What are your thoughts on BAC and C. They have more than doubled over the last couple of weeks, but they are also down 85% from their highs. Will they survive the stress test in April and move higher, or will they need more capital from Uncle and fall further in the ditch? 
Long Enuff
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Originally posted by Long EnuffWhat are your thoughts on BAC and C. They have more than doubled over the last couple of weeks, but they are also down 85% from their highs. Will they survive the stress test in April and move higher, or will they need more capital from Uncle and fall further in the ditch?
Long Enuff
I have some BAC. Sold a bunch of it off in '06 while it was up high because I figured the housing bubble could bust at any time and would hurt lending. I had no idea it’d hurt it THIS much, but anyhow…
I’m seriously considering getting back into more of it now even though I missed it at under $3 two weeks ago as I wasn’t paying attention. It has been over $40 per share and paying good DIV’s ever since I got it as a kid.
The inflation thing bothers me a little with any bank stock, but keep in mind that when this thing turns around, the financial folks are always the first to ramp up. Savings and loan crisis in the 80’s, oil crisis in the 70’s, 1929 crash, 90’s dot com crash, 9/11 crash, etc. etc. What we have right now is much more complex than any of those, but if you look at the bank stocks versus others in the 100 days after the historic troughs, the banks are out in front. And remember these historic crashes were during times when our currency was both strong and experiencing inflation (late 70’s).
Furthermore, BAC will come out of this owning something like 3/4 of the financial assets in this country (if you take the US govt out of it). Their stock wouldn’t be in the dump right now if they hadn’t spent all the cash they had on all the bargain basement deals they could find as other companies are failing.
So I feel good about the BAC I’ve got now, and I’m sort of just waiting to see if the market will turn back down just a little before I jump back i
I just bought some FAZ this morning (which means I am bearish on banks). The economy is in a catch 22. Despite what they tell you on TV, credit is still pretty frozen. I entertained a call to my bank yesterday to see if I could refinance. I don’t have 20% equity in my house and their requirement was that I pay them the difference to be able to finance. If the problem with America is people making decisions and paying too much for houses to begin with and having the lowest savings rate ever, how do we expect that they will be able to cough up 20% (or in some cases more) to refinance?
I have no doubt that a lot of the smaller banks are still going to either do mass layoffs or file for bankruptcy. In times like these, the big zombie banks probably won’t recover as fast as people hope. In times like these, assets flow from the irresponsible to the responsible. I don’t know the state of most of these banks, but C has been known as the “irresponsible” poster child. If you want to invest in banks, why not look for a bank that didn’t have exposure to the toxic asset stuff?
Also, as Phin mentions we are going through inflationary times in the next decade. How will banks make money as the loan out loans at 4% when inflation is hitting 5-10%? To combat this, they will have to raise interest rates. Our all time high was in October 81 at 18.5%!!! Let’s say that they got an even moderate increase and rates went to 7%. Heck, people can’t get loans now at 4.5%, what makes us think that business will be any better then??? So, my long term outlook for banks isn’t very bright…
That being said, I am looking at one canadian bank in particular. Supposedly, Canadian banks are some of the best in the world and are not exposed to our problems. Bank of Montreal (BMO) is your pick, but it’s run up pretty high in the past few weeks. I want it to fall about 15-20% before I try to get back in. Even if this one doesn’t skyrocket, I am hoping that it will give some inflation protection as well as our USD drops.
One Bull and one Bear, both good arguments though. I would stay on top of that FAZ with three times the downside risk, must take nerves of steel!
Long Enuff
quote:I'm not betting the farm on it. I only picked up 100 shares at $19 each. I just found it hard to resist since banks have had such a tremendous run in the past few weeks. Fundamentally, I don't think much has changed.
Originally posted by Long EnuffOne Bull and one Bear, both good arguments though. I would stay on top of that FAZ with three times the downside risk, must take nerves of steel!
Long Enuff
This march has been the biggest monthly gain in 22 years!!! Now, let me ask you this… Has there been anything that’s fundamentally changed in the economy (other than oncoming inflation) that should have investors throwing that much money in? Earnings season starts in a couple of weeks. Will reality set back in? Heck, a few days ago, Bernanke went to sell some bonds and actually came back with more than he took. That should tell you about what foreigners think about our economy right now.
Check out Nouriel Roubini’s chat about the banks here:
http://moneynews.newsmax.com/streettalk/roubini/2009/03/27/196708.html?s=al&promo_code=7CF8-1
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Originally posted by skinneejI just bought some FAZ this morning (which means I am bearish on banks).
</font id=“quote”></blockquote id=“quote”>Welcome to the dark side. I’m sitting on a pile of FAZ and a bit of FAS. I haven’t had a chance to digest how/if Direxions news on changes in rebalancing the etfs monthly will afect FAS/FAZ performance, but it may be something to consider. Only problem w/ the 3x’s is you have to babysit them, as your stop WILL get taken out the moment you take your eyes off the screen…