Displaying items by tag: Banks

I was perusing ZeroHedge the other day (a fine, rabble rousing rag after my own heart), when I came across a guest post accusing JP Morgan of some funny stuff. Those that follow me know that I really believe JPM to be highly overrated. In reviewing the authors allegations, he may actually be on to something in regards to portions of the AML stuff. In order to truly ascertain the extent, if any, I would have to dig a little further, which I don't have the time to do right now.

I feel he is jumping the gun on the general liquidity argument though. No disrespect intended to the man, for anyone willing to break out a calculator and dispel the "this is the best thing since sliced bread" propaganda and disinformation is cool in my book.

I was perusing ZeroHedge the other day (a fine, rabble rousing rag after my own heart), when I came across a guest post accusing JP Morgan of some funny stuff. Those that follow me know that I really believe JPM to be highly overrated. In reviewing the authors allegations, he may actually be on to something in regards to portions of the AML stuff. In order to truly ascertain the extent, if any, I would have to dig a little further, which I don't have the time to do right now.

I feel he is jumping the gun on the general liquidity argument though. No disrespect intended to the man, for anyone willing to break out a calculator and dispel the "this is the best thing since sliced bread" propaganda and disinformation is cool in my book.

In a contributory post that I made for another site, one of the commenters alleged that it was misleading to say that the failed bulge bracket banks had backing from the Federal Reserve, or else they wouldn't have failed. This is simply not true. The blessing of the government does not necessarily cure all of your ills. The Federal Reserve opened its discount window to the remaining bulge bracket banks after Bear Stearns (Is this the Breaking of the Bear?) filed for bankruptcy. It even decided to allow much lower grade collateral, degrading its standards to the point where it took stock and MBS, if I am not mistaken. This liquidity backstop (among other programs) did not prevent the collapse of Lehman Brothers, nor the very near collapse of Merrill Lynch. The remaining two bulge bracket banks were literally forced to become commercial banks to stave off their downfall. This history is barely a year old and is already lost on some.

In a contributory post that I made for another site, one of the commenters alleged that it was misleading to say that the failed bulge bracket banks had backing from the Federal Reserve, or else they wouldn't have failed. This is simply not true. The blessing of the government does not necessarily cure all of your ills. The Federal Reserve opened its discount window to the remaining bulge bracket banks after Bear Stearns (Is this the Breaking of the Bear?) filed for bankruptcy. It even decided to allow much lower grade collateral, degrading its standards to the point where it took stock and MBS, if I am not mistaken. This liquidity backstop (among other programs) did not prevent the collapse of Lehman Brothers, nor the very near collapse of Merrill Lynch. The remaining two bulge bracket banks were literally forced to become commercial banks to stave off their downfall. This history is barely a year old and is already lost on some.

One of the quandaries of running a subscription service is that when you have some really juicy stuff, you inherently limit the audience that you are able to reach. Normally, this isn't that big a deal. When you believe that there is a mass cover up aiming to prop up the largest cadre of zombie, insolvent companies in modern history it becomes a much bigger deal. This leads me to distribute a significant amount of research for free. On that note, I have been following the breadcrumb trail of hidden (or more aptly put, concealed) corporate liabilities, and it has led me to (of all places) off the balance sheet of the big banks. I have spent a lot of time concentrating on exactly where the losses, if any, will come from in these banks. We have already established that the smaller banks had, have and will totally drain the FDIC's insurance fund over a year and a half ago (see As I see it, 32 commercial banks and thrifts may see the feces hit the fan blades Friday, 23 May 2008, notice how many of the banks have went under since then) in the post "I'm going to try not to say I told you so...

I would also like to add that I have raised the flag on this regional bank/commercial real estate issue many months before the sell side and the main stream media said a peep. This is not to brag or boast, for I am a fundamental investor and the market has definitively ignored the fundamentals for 7 months running. The point that I am trying to convey is that analysts in the big sell side banks work for their trading desks, underwriting and sales departments, and not for the investor (be it retail or institutional). Thus, proclamations of "Buy! Buy! Buy!" do not necessarily mean we have entered into a fundamentally firm area in which to buy stocks, bonds or any other risky assets covered by these guys. For a sterling example, see "The sell side is pushing with all of their might to inflate the market...".

As a matter of fact, I have also focused on those very same brokerages, banks, insurers and REITs that went bust, starting as far back as 2007, again before it was fashionable to do so (see Is this the Breaking of the Bear? January 2008, GGP and the type of investigative analysis you will not get from your brokerage house November 2007 to December 2008, A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton circa November 2007, etc.)

Now, that everyone feels the coast is clear and we will be entering a new bull market amid a broad economic recovery sprouting green shoots all over the place, I am intent on quantifying what remaining risks there are - if there are any remaining risks I am also in the process of fine tuning the market neutral strategy that can produce profits up until and through the period that these banks bring the market and economy back down (see Option Strategy Analysis Update for the strategy analysis and their performance thus far).

One of the quandaries of running a subscription service is that when you have some really juicy stuff, you inherently limit the audience that you are able to reach. Normally, this isn't that big a deal. When you believe that there is a mass cover up aiming to prop up the largest cadre of zombie, insolvent companies in modern history it becomes a much bigger deal. This leads me to distribute a significant amount of research for free. On that note, I have been following the breadcrumb trail of hidden (or more aptly put, concealed) corporate liabilities, and it has led me to (of all places) off the balance sheet of the big banks. I have spent a lot of time concentrating on exactly where the losses, if any, will come from in these banks. We have already established that the smaller banks had, have and will totally drain the FDIC's insurance fund over a year and a half ago (see As I see it, 32 commercial banks and thrifts may see the feces hit the fan blades Friday, 23 May 2008, notice how many of the banks have went under since then) in the post "I'm going to try not to say I told you so...

I would also like to add that I have raised the flag on this regional bank/commercial real estate issue many months before the sell side and the main stream media said a peep. This is not to brag or boast, for I am a fundamental investor and the market has definitively ignored the fundamentals for 7 months running. The point that I am trying to convey is that analysts in the big sell side banks work for their trading desks, underwriting and sales departments, and not for the investor (be it retail or institutional). Thus, proclamations of "Buy! Buy! Buy!" do not necessarily mean we have entered into a fundamentally firm area in which to buy stocks, bonds or any other risky assets covered by these guys. For a sterling example, see "The sell side is pushing with all of their might to inflate the market...".

As a matter of fact, I have also focused on those very same brokerages, banks, insurers and REITs that went bust, starting as far back as 2007, again before it was fashionable to do so (see Is this the Breaking of the Bear? January 2008, GGP and the type of investigative analysis you will not get from your brokerage house November 2007 to December 2008, A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton circa November 2007, etc.)

Now, that everyone feels the coast is clear and we will be entering a new bull market amid a broad economic recovery sprouting green shoots all over the place, I am intent on quantifying what remaining risks there are - if there are any remaining risks I am also in the process of fine tuning the market neutral strategy that can produce profits up until and through the period that these banks bring the market and economy back down (see Option Strategy Analysis Update for the strategy analysis and their performance thus far).

I have commented on the interconnected counterparty risks in the banking and shadow banking system. A tidbits are now coming out in the news. Anytime a big lender defaults, another big lender (or three will be on the hook for it).

 Yes, Goldman Sachs, the big, powerful, influential Wall Street bank put out a big buy reco on the very same banks that I have called insolvent. You can guess what happened, in damn near real time... First, Wells Fargo, JPMorgan `Attractive' on Earnings Outlook, Goldman Sachs Says - then... Stocks in U.S. Climb as Goldman Upgrades Banks, ISM Index Beats Estimates.  I know I don't carry that Goldman pedigree, you know being a brother from Brooklyn and all. Yet, Goldman and I have disagreed on this very same issue before. Let me refresh your collective memories...

I have commented on the interconnected counterparty risks in the banking and shadow banking system. A tidbits are now coming out in the news. Anytime a big lender defaults, another big lender (or three will be on the hook for it).

 Yes, Goldman Sachs, the big, powerful, influential Wall Street bank put out a big buy reco on the very same banks that I have called insolvent. You can guess what happened, in damn near real time... First, Wells Fargo, JPMorgan `Attractive' on Earnings Outlook, Goldman Sachs Says - then... Stocks in U.S. Climb as Goldman Upgrades Banks, ISM Index Beats Estimates.  I know I don't carry that Goldman pedigree, you know being a brother from Brooklyn and all. Yet, Goldman and I have disagreed on this very same issue before. Let me refresh your collective memories...