The Credit Crisis Financial Stocks Short Journal

Daal,

Well thought out logic there, and I'm starting to think that there is an increasing chance of nationalisation for BAC and C, for a variety of reasons.

With C and BAC stocks quickly heading towards zero (new multi-year low for C today), this could also force Obama and Timmy G to do something (nationalisation) if they're not quick enough to do 'something else'.

However I still think there is a better chance that they do the 'something else', which is to provide generous guarantees like they did for C in November.


Quote from Daal:

m22au,
The reason that I think they will nationalize(specially the big banks) is because consensus is a very persuasive thing for most people. Alan Greenspan is a chicago school type economist, Bernanke is as well and probably agrees with with him 80%+ of the time, so if greenspan is saying that, bernake is in all likelyhood already there. Yesterday he gave BS reasons and mostly said the administration wants banks in private hands.

Remember when fnm and fre had rumors of inadequate capital, bernanke and paulson denied and denied and sometime after they took them over, the consensus of people and the stock market was very strong for them to ignore. At this point all it takes if for the consensus to get to Obama as he seems to control Geithner a good deal, as opposed to Paulson who was running the show and Bush just accepted his decisions. More and more Obama will hear natz from everywhere, that should persuade him

We as traders tend ignore consensus due our contrarian nature but I believe for most people it works

Its hard to see an end to this uptrend on natz consensus and financial stocks massacre
More...
 
Quote from Daal:

m22au,
The reason that I think they will nationalize(specially the big banks) is because consensus is a very persuasive thing for most people. Alan Greenspan is a chicago school type economist, Bernanke is as well and probably agrees with with him 80%+ of the time, so if greenspan is saying that, bernake is in all likelyhood already there. Yesterday he gave BS reasons and mostly said the administration wants banks in private hands.

Remember when fnm and fre had rumors of inadequate capital, bernanke and paulson denied and denied and sometime after they took them over, the consensus of people and the stock market was very strong for them to ignore. At this point all it takes if for the consensus to get to Obama as he seems to control Geithner a good deal, as opposed to Paulson who was running the show and Bush just accepted his decisions. More and more Obama will hear natz from everywhere, that should persuade him

We as traders tend ignore consensus due our contrarian nature but I believe for most people it works

Its hard to see an end to this uptrend on natz consensus and financial stocks massacre
More...

They need to rip the band aid off quick on BAC C. Otherwise the market will die of a 1000 cuts.
 
If nothing else, it's fun to watch C and BAC trading every day.

It's similar to FRE / FNM / LEH / AIG, and waiting to see what form the next bailout takes.

Quote from Cdntrader:

They need to rip the band aid off quick on BAC C. Otherwise the market will die of a 1000 cuts.
More...
 
Quote from m22au:

If nothing else, it's fun to watch C and BAC trading every day.

It's similar to FRE / FNM / LEH / AIG, and waiting to see what form the next bailout takes.
More...


Well with these "Stress tests" we could be waiting a looong time for Geithner to make a move.
 
Cdntrader,

Interesting point. Maybe it's because I am used to Paulson coming in and working a long weekend, and announcing a bailout on Sunday night.

However I should remember that Timmy G is a different person, and obviously he is keen to take more time to work things out.



Quote from Cdntrader:

Well with these "Stress tests" we could be waiting a looong time for Geithner to make a move.
More...
 
Quote from Cdntrader:

Well with these "Stress tests" we could be waiting a looong time for Geithner to make a move.
More...
I think the stress tests could/will be used as a pretext to nationalize C and BAC. They will say we didn't want to, tried every which way to work the numbers, but they both flunked the stress tests, so we had no choice but to nationalize (when they really wanted to all along...).

Maybe they think this logic will not scare away foreign/institional investors...
 
Thanks Stinkyfelix.

Earlier in the week, the cynic in me thought that the government will not allow BAC and C to fail the 'stress test'.

However your argument makes a lot of sense.


Quote from stinkyfelix:

I think the stress tests could/will be used as a pretext to nationalize C and BAC. They will say we didn't want to, tried every which way to work the numbers, but they both flunked the stress tests, so we had no choice but to nationalize (when they really wanted to all along...).

Maybe they think this logic will not scare away foreign/institional investors...
More...
 
Quote from Daal:

I posted about low testing a while back, JPMorgan has a study showing the low gets tested 86% of the time
http://www.bloomberg.com/apps/news?pid=20601087&sid=ak7FQQWIAF5k&refer=home

It takes at the most 100 days for that to happen, this suggests by the end of March 09 we will have tested the 08 Nov lows
More...

Looks like JPMorgan was right and the stock market is crashing on schedule. If the lows break I got to be honest it will be though to know where the market is headed next. I came in this year being guided by the study and short a few names and long puts but at around 700 level for the SP, it feels a little undisciplined to keep pounding the same trade as the risk reward ratio gets worse and worse

I'm inclined to hold the banks as a bet they go to near $0 and spy puts, the problem is what about all the other positions that trade very correlated to the SP500?I'm long the dollar, a bit of gold and yen, out of commodities, long a few stocks(which almost all are down). Without a strong opinion on the stock market it should be though to make big money this year

Gary Shilling and Roubini are talking about SP500 to 600-650 based on the multiples the stock market tend to bottom, but I would need to see all their numbers before buying this theory
 
Financial stocks nosediving 6%, preferreds down 13% and C bonds tanking, YTM of 15% on the highest yielding, reaching junk status

The one I own went into the red yesterday and trades at 68c on the dollar with a 5% coupon(YTM 13.3%), my short C stock hedge worked up to this point so I still show a small profit but the short is now so low I'm basically naked long the bond

These yields seem absurd, even in worst case scenario of nationalization and say a 25c haircut for the bonds(and this scenario would destroy bank senior debt markets so its not going to happen), then they became de facto agency bonds with 5% coupons. In that event I would have a capital gain as they go to premium to par(par being 75c on the dollar)
I think the market is nuts in leaving those yields out there
 
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