Author Topic: Bank Stocks  (Read 22016 times)

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #150 on: August 28, 2019, 08:22:44 AM »
Its not that syndications are more/less profitable, its more about the relationship between loan size and loan pricing.

Larger loans generally trade at lower prices, there's more interest income to go around and they can only take so much risk.  The larger the loans, the more eyes on the loans at every bank.  Higher level credit people approve it, they get reviewed more by internal risk people, then the larger ones get reviewed by outside agencies.  The banks can't compete on taking more risk, so the only competitive option they have it to do the loans at lower prices.

****

One observation I have....(with the disclosure I'm usually wrong about price predictions)... I see absolutely nothing between now and the first week of October that could send these stocks higher.  I think we need *another* round of bank earnings for investors to see just how much stock is being bought back and what that's doing to EPS.   Its been this crazy quarterly cycle with prices going up and looking like they'll breakout after each earnings period, then something macro driving them down again.

Stock prices ultimately rise with earnings per share.  EPS is going a LOT higher with buybacks at these prices

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #151 on: August 28, 2019, 09:24:50 AM »

On the loan growth, take a look at the Net Interest Margin decline....   

I had to re-read your comment on the NIM a couple times and think about it, but having that little tidbit of info makes a lot of sense. And helps my analysis greatly. Thank you again.

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #152 on: August 28, 2019, 09:58:05 AM »
****

One observation I have....(with the disclosure I'm usually wrong about price predictions)... I see absolutely nothing between now and the first week of October that could send these stocks higher.  I think we need *another* round of bank earnings for investors to see just how much stock is being bought back and what that's doing to EPS.   Its been this crazy quarterly cycle with prices going up and looking like they'll breakout after each earnings period, then something macro driving them down again.

Stock prices ultimately rise with earnings per share.  EPS is going a LOT higher with buybacks at these prices

They could send out a Mariachi band and dancing girls and it wouldnít make a difference. IMHO, this is the side effect of the current obsession with index funds. Stocks that used to have lots of people watching them and making their bets have been replaced with a few analysts and some hedge funds. And as a result there are companies with just stupid low PE ratios out there.

 I ended up buying another dog for my kennel yesterday. I put in what I thought was a relatively lowball limit order over the weekend. PE ratio was less than 6. Profitable company. Earnings look reasonably stable. So I could buy that on sale, or I could get an index fund with a PE ratio of 20 plus.

Obviously I need to read yet another book or blog post on the virtues of index investing. 😁



ecchastang

  • Stubble
  • **
  • Posts: 132
Re: Bank Stocks
« Reply #153 on: August 28, 2019, 11:22:16 AM »
IMHO, this is the side effect of the current obsession with index funds. Stocks that used to have lots of people watching them and making their bets have been replaced with a few analysts and some hedge funds. And as a result there are companies with just stupid low PE ratios out there.


This is a valid point. 

bacchi

  • Magnum Stache
  • ******
  • Posts: 4179
Re: Bank Stocks
« Reply #154 on: August 28, 2019, 01:44:49 PM »
They could send out a Mariachi band and dancing girls and it wouldnít make a difference. IMHO, this is the side effect of the current obsession with index funds. Stocks that used to have lots of people watching them and making their bets have been replaced with a few analysts and some hedge funds. And as a result there are companies with just stupid low PE ratios out there.

 I ended up buying another dog for my kennel yesterday. I put in what I thought was a relatively lowball limit order over the weekend. PE ratio was less than 6. Profitable company. Earnings look reasonably stable. So I could buy that on sale, or I could get an index fund with a PE ratio of 20 plus.

Obviously I need to read yet another book or blog post on the virtues of index investing. 😁

There's still almost 2x as much money in active funds vs passive funds. Maybe if you add in the pension and endowment funds, you'd get over 50% market cap ownership, but they run by their own rules.

Eta: I found some updated numbers from Morningstar and they're now equal in assets.
https://www.morningstar.com/blog/2019/06/12/asset-parity.html



So the question is: What do you know about this new stock that everyone else is missing? And why haven't the analysts at 1000+ active mutual funds found it?
« Last Edit: August 28, 2019, 01:50:04 PM by bacchi »

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #155 on: August 28, 2019, 02:01:21 PM »
IMHO, this is the side effect of the current obsession with index funds. Stocks that used to have lots of people watching them and making their bets have been replaced with a few analysts and some hedge funds. And as a result there are companies with just stupid low PE ratios out there.


This is a valid point.

Thanks. My primary objection to index funds chasing the Dow or S+P or the like is that theyíre trading at CAPEs in the high 20s and PE ratios around 20. There just isnít that much room to make money there in my view.

 You could do some value indexes I guess, and I do some, but the problem there is that youíre buying a bunch of trash mixed in with the diamonds in the rough.

MaaS

  • Stubble
  • **
  • Posts: 176
Re: Bank Stocks
« Reply #156 on: August 28, 2019, 03:23:06 PM »
So the question is: What do you know about this new stock that everyone else is missing? And why haven't the analysts at 1000+ active mutual funds found it?

This whole "the market is always priced correctly" argument is a half-truth IMO. You have to consider that the market is made up of investors with completely different timeframes. Some are trying to maximize 2019's return to bring in more clients for 2020. Some are investing for decades from now. Some are simply reading the charts trying to capture "momentum."

These differing timeframes can occasionally create opportunities for someone with a different time horizon.

*I'm NOT saying identifying these opportunities is easy.

ctuser1

  • Bristles
  • ***
  • Posts: 432
Re: Bank Stocks
« Reply #157 on: August 29, 2019, 07:08:36 AM »
Market is NOT always priced correctly. We all know that!!

Market simply maximizes disagreement between participants who participate by putting or picking bid/ask orders!!

If you follow the bid-ask spread -> price discovery mechanism, then market usually settles somewhere between the last marginal bid, last marginal ask and keep moving till it has exhausted the entire overlap!!

The "marginal" part is important!! Since market price depends on the "marginal" bid/ask price, it is not too difficult to move the market in the short run by a convinced bit player.

You, or I are just one such player.

The only rational hope of consistently picking a winner is one of the two things:
1. Doing an intrinsic value calculation based on discounted cash flow, adding a big margin for safety, and picking stocks cheaper than their intrinsic value. :-)...
2. Betting on the entire market, with the hope/understanding it always goes up.

---------------------------

I picked WFC long time ago (6 years now, I think). At that time, it looked like a sure winner based on discounted cashflow analysis.
Then the scandals hit. The discounted cash flow still looks great - just less so. And the bull thesis is significantly dented. Had I picked the financial sector etf (VFH) instead, I would have gotten a 25% return by now - instead of this position basically laying an egg for me so far.

---------------------------
The point I am making is that it is hard to make correct prediction on specific stocks.
It is a little easier to make predictions based on entire sectors.
It is much easier to make predictions for the entire economy.

Hence the thinking that "terrorists win if you don't bet all on VTSAX" :-D ....


Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #158 on: August 29, 2019, 07:09:38 PM »
Market is NOT always priced correctly. We all know that!!


Whoa friend! Tread carefully. Youíre getting mighty close to heresy. Faith in the Holy Mysterious and Magical Market is pervasive in these parts.

I donít think that you or I are going to move a market. But thereís really no need to. The idea is to identify the incongruities and invest accordingly in my/our own small way. Given the choice of running with the in-crowd or being wealthier, Iíll regrettably choose the latter. 🤭

As for your bank stock hereís the thing. What happened in my view was pretty close to a black swan. I mean really: when was the last time you heard of a company firing thousands of employees for fraud? Not something Iíve seen. Thatís part of the reason why having numerous stocks in a portfolio makes sense. Try as hard as you might, youíll get a bad stock every now and then. But look on the bright side: once youíve identified a bad stock, you can ditch it in 5 minutes. If itís in an index, you get to ride it all the way down.

Speaking for myself, an index is is just a big portfolio. BUT you have less control over what goes in, what goes out, how the underlying investments are structured for taxes, and whether you can structure to take better advantage of market anomalies.

With that, my apologies to all for sidelining this great thread. I need to learn to shut up and not attract the Index police.
« Last Edit: August 29, 2019, 07:22:41 PM by Buffalo Chip »

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #159 on: August 30, 2019, 05:40:58 AM »
I said I was terrible with price predictions...

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #160 on: August 30, 2019, 10:41:21 AM »
I said I was terrible with price predictions...

Isnít that why we have limit orders?  😁

Doesnít look like Iíll get RF this week. Oh well.
« Last Edit: August 30, 2019, 10:42:59 AM by Buffalo Chip »

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #161 on: August 30, 2019, 08:01:35 PM »
Patience is a virtue in this game.  Labor day will be over soon and something will spook the banks again

Monerexia

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Bank Stocks
« Reply #162 on: August 30, 2019, 10:53:10 PM »
All I know is i bought a fairly good chunk of BofA a year ago in some sort of enthusiastic fugue and is down over 11% from Sep2018. I guess buy and hold haha

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #163 on: August 31, 2019, 06:23:32 AM »
All I know is i bought a fairly good chunk of BofA a year ago in some sort of enthusiastic fugue and is down over 11% from Sep2018. I guess buy and hold haha

I bought a bunch of stuff in October.  Sometimes being right (but early) is as painful as being wrong

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #164 on: August 31, 2019, 07:25:43 AM »
Patience is a virtue in this game.  Labor day will be over soon and something will spook the banks again

For sure.  They seem to have a fit every few weeks.  Usually as a result of some political thing that doesn't matter worth a hill of beans.  Efficient Markets and all. 

flipboard

  • Bristles
  • ***
  • Posts: 281
Re: Bank Stocks
« Reply #165 on: August 31, 2019, 09:54:16 AM »
UBS and CS look like strong value plays. Count me in.

Quote
So the question is: What do you know about this new stock that everyone else is missing? And why haven't the analysts at 1000+ active mutual funds found it?

It's not about what you  know. It's about how you weight it.

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #166 on: August 31, 2019, 07:29:53 PM »
UBS and CS look like strong value plays. Count me in.

Please do tell. Whatís your thought process of UBS or CS over other banks?

As for the index police, I pretty much ignore them at this point.

flipboard

  • Bristles
  • ***
  • Posts: 281
Re: Bank Stocks
« Reply #167 on: September 01, 2019, 01:47:22 AM »
UBS and CS look like strong value plays. Count me in.

Please do tell. Whatís your thought process of UBS or CS over other banks?

As for the index police, I pretty much ignore them at this point.
Book/Price makes them close to foolproof.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #168 on: September 01, 2019, 04:27:23 AM »
Personally I won't touch European Banks.

I don't know if this is still the case, but last time I looked their price/book ratio includes allowing to call European Soverign Debt a risk free asset.

I put them in the bucket of "can't understand" and don't invest

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #169 on: September 01, 2019, 09:51:51 AM »
Thanks for the note on CS and UBS. CS doesnít look to have a dividend. I do think companies in a mature industry should both pay a dividend and be profitable. CS isnít meeting one of my basic criteria, so I would take a pass. UBS is more intriguing. Lower PE ratio, profitable, pays dividends. I gotta wonder whatís on their books that is allowing that low of a PB ratio. Sounds like one Iíd go back and research after Iíve bought the other bank stocks I want.

habaneroNorway

  • Bristles
  • ***
  • Posts: 462
Re: Bank Stocks
« Reply #170 on: September 02, 2019, 05:34:18 AM »
For anyone who thinks any bank with a low Price-to-book ratio is a steal or foolprof it's just to buy Deutsche Banks shares with both hands. It has a P/B - ratio of 0.23. Never mind that they don't make any money and hasn't done so for ages, operate in the most over-banked country in the world and has spent the last few years shelling out a humongous pile of money on various fines and settlements dating back to the financial crisis and its aftermath.

For a quick read:
https://www.bloomberg.com/news/articles/2019-02-01/how-deutsche-bank-drifted-into-its-whirlpool-of-woes-quicktake

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #171 on: September 02, 2019, 10:55:13 AM »
For anyone who thinks any bank with a low Price-to-book ratio is a steal or foolprof it's just to buy Deutsche Banks shares with both hands. It has a P/B - ratio of 0.23. Never mind that they don't make any money and hasn't done so for ages, operate in the most over-banked country in the world and has spent the last few years shelling out a humongous pile of money on various fines and settlements dating back to the financial crisis and its aftermath.

For a quick read:
https://www.bloomberg.com/news/articles/2019-02-01/how-deutsche-bank-drifted-into-its-whirlpool-of-woes-quicktake

That was a good article and had an interesting graphic that compared expenses among the major European and American banks.

flipboard

  • Bristles
  • ***
  • Posts: 281
Re: Bank Stocks
« Reply #172 on: September 02, 2019, 11:09:54 AM »
Thanks for the note on CS and UBS. CS doesnít look to have a dividend. I do think companies in a mature industry should both pay a dividend and be profitable. CS isnít meeting one of my basic criteria, so I would take a pass. UBS is more intriguing. Lower PE ratio, profitable, pays dividends. I gotta wonder whatís on their books that is allowing that low of a PB ratio. Sounds like one Iíd go back and research after Iíve bought the other bank stocks I want.
CS do have a dividend - but to be fair I haven't done my full due diligence on them and therefore haven't invested yet:
https://www.credit-suisse.com/about-us/de/investor-relations/unternehmensinformationen-aktieninhaber/aktieninformationen/dividende-schweizer-steuerwert.html

With UBS (and all banks in Europe really) the worry is they aren't sexy enough, and to be fair the banking business is challenged by the various Fintechs in Europe. Plus UBS especially was beaten down by the whole customer-hiding-their-assets-from-tax-authorities affair. Neither of those is really significant for their core businesses, but hey investors get worried by news like that.

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #173 on: September 02, 2019, 01:45:13 PM »
CS do have a dividend - but to be fair I haven't done my full due diligence on them and therefore haven't invested yet:
https://www.credit-suisse.com/about-us/de/investor-relations/unternehmensinformationen-aktieninhaber/aktieninformationen/dividende-schweizer-steuerwert.html

With UBS (and all banks in Europe really) the worry is they aren't sexy enough, and to be fair the banking business is challenged by the various Fintechs in Europe. Plus UBS especially was beaten down by the whole customer-hiding-their-assets-from-tax-authorities affair. Neither of those is really significant for their core businesses, but hey investors get worried by news like that.
[/quote]

Interesting.  Marketwatch shows the dividend yield as "N/A."  Checked out other site and your link and indeed they are paying a premium.

In any case, I think I'll buy some more USA bank stocks then circle back.  There are plenty of unloved stocks right now.   


habaneroNorway

  • Bristles
  • ***
  • Posts: 462
Re: Bank Stocks
« Reply #174 on: September 03, 2019, 02:51:56 AM »
This is a very good write-up on the Eurozone banking system, its woes and it structural problems which, as the note argues, have implications far beyond the banking system. It also provides some key factors as to how the US and European banking systems are fundamentally different. It's quite lengthy, but it is most def worth the time for anyone interested in banking. It is one of the better pieces I have read in quite some time on the topic.

Ironically, it's written by some folks at Deutsche Bank - pretty much they poster child of everything that's wrong in European banking:

https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000488973/How_to_fix_European_banking%E2%80%A6_and_why_it_matters.PDF

In case the link doesnt work the report can be accessed from here:
https://www.db.com/newsroom_news/2018/how-to-fix-european-banking-and-why-it-matters-en-11823.htm

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #175 on: September 03, 2019, 05:17:46 AM »
I haven't read it yet, but I'm guessing it has something to do with....rates are near zero, so banks can't really make money.  So they let them run with less equity. 

Now they decided less equity is bad...but near zero rates (and tons of govt debt on the balance sheet) prevents any equity.

Central banks aren't willing to raise rates because real estate prices would decline, tanking the bank's balance sheet.

Then demographic issues with 1% economic growth can't outpace the issue.

This sounds like one of those doomsday people, but here it goes:

We're in for a painful round of deflation to reset prices downward.  The governments around the world keep running deficits, near zero percent rates, and now propping up asset prices through buying assets with central banks.  Eventually this cycle breaks and it breaks with deflation.  The economy slows so much that people start delaying purchases until "things get cheaper".   The psychological part of this makes it a self fulfilling prophecy, people aren't buying much residential real estate now in places even with 0% - 4% and a price reset is coming.

This will mainly be in real estate, but it'll persist elsewhere.   I think this is priced into the US banks because they have a 1% loss reserve, a nice margin in earnings, and 10% equity on their balance sheet. 

The other problem with predictions is I could be right, but right way too early and that leads to other issues.  People were saying this in 2011 and refused to invest in the stock market and missed a decade of returns.   Diversity still is king



habaneroNorway

  • Bristles
  • ***
  • Posts: 462
Re: Bank Stocks
« Reply #176 on: September 03, 2019, 05:35:14 AM »
The main problem is low profitability - for which negative rates are only one of several factors.

ctuser1

  • Bristles
  • ***
  • Posts: 432
Re: Bank Stocks
« Reply #177 on: September 03, 2019, 06:24:59 AM »
European central banks and regulators were *not* as aggressive in exorcising all the dirt from under the carpet after 2008 as the US counterparts were!!!

This subjective reason alone will keep me away from the likes of UBS/CS etc - banks that otherwise seem healthy.

Who knows what other crap is hidden beneath those complex derivatives with 50 year maturity that are still unwinding and working through the system.

This is *not* meant to say everything is hunky dory in the US. There is a strong deregulatory push underway in the us as well. A big set of regulatory thresholds were supposed to come in place from 2019/2020 to require more capital and liquidity reserves of the US banks. All that got silently put in the back burner and nobody paid attention.

I paid attention because I had to make code changes in the back end to *prevent* those tighter rules to go into effect in the GL.
« Last Edit: September 03, 2019, 06:31:03 AM by ctuser1 »

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #178 on: September 03, 2019, 04:27:32 PM »

This sounds like one of those doomsday people, but here it goes:

We're in for a painful round of deflation to reset prices downward.  The governments around the world keep running deficits, near zero percent rates, and now propping up asset prices through buying assets with central banks.  Eventually this cycle breaks and it breaks with deflation.  The economy slows so much that people start delaying purchases until "things get cheaper".   The psychological part of this makes it a self fulfilling prophecy, people aren't buying much residential real estate now in places even with 0% - 4% and a price reset is coming.

This will mainly be in real estate, but it'll persist elsewhere.   I think this is priced into the US banks because they have a 1% loss reserve, a nice margin in earnings, and 10% equity on their balance sheet. 

The other problem with predictions is I could be right, but right way too early and that leads to other issues.  People were saying this in 2011 and refused to invest in the stock market and missed a decade of returns.   Diversity still is king

Repent! The end of the bull is near!😆

Your scenario doesnít look that far off. The big thing to me is the demographics. Aging populations donít want or need as much stuff. So where is your GDP growth going to come from in the long term?

And then we can look at where our FI brethren are invested. 80, 90, 100% into the market. Oh well. Theyíre consenting adults.




chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #179 on: September 09, 2019, 06:12:31 PM »
Update for everyone.  I trimmed a few of my "trades" in this space.  Bought 3-8% lower and went and bought treasuries/treasury funds with the money.  Let this thing reverse, rinse, and repeat.

If it doesn't work, I'm still okay.

Decided to stay the most long on BAC and JPM with some RF and a few other regional banks making up smaller positions.   

If we get another 10-15% drop, I'm buying again unless some macro issue screams otherwise.


As a former mid-level manager in a US bank, I wouldn't say we are over or under regulated.  Its more mis-regulation.   We micromanage the banks like crazy but still allow the biggest banks to operate with lower capital levels than I think they should be allowed to operate with.  That and the environment against M&A and rules against activist investing is creating its own issues.

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #180 on: September 09, 2019, 06:27:29 PM »
Update for everyone.  I trimmed a few of my "trades" in this space.  Bought 3-8% lower and went and bought treasuries/treasury funds with the money.  Let this thing reverse, rinse, and repeat.

If it doesn't work, I'm still okay.

Decided to stay the most long on BAC and JPM with some RF and a few other regional banks making up smaller positions.   

If we get another 10-15% drop, I'm buying again unless some macro issue screams otherwise.


As a former mid-level manager in a US bank, I wouldn't say we are over or under regulated.  Its more mis-regulation.   We micromanage the banks like crazy but still allow the biggest banks to operate with lower capital levels than I think they should be allowed to operate with.  That and the environment against M&A and rules against activist investing is creating its own issues.

I think I have what Iím going to have in banks for now. Didnít get my RF.  Got my BAC. Looking at other sectors for now on the ultra value side of things. Otherwise cash looks like a very nice place to be.

As for regulation, seems they always want to regulate the last set of problems.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #181 on: September 10, 2019, 05:43:45 AM »
If history repeats itself, you'll have another opportunity in the next three months. 

They've mainly been scared by treasuries and a trade war, three years ago it was oil.  We still need the real estate scare.  Too many new developments, not enough absorption, and low interest rates won't be enough.  Always a nice discount on bank stocks when that happens.

Will it be cheaper than we picked up earlier?   Who knows

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #182 on: September 10, 2019, 10:33:22 AM »
If history repeats itself, you'll have another opportunity in the next three months. 

They've mainly been scared by treasuries and a trade war, three years ago it was oil.  We still need the real estate scare.  Too many new developments, not enough absorption, and low interest rates won't be enough.  Always a nice discount on bank stocks when that happens.

Will it be cheaper than we picked up earlier?   Who knows

Efficient Markets that price in all publicly available information. Or so Iím told. 😆

Iím on something of a shopping mission. Picking the stocks I want to own and the prices Iím willing to pay. Sometimes I even get to buy them! 

RF is definitely on the shopping list. JPM and KEY would be, but I donít think Iíll pick them up for what I want to pay.  If their prices drop that much, then thereís probably a lot of other stocks on sale that I would want.




Grafter

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: Bank Stocks
« Reply #183 on: September 10, 2019, 07:25:33 PM »
I ended up selling some of the RF that I picked up and am thinking about putting in a sales order for my shares of BAC.  But like chasesfish points out, this cycle has repeated twice since December and I wouldn't be surprised if there is another go around in the near term.

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #184 on: September 10, 2019, 08:07:22 PM »
I ended up selling some of the RF that I picked up and am thinking about putting in a sales order for my shares of BAC.  But like chasesfish points out, this cycle has repeated twice since December and I wouldn't be surprised if there is another go around in the near term.

Which ones do you find yourself wanting to hold? Not that Iím at all against turning a buck. Iím just more of the buy and hold mindset.

Grafter

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: Bank Stocks
« Reply #185 on: September 10, 2019, 10:02:35 PM »
I had to pick a handful of names to hold for the long term CFR would probably be one of the names at the top of the list (ideally at a price in the low 80s).  I really do think that they warrant their premium valuation, due to the core deposit (and low cost of deposits).

Other than that, I keep on going back and forth on BAC and WFC.  I know that BAC had been in the doghouse for years since the Great recession and has had large improvements in its retail banking side, and the market seems to have recognized it.  As for WFC, it has historically had a good retail operation, that has lately been blighted by the fake accounts, political scrutiny and lack of non-inteirm CEO.  On the other, most of these are temporarily problems, and they have had strong earnings, as well as are returning a ton of capital to shareholders (and really driving down the share count).  So, it seems like BAC still has some run way (and I'm happy buying at 27 and selling at 30, even though their dividend is not as large).  But WFC is currently beaten down, and I'm not sure when everything will clear up, but in the mean time, am perfectly happy to buy at 44-45 and sell at 48-50 and collect a 4+% dividend in between.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #186 on: September 11, 2019, 04:03:30 AM »
@Grafter - I would also add that taking the proceeds from the bank stock sale and sticking them in a 10-yr treasury ETF has been pretty profitable for me.  Its moved inversely with Bank prices without near the volatility.

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #187 on: September 11, 2019, 03:28:41 PM »
I had to pick a handful of names to hold for the long term CFR would probably be one of the names at the top of the list (ideally at a price in the low 80s).  I really do think that they warrant their premium valuation, due to the core deposit (and low cost of deposits).

Other than that, I keep on going back and forth on BAC and WFC. 

Thanks for the info. I had taken a look at CFR a little ways back, but passed them over because of the premium. Iím going to take a second look for my wishlist.

I have BAC. They seem to have done a turnaround and Iím good with a ďwe get it, we fixed itĒ narrative. Actually Iím kind of a sucker for it.

As for WFC I did think about it. And I do listen when smart people on these forums talk. In the end I answered them question the Sam Walton way, by becoming a WFC customer. And so began my descent into the 7th circle of banking hell.  Iíll skip the sordid tale. WFC is on my Do Not Buy list.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #188 on: September 11, 2019, 03:49:31 PM »
Maybe the day to buy WFC is if/when Warren is announced as the president elect.  I swear that company is worth more than the sum of its parts and it'll be dirt cheap with no buyers

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 803
  • A Very Stupid Personģ️
Re: Bank Stocks
« Reply #189 on: September 11, 2019, 04:56:27 PM »
Maybe the day to buy WFC is if/when Warren is announced as the president elect.  I swear that company is worth more than the sum of its parts and it'll be dirt cheap with no buyers
I think Lizzies dislike for the banks is generic. Personally, Iíd go for the great but currently expensive banks like JPM and BK and any others I could think up. Nice to dream, isnít it?
« Last Edit: September 11, 2019, 08:56:39 PM by Buffalo Chip »

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #190 on: September 12, 2019, 04:37:27 AM »
Maybe the day to buy WFC is if/when Warren is announced as the president elect.  I swear that company is worth more than the sum of its parts and it'll be dirt cheap with no buyers
I think Lizzies dislike for the banks is generic. Personally, Iíd go for the great but currently expensive banks like JPM and BK and any others I could think up. Nice to dream, isnít it?

All true.

Stick to a good asset allocation, then make some buys when there's panic in the streets.  Looks like some of my favorite bank stocks and a few value stocks I've been playing in are officially out of panic mode.  Going to be boring on my buying/selling for a while until the next scare.  Fortunately opportunities have been coming around once a quarter lately

talltexan

  • Magnum Stache
  • ******
  • Posts: 2872
Re: Bank Stocks
« Reply #191 on: September 17, 2019, 08:15:51 AM »
IMHO, this is the side effect of the current obsession with index funds. Stocks that used to have lots of people watching them and making their bets have been replaced with a few analysts and some hedge funds. And as a result there are companies with just stupid low PE ratios out there.


This is a valid point.

Thanks. My primary objection to index funds chasing the Dow or S+P or the like is that theyíre trading at CAPEs in the high 20s and PE ratios around 20. There just isnít that much room to make money there in my view.

 You could do some value indexes I guess, and I do some, but the problem there is that youíre buying a bunch of trash mixed in with the diamonds in the rough.

I think the diamonds will pay the bill for the trash and then some.

talltexan

  • Magnum Stache
  • ******
  • Posts: 2872
Re: Bank Stocks
« Reply #192 on: September 17, 2019, 08:22:33 AM »
Maybe the day to buy WFC is if/when Warren is announced as the president elect.  I swear that company is worth more than the sum of its parts and it'll be dirt cheap with no buyers
I think Lizzies dislike for the banks is generic. Personally, Iíd go for the great but currently expensive banks like JPM and BK and any others I could think up. Nice to dream, isnít it?

All true.

Stick to a good asset allocation, then make some buys when there's panic in the streets.  Looks like some of my favorite bank stocks and a few value stocks I've been playing in are officially out of panic mode.  Going to be boring on my buying/selling for a while until the next scare.  Fortunately opportunities have been coming around once a quarter lately

This strategy sounds like a winner.

The problem is that I think back to how I was feeling watching the market in December of 2018. It was easy to not sell--I had enough wise people around me to keep me from that--but I sure didn't feel like putting more into that dumpster fire. It is really emotionally tough to call or buy the dip.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #193 on: September 17, 2019, 10:25:49 AM »
@talltexan It always is.  I thought about going into margin on Friday to buy some 10 & 30 year treasuries when the yield on the 10 year got up to 1.9%...but alas I did not.   Lower rates in the future are a good bet I want to keep making

ctuser1

  • Bristles
  • ***
  • Posts: 432
Re: Bank Stocks
« Reply #194 on: September 17, 2019, 12:30:43 PM »
I am not convinced that lower rates 10 years hence is a given in the US. I'd think should be considered a failure for the US if the rates are lower in 10 years!!

Yesterday night I came across an interesting Google Talk where Yanis Varoufakis, the former finance minister of Greece, attempts to explain what ails Europe.
 
https://www.youtube.com/watch?v=P2Zpkz7lK-s

He is a known left-winger economist, his explanations may need to be looked at from that prism. The explanations did seem to make a lot of sense to me, however.

Basically, he says:
1. Money *is* a commodity that is bought and sold.
2. Interest Rate is the cost of purchasing money
     - Makes a lot of sense to me. I have written code that uses interest rate parity to predict/calculate forward FX rates where a forward market does not exist.
3. Money supply to the banks come from savings, demand comes from entrepreneurs willing to take risks for future income -> savings. This is the cycle that repeats.
4. Unlike other commodities demand elasticity does not work the same way for money. If the price of money is lowered by the central banks, that is usually accompanied with dim outlook for future. This further depresses demand for money. He uses game theory examples to show why the demand for money decreases when the cost is lowered.
5. The demand for money is not linked to it's cost, but something non-quantifiable - the optimism of the entrepreneurs and investors deploying that money for productive enterprises.

The above do make sense to me, with some rather minor reservations:
Like any left wingers, he seems to think only "earned" income matter. His conception of "savings" only feeds from earned income. He did not get into that topic, however, As per his ideological leaning, he would probably discount "investment income" or "risk-taking income" as 100% non-productive rent-seeking. Does the flow of logic above change if you change that narrative between earned vs investment income? I don't know, and am not capable enough to opine competently.

Coming back to the topic, his explanations seem to make sense to me in the context of Europe and why EU is doomed without a new kind of politics that would instill "hope".

In the US, however, there is nowhere near that level of hopelessness and "despire" that he depicted!!

I'd very much expect the economies of EU/Japan and the US to diverge in the next decade or two and US to come out of the low interest rut!! If it doesn't, that would be a failure - that I hope does not come about.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #195 on: September 17, 2019, 04:44:05 PM »
@ctuser1 - I certainly hope rates are higher in 10 years, it means the economy is rolling and my 60%+ stock allocation far outgrows any smaller loss I take in long term treasuries.

That being said...I just have concerns about whats going on with the economy.  Its like we're giving shots of adrenaline to a healthy patient.  Lower rates, lower taxes, free programs on the horizon.  Eventually the music stops, maybe we're like Australia and it takes twenty years instead of the usual 10ish or less year cycles. 

Update - I bought another big chunk of treasuries today with my cash allocation.

I very well could be wrong, but I'm not going to be going back to work if my biggest risk is rising rates make my bond choice underperform

ctuser1

  • Bristles
  • ***
  • Posts: 432
Re: Bank Stocks
« Reply #196 on: September 17, 2019, 05:27:20 PM »
That being said...I just have concerns about whats going on with the economy.  Its like we're giving shots of adrenaline to a healthy patient.  Lower rates, lower taxes, free programs on the horizon.  Eventually the music stops, maybe we're like Australia and it takes twenty years instead of the usual 10ish or less year cycles. 

This has been going on for a loooooong time. Reagan started the policy of running up the deficits (i.e. "borrow"ing from the kids) so that he could give handouts to his billionaire buddies and massive corporate welfare.

Bush 1/2 and Trump are just continuing this policy of the freeloaders and for the freeloaders!!
(Note: I did not mention the other two presidents - one ran surplus during boom times, and the other rescued us from what could be the next great depression - just bigger).

I am just hopeful that the demographic realities will drive the freeloaders off the stage at least at the federal level - which is where the highest degree of harm is possible!!

I am also hopeful that US economy is strong enough to survive till the political help arrives.

If I am wrong, then I doubt economic actions are going to help anybody!! Economics is unlikely to be important in that scenario.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3346
  • Age: 37
  • Location: South Carolina
Re: Bank Stocks
« Reply #197 on: September 18, 2019, 04:55:46 AM »
I guess that's where we can disagree.  I see no "political help" and find both sides equally distasteful.  About the only thing I hope for is for the parties to split power and stop messing stuff up so it can lead to expansion.

I find them equally terrible when either side gets full control, they both give away money but get selective amnesia about stuff they raise money on but don't want to actually fix and loose the ability to campaign on.  (fiscal discipline/balanced budget for republicans, immigration and gun control for democrats). 

talltexan

  • Magnum Stache
  • ******
  • Posts: 2872
Re: Bank Stocks
« Reply #198 on: September 18, 2019, 11:21:28 AM »
I am not convinced that lower rates 10 years hence is a given in the US. I'd think should be considered a failure for the US if the rates are lower in 10 years!!

Yesterday night I came across an interesting Google Talk where Yanis Varoufakis, the former finance minister of Greece, attempts to explain what ails Europe.
 
https://www.youtube.com/watch?v=P2Zpkz7lK-s

He is a known left-winger economist, his explanations may need to be looked at from that prism. The explanations did seem to make a lot of sense to me, however.

Basically, he says:
1. Money *is* a commodity that is bought and sold.
2. Interest Rate is the cost of purchasing money
     - Makes a lot of sense to me. I have written code that uses interest rate parity to predict/calculate forward FX rates where a forward market does not exist.
3. Money supply to the banks come from savings, demand comes from entrepreneurs willing to take risks for future income -> savings. This is the cycle that repeats.
4. Unlike other commodities demand elasticity does not work the same way for money. If the price of money is lowered by the central banks, that is usually accompanied with dim outlook for future. This further depresses demand for money. He uses game theory examples to show why the demand for money decreases when the cost is lowered.
5. The demand for money is not linked to it's cost, but something non-quantifiable - the optimism of the entrepreneurs and investors deploying that money for productive enterprises.

The above do make sense to me, with some rather minor reservations:
Like any left wingers, he seems to think only "earned" income matter. His conception of "savings" only feeds from earned income. He did not get into that topic, however, As per his ideological leaning, he would probably discount "investment income" or "risk-taking income" as 100% non-productive rent-seeking. Does the flow of logic above change if you change that narrative between earned vs investment income? I don't know, and am not capable enough to opine competently.

Coming back to the topic, his explanations seem to make sense to me in the context of Europe and why EU is doomed without a new kind of politics that would instill "hope".

In the US, however, there is nowhere near that level of hopelessness and "despire" that he depicted!!

I'd very much expect the economies of EU/Japan and the US to diverge in the next decade or two and US to come out of the low interest rut!! If it doesn't, that would be a failure - that I hope does not come about.

Thanks for the video!

I think the thesis for why US economy should outpace Europe over the medium-term has to do with population growth: the US population is growing, and Europe's isn't. That should be a place in which Varoufakis agrees with conservative/Austrian/Libertarian economists in the US (who still believe that the money supply doesn't really affect long-term economic growth).

ctuser1

  • Bristles
  • ***
  • Posts: 432
Re: Bank Stocks
« Reply #199 on: September 18, 2019, 12:38:17 PM »
That should be a place in which Varoufakis agrees with conservative/Austrian/Libertarian economists in the US (who still believe that the money supply doesn't really affect long-term economic growth).

I don't follow.

In great depression money supply was inelastic due to gold standard and hence nobody could do anything about decreased money velocity -> deflationary effect -> one of the many reasons why it was so protracted and severe despite relatively dis-joined economies in that day.

On the other hand, breaking the gold standard (which was a good thing to do long term) was immediately followed by a long period of stagflation in the 70's. I haven't done enough reading on this - but seems like sudden change in money supply led to the stagflation.

Wouldn't you think money supply has a major effect on consumer confidence? More so on the deflationary side than inflationary - but present on both ends? So it would be a major factor - no?

Or are you alluding to some left-wing dogma that I might be missing.