After the heated discussions that have taken place on this board, any thoughts on their “return to profitability”?
What’s the expression: “Buy the sectors/stocks when those who know it the most love it the least”. Might want to check out Merrill and Citi also. However, I’m waiting for AIG to “drop the bomb” too. You gotta figure that one’s got support at $61/$62 right? Willy
I bought CFC, BAC, and C this week and luckily got them very near their lows. CFC made me the most nervous, but being up 32%+ today alone is making me feel a lot better. My reason for buying was that I thought those names had been beat up enough in the headlines and that most future troubles were already priced in. CFC moving this much this fast, however, is tempting me to to take it all off the table and wait for another pull back.
I have no idea when they will return to profitability. But I do know that the market is pricing in substantial liquidity concerns, and unless you have a good enough handle on their business to estimate if those liquidity concerns are priced in efficiently, then you are just guessing on the stock. As for Willy’s quote above, I am just glad he isn’t in charge of picking stocks for me.
My favorite is how people think the banks just threw everything into these charges and are now in the clear. Because that’s what they thought 2 weeks ago, when MER announced a $5B charge.
Buy when the blood runs in the street ( think it is), just dont bet the farm on one name. I think it is also a good time to pick up other names in the space, the P/E and Div yeild are getting too good to pass by.
CCM Wrote: ------------------------------------------------------- > Buy when the blood runs in the street ( think it > is), just dont bet the farm on one name. I think > it is also a good time to pick up other names in > the space, the P/E and Div yeild are getting too > good to pass by. I agree. I couldn’t decide on whether I liked BAC or C more, so I just divided my capital between them. They still only make up about 2% of my portfolio, so if they get in trouble it won’t kill me, but if they make substantial moves back up it will be a nice boost to the bottom line.
I’ve actually taken a beating in CFC and was contemplating selling it earlier this week. Still may, but I’m glad I waited. Lets see some post earnings drift…
CCM Wrote: ------------------------------------------------------- > Buy when the blood runs in the street ( think it > is), just dont bet the farm on one name. I think > it is also a good time to pick up other names in > the space, the P/E and Div yeild are getting too > good to pass by. How much more blood is there to be let go? I have numerous bets internally for free lunches and dinners that CFC crashes by next fall. This whole idea about the worst being over is BS. By all indications CDO debt hasn’t even been marked by 20%. CLO debt is still being marked and is dropping rapidly. Issues such as Realogy, a $3bn issue, is trading at a 10-20% discount because of major concerns (Institution Investor article). CFC is hurting, they are almost out of liquidity and their portfolio is still tanking. The whole idea that their losses are done is foolish. I am not sure how the securitization accounting for RMBS works, but AFAIK, you have to make assumptions for interest rate movements on ARMs for the Gain On Sale accounting for FAS 140. If those assumptions were made assuming large repricings of the ARMs once they reset, *AND* CFC locks those arms at rates less than the GOS accounting, you’re going to see reverals of massive GOS revenue if CFC starts modifying the terms. That’s not even to mention the amount of flack the market is going to take. FAS 140 Off-BS was intended to eliminate manipulation of debt by the Servicer/Seller and only allow modifications for 3rd party actions, such as bankruptcies. It wasn’t intended to hold off BKs. FAS 140 is already in hot water and the multiple reiterations of the modifications to the statement by FASB over the last 2 years (they still haven’t figured out what to do with this mess), means that, if they f with Off-BS QSPE treatments too much, they will probably create a good case for completele overhaul and QSPE Off/BS treatment elimination. That means that all of this malarky of hiding this stuff off the books and “passing risk” bullcrap will finally be over. I am sure trusts off-bs now will probably stay there, but new issuances will probably not be allowed to be taken off. Unwittingly, they are destroying the only thing that has kept them afloat in the past 7 years.
Sorry guys, I’ve been gone for a while, too busy counting profits in CFC short. Made about 3x my money on put options. Ahahah – you’ve been OWNED. LOL
I agree that there is money to be made in creating a “basket” of select financials as a long term, core holding; however I am not sure this is one of them. CDS has widened so much that it now requires money upfront to buy protection. The ABX is pricing in a 50% default rate on subprime mortgages and a 50% recovery rate on the assets. Even though CFC isn’t overly saturated with subprime (or at lease d/n seem so by comparison) that is so far out of historical that even if remotely correct, that doesn’t bode well for the traditional stuff either. Now you have capital adequacy concerns at the likes C, BAC, and now, FRE and FNM?!? Who is going to buy all their mortgages? So, long story short, I am not convinced CFC is part of that basket. There are too many HUGE bets you have to win for that to work.
Several mortgage lenders/guarantors and homebuilders are obvious bankruptcies at this point. Needless to say I’ve made a ton of money shorting both in the last three months.
farley you’re awesome… I wish I was as awesome as you… please autograph my mousemat.
You could ignore all the noise and just simplify this whole mess as a hangover from super low interest rates and ultra-loose lending… what usually follows a hangover? Not another party. A long, dry, dull, languishing period to forget the hangover punishment and to get back to your old ways… for me that would be two days but for a complicated global market of stocks & bonds I would say at least 2 years. I think the last real estate bust lasted 8 or so years but that was before the internet. These days people are smarter and quicker on the rebound. I swear recessions come and go every 15 minutes. Remember the pendulum? Relating to this stuff the pendelum is not just interest rates. It’s all that other stuff about who gets loans, credit ratings, lending standards, etc. The pendelum is going to swing so hard back to the other side that even when investor appetite returns, it will be very expensive to loan money to people (I predict a lot of new predatory lending laws… afterall it was predatory lending that caused this problem (NOT!)). ps Jimmy rogers, the commodity guru, says the that the financials are still in trouble. The companies themselves don’t even know how bad it is. Thus the CEO turnover. Quick CEO turnover is a total loss of faith/out-of-control type market signal.
farley013 Wrote: ------------------------------------------------------- > Sorry guys, I’ve been gone for a while, too busy > counting profits in CFC short. Made about 3x my > money on put options. Ahahah – you’ve been OWNED. > LOL No question. I still don’t think it’s going to zero, but I’ll let someone else make the value play here…
farley013 Wrote: ------------------------------------------------------- > Sorry guys, I’ve been gone for a while, too busy > counting profits in CFC short. Made about 3x my > money on put options. Ahahah – you’ve been OWNED. > LOL Poof. Yep, that call didn’t turn out so well. Unless you’re a much better stock picker than ahahah (who seems like a pretty smart guy to me), you should just keep this stuff to yourself.
A big loser in all of this is Bank of America.
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Washington Mutual is currently yielding over 12%. The pain will worsen as dividends are reduced, unless this is currently priced in. I don’t think it is.
GoCats… Gata