From Banks, Brokers, & Bullsh1+ part 1:

A thorough forensic analysis of Goldman Sachs, Bear Stearns, Citigroup, Morgan Stanley, and Lehman Brothers has uncovered...

More on Lehman Brothers Dies While Getting Away with Murder: Introducing Regulatory Capture:

From Banks, Brokers, & Bullsh1+ part 1:

A thorough forensic analysis of Goldman Sachs, Bear Stearns, Citigroup, Morgan Stanley, and Lehman Brothers has uncovered...

More on Lehman Brothers Dies While Getting Away with Murder: Introducing Regulatory Capture:

Implied volatility for the big banks is down across the board, just about where it was before the system went into convulsions. This implies the coast is clear, as do the share prices of many banks.

Hard core forensic and fundamental analysis implies otherwise. So does the Fed's actions, which still incorporates ZIRP policy, as well as the waffling at FASB. We will either have smooth sailing from this point on out or there is a nasty surprise waiting (on and off balance sheet) for bank investors in the near future. I invite readers to weigh in with their opinions.

image001.png

As you can see, we are just about where we were in 2007 in terms of average volatility. 

Implied volatility for the big banks is down across the board, just about where it was before the system went into convulsions. This implies the coast is clear, as do the share prices of many banks.

Hard core forensic and fundamental analysis implies otherwise. So does the Fed's actions, which still incorporates ZIRP policy, as well as the waffling at FASB. We will either have smooth sailing from this point on out or there is a nasty surprise waiting (on and off balance sheet) for bank investors in the near future. I invite readers to weigh in with their opinions.

image001.png

As you can see, we are just about where we were in 2007 in terms of average volatility. 

Monday, 22 March 2010 19:00

Newscan from the Weekend Past

Comments on global news from the weekend past...

Bloomberg.com:

  • $7.88 billion of slices underwritten by Deutsche Bank under downgrade review since underlying CMBS have been downgraded (CDOs are MAX CMBS I Ltd. Series 2007-1 and Series 2008-1), S&P has already downgraded 2007-1 to BB+
  • A BlackRock presentation stated that Deutsche Bank's CDO portfolio does not forecast for tranche losses
  • The MAX CDOs are among the Federal Reserve's holdings in Maiden Lane III
  • AIG provided Deutsche Bank with $5.61 billion in collateral before the Maiden Lane III transfer

FT Article: Merkel v. Greece Round 239,084.67 (Ding, ding) @ http://www.ft.com

  • Merkel insists Greece has not asked for money, and Greece does not need any [Let's permanently attached this to Merkel's credibility rating]
  • European Commission and IMF officials are far from same page as Merkel
  • The article wasn't dense with info, which is not unusual considering the subject matter, but what is clear is that the bazooka everyone was talking about has no trigger, and probably loaded with more baby powder than gunpowder!
  • That is going to be a big issue with Greek debt maturing in April if they have no revenue to pay it off

FT Article @ http://www.ft.com

  • British Airway strikes did nothing to dampen travel plans over the weekend
  • Examples like this are calling the union's bluff, they are not stopping society, potentially leaving room for union break ups by private companies, sovereigns and municipalities if they choose so, this could be a blip on the radar or an emerging trend, so something to continue to watch
Monday, 22 March 2010 19:00

Newscan from the Weekend Past

Comments on global news from the weekend past...

Bloomberg.com:

  • $7.88 billion of slices underwritten by Deutsche Bank under downgrade review since underlying CMBS have been downgraded (CDOs are MAX CMBS I Ltd. Series 2007-1 and Series 2008-1), S&P has already downgraded 2007-1 to BB+
  • A BlackRock presentation stated that Deutsche Bank's CDO portfolio does not forecast for tranche losses
  • The MAX CDOs are among the Federal Reserve's holdings in Maiden Lane III
  • AIG provided Deutsche Bank with $5.61 billion in collateral before the Maiden Lane III transfer

FT Article: Merkel v. Greece Round 239,084.67 (Ding, ding) @ http://www.ft.com

  • Merkel insists Greece has not asked for money, and Greece does not need any [Let's permanently attached this to Merkel's credibility rating]
  • European Commission and IMF officials are far from same page as Merkel
  • The article wasn't dense with info, which is not unusual considering the subject matter, but what is clear is that the bazooka everyone was talking about has no trigger, and probably loaded with more baby powder than gunpowder!
  • That is going to be a big issue with Greek debt maturing in April if they have no revenue to pay it off

FT Article @ http://www.ft.com

  • British Airway strikes did nothing to dampen travel plans over the weekend
  • Examples like this are calling the union's bluff, they are not stopping society, potentially leaving room for union break ups by private companies, sovereigns and municipalities if they choose so, this could be a blip on the radar or an emerging trend, so something to continue to watch
Wednesday, 11 November 2009 19:00

News Recap for 11/12/09

Are we in consecutive back to back bubbles or what?

From Bloomberg:

KKR Puts Higher Valuation on Dollar General Than Walmart in IPO Offering: Wasn't the private equity/LBO biz dead just a year ago?

Wall Street Faces `Live Ammo' as Congress Tries to Dismantle Biggest Banks: So all of that posting about busting up the big banks didn't go to waste! See Any objective review shows that the big banks are simply too big for the safety of this country, Big Bank (and the Treasury) vs. Little Bank: Whose risking your tax dollars?, The Next Step in the Bank Implosion Cycle??? and the very important JPM Public Excerpt of Forensic Analysis Subscription (1878) 

Japan Credit Default Swaps Seen Unraveling as Aiful Defers Payment on Debt: The Japanese version! See The Next Shoe to Drop: Credit Default Swaps (CDS) and Counterparty Risk - Beware what lies beneath!, Reggie Middleton says the CDS market represents a "Clear and Present Danger"!, CDS stands for Credit Default Suckers... and Will this be the first domino in the CDS collapse? .  

Spanish Economy Contracts for a Sixth Quarter, Slowing European Rebound: BBVA may be seen as more viable than it actually is. See Banco Bilbao Vizcaya Argentaria SA (BBVA) Professional Forensic Analysis Banco Bilbao Vizcaya Argentaria SA (BBVA) Professional Forensic Analysis 2009-02-23 09:05:09 439.80 Kb 

And from my friends over at Calculated Risk: Fannie, Freddie, Counterparty Risk and More - excerpt from Freddie Mac's 10-Q:

We believe that several of our mortgage insurance counterparties are at risk of falling out of compliance with regulatory capital requirements, which may result in regulatory actions that could threaten our ability to receive future claims payments, and negatively impact our access to mortgage insurance for high LTV loans.

Those that follow me know how bearish I have been on the mortgage insurers for two years running now. I pretty much promised my readers that Ambac and MBIA were insolvent back in 2007:

Wednesday, 11 November 2009 19:00

News Recap for 11/12/09

Are we in consecutive back to back bubbles or what?

From Bloomberg:

KKR Puts Higher Valuation on Dollar General Than Walmart in IPO Offering: Wasn't the private equity/LBO biz dead just a year ago?

Wall Street Faces `Live Ammo' as Congress Tries to Dismantle Biggest Banks: So all of that posting about busting up the big banks didn't go to waste! See Any objective review shows that the big banks are simply too big for the safety of this country, Big Bank (and the Treasury) vs. Little Bank: Whose risking your tax dollars?, The Next Step in the Bank Implosion Cycle??? and the very important JPM Public Excerpt of Forensic Analysis Subscription (1878) 

Japan Credit Default Swaps Seen Unraveling as Aiful Defers Payment on Debt: The Japanese version! See The Next Shoe to Drop: Credit Default Swaps (CDS) and Counterparty Risk - Beware what lies beneath!, Reggie Middleton says the CDS market represents a "Clear and Present Danger"!, CDS stands for Credit Default Suckers... and Will this be the first domino in the CDS collapse? .  

Spanish Economy Contracts for a Sixth Quarter, Slowing European Rebound: BBVA may be seen as more viable than it actually is. See Banco Bilbao Vizcaya Argentaria SA (BBVA) Professional Forensic Analysis Banco Bilbao Vizcaya Argentaria SA (BBVA) Professional Forensic Analysis 2009-02-23 09:05:09 439.80 Kb 

And from my friends over at Calculated Risk: Fannie, Freddie, Counterparty Risk and More - excerpt from Freddie Mac's 10-Q:

We believe that several of our mortgage insurance counterparties are at risk of falling out of compliance with regulatory capital requirements, which may result in regulatory actions that could threaten our ability to receive future claims payments, and negatively impact our access to mortgage insurance for high LTV loans.

Those that follow me know how bearish I have been on the mortgage insurers for two years running now. I pretty much promised my readers that Ambac and MBIA were insolvent back in 2007:

Before I delve into specifically what makes Wells Fargo an ongoing Doo Doo list member, I urge those who do no normally follow me to read the precursors to this article:

  1. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?
  2. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 - JP Morgan
  3. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 3 - Bank of America
  4. And the next AIG is... (Public Edition)

After reading through Wells Fargo's numbers below, I want some of you guys (and gals) with calculators and spreadsheets to review "I'm going to try not to say I told you so..." and let me know the chances of the FDIC's absorbing a behemoth such as the CDO trading, CDS writing, off balance sheet VIE having, QSPE bulging, California and Florida Zero recovery 2nd lien sporting Wells Fargo in the case some of its arcane and non-performing assets really hit the fan. I am getting ahead of myself though. Let's take this from the beginning. 

 Subscription Analysis - The Heavy Stuff  The Free Stuff

 WFC Off Balance Sheet Exposure WFC Off Balance Sheet Exposure 2009-10-19 04:11:50 259.25 Kb - The complete off balance sheet review 

WFC Research Note Sep 2009 WFC Research Note Sep 2009 2009-09-30 13:01:30 281.29 Kb -  The Skinny on that CDS exposure. Are they doing the AIG thing too???

WFC Investment Note 22 May 09 - Retail WFC Full Forensic Analysis & Research Note 22 May 09 - Retail 2009-05-27 01:55:50 554.15 Kb

WFC Investment Note 22 May 09 - Pro WFC Full Forensic Analysis & Research Note with Anticipated Capital Requirements under revised SCAP/Stress testing 22 May 09 - Professional 2009-05-27 01:56:54 853.53 Kb This is the document that ties all of the ancillary research togther and includes our best estimate as to the amount of capital Wells Fargo will need to raise!

Wells Fargo ABS Inventory Wells Fargo ABS Inventory 2008-08-30 06:40:27 798.22 Kb

 

The open source mortgage default model

Fact, Fiction, Farce and Lies! What happened to the Bank Bears? 

Beware of Bank Earnings Propaganda - They are still in BIG trouble!

Wells Fargo reports in a few hours and I wonder how forthcoming they will be with their credit losses

Wells Fargo Q2 2008 Highlights  

Green Shoots are Being Fertilized by Brown Turds in the Mortgage Markets

Doo-Doo bank drill down, part 1 - Wells Fargo  

 

When the ticker WFC came up as a short list finalist in one of our scans last year, I was able to hear the cackling of those name brand groupies and CNBC junkies literally leaping from my keyboard. This is an excerpt from a free piece that I released on them exactly a year and a half ago, before the days of TARP:

"Well, the first bank on the drill down list will also be 2nd of the banks that I will deliver a forensic analysis on (the first was PNC Bank). That bank is,,, (drum roll in the background, crescendo.... I know some of you hate it when I do this........) Wells Fargo! I can hear a few of you naysayers cackling behind your computer screens as I type this. Wells Fargo is a big name brand bank (cackle, cackle)! Wells Fargo has Warren Buffet as its largest investor (cackle, cackle)! Wells Fargo this and that and blah, blah and (cackle, cackle).... All I can say is, beware of name brands (I actually felt compelled to address this in earlier posts). I have made more than a couple of dollars benefiting from name brand hubris and smaller investors who would rather be told what to do than read a balance sheet! Time will tell if I am right or not on Wells Fargo, just be forewarned - several of the banks on the Doo-Doo 32 (32 banks in deep doo-doo) list have already taken a trip to the confessional!"

Well, fast forward a year and a half and we see who was right. I urge those who do not subscribe to my blog to reference "Doo-Doo bank drill down, part 1 - Wells Fargo". Wells Fargo was actually one of the original Doo Doo 32 banks (32 banks in deep doo-doo), a list of institutions quite likely to hit the fan from an investor's perspective. I welcome all to track the well being of the banks on that list from that period to date. As for Wells Fargo, even despite extreme efforts by the government to prop it up, it appears as if I was on to something back then. Although many pundits STILL believe that I am wrong, the more I dig into the innards of this bank, the more cracks I see in its armor.

The risks posed by the housing crisis and arcane financing vehicles are drastically under-appreciated by the sell side...

Wells Fargo's high risk from its exposure to some of the hardest hit regions like California and Florida was further enlarged through the acquisition of Wachovia's ailing portfolio. The surge in NPAs pushed up the Texas ratio of the Bank to 29.9% as of  June 2009 from 19.1% in December, 2008. Wells Fargo Eyles Test exceeded the allowance for loan losses by $3.7 billion or 6.3% of the tangible equity as of June 30, 2009 as against the excess allowance for loan losses over ET of $3.4 billion or 7.5% of the tangible equity in Dec 2008. As the rise in NPAs is far from subsiding, the Bank is expected to feel additional the pressure from high charge offs and provisions (see the latest news on the housing front and proposed FDIC charges whose charges have already [within a month] seen the need to be modified, see "I'm going to try not to say I told you so...").

Before I delve into specifically what makes Wells Fargo an ongoing Doo Doo list member, I urge those who do no normally follow me to read the precursors to this article:

  1. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?
  2. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 - JP Morgan
  3. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 3 - Bank of America
  4. And the next AIG is... (Public Edition)

After reading through Wells Fargo's numbers below, I want some of you guys (and gals) with calculators and spreadsheets to review "I'm going to try not to say I told you so..." and let me know the chances of the FDIC's absorbing a behemoth such as the CDO trading, CDS writing, off balance sheet VIE having, QSPE bulging, California and Florida Zero recovery 2nd lien sporting Wells Fargo in the case some of its arcane and non-performing assets really hit the fan. I am getting ahead of myself though. Let's take this from the beginning. 

 Subscription Analysis - The Heavy Stuff  The Free Stuff

 WFC Off Balance Sheet Exposure WFC Off Balance Sheet Exposure 2009-10-19 04:11:50 259.25 Kb - The complete off balance sheet review 

WFC Research Note Sep 2009 WFC Research Note Sep 2009 2009-09-30 13:01:30 281.29 Kb -  The Skinny on that CDS exposure. Are they doing the AIG thing too???

WFC Investment Note 22 May 09 - Retail WFC Full Forensic Analysis & Research Note 22 May 09 - Retail 2009-05-27 01:55:50 554.15 Kb

WFC Investment Note 22 May 09 - Pro WFC Full Forensic Analysis & Research Note with Anticipated Capital Requirements under revised SCAP/Stress testing 22 May 09 - Professional 2009-05-27 01:56:54 853.53 Kb This is the document that ties all of the ancillary research togther and includes our best estimate as to the amount of capital Wells Fargo will need to raise!

Wells Fargo ABS Inventory Wells Fargo ABS Inventory 2008-08-30 06:40:27 798.22 Kb

 

The open source mortgage default model

Fact, Fiction, Farce and Lies! What happened to the Bank Bears? 

Beware of Bank Earnings Propaganda - They are still in BIG trouble!

Wells Fargo reports in a few hours and I wonder how forthcoming they will be with their credit losses

Wells Fargo Q2 2008 Highlights  

Green Shoots are Being Fertilized by Brown Turds in the Mortgage Markets

Doo-Doo bank drill down, part 1 - Wells Fargo  

 

When the ticker WFC came up as a short list finalist in one of our scans last year, I was able to hear the cackling of those name brand groupies and CNBC junkies literally leaping from my keyboard. This is an excerpt from a free piece that I released on them exactly a year and a half ago, before the days of TARP:

"Well, the first bank on the drill down list will also be 2nd of the banks that I will deliver a forensic analysis on (the first was PNC Bank). That bank is,,, (drum roll in the background, crescendo.... I know some of you hate it when I do this........) Wells Fargo! I can hear a few of you naysayers cackling behind your computer screens as I type this. Wells Fargo is a big name brand bank (cackle, cackle)! Wells Fargo has Warren Buffet as its largest investor (cackle, cackle)! Wells Fargo this and that and blah, blah and (cackle, cackle).... All I can say is, beware of name brands (I actually felt compelled to address this in earlier posts). I have made more than a couple of dollars benefiting from name brand hubris and smaller investors who would rather be told what to do than read a balance sheet! Time will tell if I am right or not on Wells Fargo, just be forewarned - several of the banks on the Doo-Doo 32 (32 banks in deep doo-doo) list have already taken a trip to the confessional!"

Well, fast forward a year and a half and we see who was right. I urge those who do not subscribe to my blog to reference "Doo-Doo bank drill down, part 1 - Wells Fargo". Wells Fargo was actually one of the original Doo Doo 32 banks (32 banks in deep doo-doo), a list of institutions quite likely to hit the fan from an investor's perspective. I welcome all to track the well being of the banks on that list from that period to date. As for Wells Fargo, even despite extreme efforts by the government to prop it up, it appears as if I was on to something back then. Although many pundits STILL believe that I am wrong, the more I dig into the innards of this bank, the more cracks I see in its armor.

The risks posed by the housing crisis and arcane financing vehicles are drastically under-appreciated by the sell side...

Wells Fargo's high risk from its exposure to some of the hardest hit regions like California and Florida was further enlarged through the acquisition of Wachovia's ailing portfolio. The surge in NPAs pushed up the Texas ratio of the Bank to 29.9% as of  June 2009 from 19.1% in December, 2008. Wells Fargo Eyles Test exceeded the allowance for loan losses by $3.7 billion or 6.3% of the tangible equity as of June 30, 2009 as against the excess allowance for loan losses over ET of $3.4 billion or 7.5% of the tangible equity in Dec 2008. As the rise in NPAs is far from subsiding, the Bank is expected to feel additional the pressure from high charge offs and provisions (see the latest news on the housing front and proposed FDIC charges whose charges have already [within a month] seen the need to be modified, see "I'm going to try not to say I told you so...").

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