The Credit Crisis Financial Stocks Short Journal

I will be wrong about a lot of things in my life but that banks, insurers, reits, levered utilities borrowing to make interest payments, law firms running ponzi schemes are either are 80% likely to go bust or will have their shares collapse wont be one of them.
So I remain short here, hussman has an article on why this bear market rally will fade
http://www.hussmanfunds.com/wmc/wmc090420.htm
He also goes on to talk about about the looming foreclosure crisis which I also mentioned in my site

Even if the SP500 has bottomed, this wont matter, the companies I'm targetting have fundamentals way worse than the top 500 US firms

The real risk I'm running is having put options expire worthless before the plunge. But I was quite careful in extending maturities since it seems I cant time short-term moves to save my life. The earliest expiration I got is september for JPM and ACC

Hussman 3rd chart is a big reason why put buyers have been making a killing, however that seem to be a total exception to the rule, its quite possible that this market will behave more like in the past so short-term puts will be riskier
 
Thats interesting, JPM just published research very similar to mine 'geithner will own XLF', their losses already taken number is bigger which decreased their losses left to go so in the end my numbers are quite close to theirs. the pre-tax pre-provision earnings number is also similar, did these guys stole my report?
http://www.bloomberg.com/apps/news?pid=20601110&sid=ahP7Xp58mE1U
The number I got it wrong in the file was the TCE of the banks, my number had tarp added on it, so the actual TCE is lower, but looks like they will convert the tarp anyway
 
Quote from Daal:

Thats interesting, JPM just published research very similar to mine 'geithner will own XLF', their losses already taken number is bigger which decreased their losses left to go so in the end my numbers are quite close to theirs. the pre-tax pre-provision earnings number is also similar, did these guys stole my report?
http://www.bloomberg.com/apps/news?pid=20601110&sid=ahP7Xp58mE1U
The number I got it wrong in the file was the TCE of the banks, my number had tarp added on it, so the actual TCE is lower, but looks like they will convert the tarp anyway
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The only thing that has worked so far is the m2m changes jammed thru by Barney Frank. Geithner/Obama can't come up with a solution to save their lives.

Frank may get legislation to backdate m2m for previous quarters, effectively reversing all the losses taken to date. That is the only thing I can see that will take the banks higher from here, unless the economy turns on a dime.
 
Quote from Cdntrader:

The only thing that has worked so far is the m2m changes jammed thru by Barney Frank. Geithner/Obama can't come up with a solution to save their lives.

Frank may get legislation to backdate m2m for previous quarters, effectively reversing all the losses taken to date. That is the only thing I can see that will take the banks higher from here, unless the economy turns on a dime.
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I agree. This BAC report is a good example on how the market can smell the BS eventually, the talk now is that 'earnings quality' is low. These conf calls have tons of analysts now scrutinizing the accounting. These CEOs are very misleading, the present the facts in a way that just guarantees they can't be jailed and thats all. The banks keep saying 'we did not use the mtm change to writeup assets this quarter, it had no effect', yet they dont mention the writedowns that would have taken if there was no rule(which will show up in 'other comprehensive income' of the 10Q)

Lewis was upset his stock was down, his earnings had more of one time extraodinary items than a bingo card, yet he wonders why he cant get people to trust him for moneymaking in the long-run
 
MS revenues in a y-o-y basis are totally collapsing meanwhile compensation is not collapsing as much, this shows that the investment banking model is screwed, these guys have a lot more layoffs to do and they need to shrink, this means lower returns and stock prices

John Mack said
'In fact, Morgan Stanley would have been profitable this quarter if not for the dramatic improvement in our credit spreads'

Talk about misleading that was just a reversal of a massive earnings benefit they got in the Q4(where they lost $11 a share)
 
Quote from Daal:

MS revenues in a y-o-y basis are totally collapsing meanwhile compensation is not collapsing as much, this shows that the investment banking model is screwed, these guys have a lot more layoffs to do and they need to shrink, this means lower returns and stock prices

John Mack said
'In fact, Morgan Stanley would have been profitable this quarter if not for the dramatic improvement in our credit spreads'

Talk about misleading that was just a reversal of a massive earnings benefit they got in the Q4(where they lost $11 a share)
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ya where are the layoffs?? they should be huge across the street. of course that news might rally the stocks.
 
Guess they are saving layoffs for when their rosy forecasts are shown to be wrong

FBR's Paul Miller says at 10% unemployment the banks can make it, at 12% they all need new capital(some TCEs get totally wiped out) at 14% they are all toast.
Roggoff research suggests unemployment is going to 11%, this is also the forecast from RGE, I wouldn't be surprised if Shilling forecasts that as well(since his GDP decline is equal to RGE's). Where is the money going to come from to recap banks?I have no idea, they might have to take over the banks with some kind of new authority or beg congress
 
Quote from Daal:

Guess they are saving layoffs for when their rosy forecasts are shown to be wrong

FBR's Paul Miller says at 10% unemployment the banks can make it, at 12% they all need new capital(some TCEs get totally wiped out) at 14% they are all toast.
Roggoff research suggests unemployment is going to 11%, this is also the forecast from RGE, I wouldn't be surprised if Shilling forecasts that as well(since his GDP decline is equal to RGE's). Where is the money going to come from to recap banks?I have no idea, they might have to take over the banks with some kind of new authority or beg congress
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I have a feeling the they are going to find a way to spin these stress test results as positive given todays runup in the banks.
 
As you know Daal, there is already a process in place to take over insolvent banks. It's called FDIC Friday.

So in theory, they could shut Citi's doors on a Friday, and nationalise it that evening or over a weekend.

In practice, it's likely that (1) the big 19 banks will all be allowed to pass the stress tests and (2) in the future, will be given generous guarantees over dodgy assets and (3) in the future, provided with equity at above-market prices [see February 2009 Citigroup example].



Quote from Daal:

Where is the money going to come from to recap banks?I have no idea, they might have to take over the banks with some kind of new authority or beg congress
More...
 
Quote from m22au:

As you know Daal, there is already a process in place to take over insolvent banks. It's called FDIC Friday.

So in theory, they could shut Citi's doors on a Friday, and nationalise it that evening or over a weekend.

In practice, it's likely that (1) the big 19 banks will all be allowed to pass the stress tests and (2) in the future, will be given generous guarantees over dodgy assets and (3) in the future, provided with equity at above-market prices [see February 2009 Citigroup example].
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True. Bernanke said they want authority do deal with bank holding companies and non-banks, its possible that they will get this soon(there was a congress hearing a few days ago, Liz Warren from the TARP watch is pushing for this, she calls the current plans a subsidy, so do a number of advisors to the whitehouse). The government seems very likely to lie in this stress test(Although I believe C will fail)

But I think shorts will be rewarded in being patient here. MBI/ABK taught me an important lesson, I was dead right that those things were worth $0 yet I kept covering every time they rallied, now they sit at $1 and $4. How can the short seller know that a monday type day where XLF drops 12% and wipes weeks of profits wont happen soon?I cant know so I need to hang in there and be patient
 
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