 

[piezoe]

Quote from JamesVU2000:

Is anyone baffled by the weakness in the banks and the shrug by the rest of the market?

Does the market assume the fed is on it?

Not sure what is meant by shrug since it doesn't look to me like the rest of market iis going to shrug off the weakness in the banks. From my vantage point it looks like many of the banks are nearing what is surely a bottom, except for those going to zero of course, and leading the entire market lower. I mean once a stock has dropped 80-90% from its high it's pretty much got to be at a bottom, by definition, unless of course it is going to zero. In the savings and loan crisis about 1/4 of banks disappeared. But only a few went to zero, the rest were merged or bought out. In my opinion, for longer term investors, the collapse of bank stocks represents an opportunity of a lifetime. Naturally traders should bide their time and wait for a breakout.

I have posted a stock thread on UCBH. Their stock has been slammed. This bank is completely mischaracterized as a regional. They are on their way to becoming a major international bank specializing in US/China banking and business loans. As of December they were FDIC "well capitalized". They could slip a notch by mid-2009 to adequately capitalized, but they have access to as much capital as they need via their China connection.

Institutions have been dumping the stock like there is no tomorrow, and insiders have been buying it with both fists. See my thread.

 

[makloda]

For what it's worth, heres what Merril Lynch is saying

Over the past seven weeks, the BKX Bank Index is down 26%, and bank stocks now appear to be in capitulation mode, which means they could trade below fair value in the near-term as 1) emotion, 2) very high credit risk, 3) more dividend cuts and capital raises, and 4) a very uncertain earnings outlook all weigh on bank prices. Still, as more large banks cut dividends, raise capital, and significantly (and more realistically) increase their credit loss and reserve building assumptions (similar to WB, NCC, KEY & FITB), we should get closer to fully discounting the credit cycle in bank stock prices and commencing a sustainable price recovery.

(http://ftalphaville.ft.com/blog/2008/06/20/13939/capitulation-in-banking/)

 

[m22au]

Quote from piezoe:

I mean once a stock has dropped 80-90% from its high it's pretty much got to be at a bottom, by definition, unless of course it is going to zero.

I disagree - a $100 stock that declines 90% to $10 can still lose another 50% from there, and yet be "only" 95% down from $100.

Someone who tried to pick the bottom at $10 is then sitting on a 50% loss.

 

[agpilot]

Quote from m22au:

I disagree - a $100 stock that declines 90% to $10 can still lose another 50% from there, and yet be "only" 95% down from $100.

Someone who tried to pick the bottom at $10 is then sitting on a 50% loss.

Hello m22au: After 41 years of investing, I agree with your numbers: buying at $10 and having to drop to $5 is a 50 percent loss. Period. No two way around that 50 % loss. Ya gotta get a 100% gain to break even and that's a lot harder to do.
I've had better results buying positions after they have doubled and still have a good steady uptrending chart pattern... (I use a stop loss also)
agpilot