Author Topic: Bank Stocks  (Read 29419 times)

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #300 on: February 04, 2020, 05:10:44 PM »
@Buffaloski Boris, Russian Bot - Absolutely interesting.

You can stick with the best of breed of the big ones (BofA, JPM)

Find the best in the next group, which PNC and USB do a good job of.

Find a niche bank with barriers (Bank of Hawaii)

Or go after those who might be consolidated and earn a premium.

For the final one, I am probably going to invest in an activist fund and ride along with professionals who know how to do this and pressure a sale.  The biggest issue with small bank consolidation is management keeping their cushy jobs at the level.   I'm in one right now that's a billion dollar bank, the CEO made $940,000 in 2018 and a bunch of the other managers made $370k.

In a division of a regional bank with the same responsibility, that cost structure looks more like 500k for the top person and 200k, all of which are in revenue producing roles.  They will fight to keep their jobs and pay that's 60-100% above market.  I've seen that way too much, when I worked in DFW at one point there was 160 banks in the market. 

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #301 on: February 04, 2020, 06:56:37 PM »
@Buffaloski Boris, Russian Bot - Absolutely interesting.

You can stick with the best of breed of the big ones (BofA, JPM)

Find the best in the next group, which PNC and USB do a good job of.

Find a niche bank with barriers (Bank of Hawaii)

Or go after those who might be consolidated and earn a premium.

For the final one, I am probably going to invest in an activist fund and ride along with professionals who know how to do this and pressure a sale.  The biggest issue with small bank consolidation is management keeping their cushy jobs at the level.   I'm in one right now that's a billion dollar bank, the CEO made $940,000 in 2018 and a bunch of the other managers made $370k.

In a division of a regional bank with the same responsibility, that cost structure looks more like 500k for the top person and 200k, all of which are in revenue producing roles.  They will fight to keep their jobs and pay that's 60-100% above market.  I've seen that way too much, when I worked in DFW at one point there was 160 banks in the market.

Yeah, that sounds about right. CEO earns orders of magnitude more than they merit. Corporate governance really is... disappointing. I do miss the days of hostile takeovers.

Iím down with BAC. A little trepidatious with JPM. How much of that value walks out the door when Jamie Dimon does? PNC and USB are solid bets. For some reason I keep circling back to Citi. Probably something in the water. Or the single digit PE ratio.


chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #302 on: February 04, 2020, 09:46:39 PM »
Hoping the activist investors force the issues with the proxy advisory firms and they can get some change in the banking sector.

I can't ever bring myself to invest in Citi.  They had to be bailed out in 1991 and 2007, I tink they will forever be a thinly capitalized ward of the state.  Not enough capital and micromanaged by bureaucrats.  Not for me.

Your absolutely right about Jamie Diamon.  This is a bet on the leader business and its okay to wait to make sure the leader is great before going in.  There's not a lot of good leadership talent in this sector, meaning the great ones will make some above market returns.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #303 on: February 28, 2020, 01:37:16 PM »
Iím drooling over stocks right now.  Lessee:

JPM is at 10.57 PE/ $113.34
BAC is at 10.18 PE / $27.83
PNC is at 10.88 PE / $123.80
USB is at 10.96 PE / $45.60
BOH is at 13.32 PE/ $74.00


chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #304 on: February 28, 2020, 05:25:26 PM »
RE: Other Post - I'm a fan of JPM and BAC.

I'm actually worried about my significant BOH holding with the corona virus.  Honolulu is highly dependent on asian tourists and there's going to be some pain in the Hawaii economy.  They're well capitalized and will be fine, but they may not buy back stock as fast and drag on earnings.

If you want to play in the regional space, there are some nice multiples there too.  Now that I'm not bringing in a bunch of income, I don't like how sensitive the banks are to *anything*.   I think I'll stick to the two big ones and take what I hope is the lower risk/lower return profile

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #305 on: February 29, 2020, 08:14:43 AM »
RE: Other Post - I'm a fan of JPM and BAC.

I'm actually worried about my significant BOH holding with the corona virus.  Honolulu is highly dependent on asian tourists and there's going to be some pain in the Hawaii economy.  They're well capitalized and will be fine, but they may not buy back stock as fast and drag on earnings.

If you want to play in the regional space, there are some nice multiples there too.  Now that I'm not bringing in a bunch of income, I don't like how sensitive the banks are to *anything*.   I think I'll stick to the two big ones and take what I hope is the lower risk/lower return profile

BOH is one I'd consider buying if the price and PE ratio dropped some more. Be greedy when others are fearful and all. 

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #306 on: March 05, 2020, 04:35:41 PM »
Just read that bank stocks are now in bear territory.  Bargain hunting to commence shortly!

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #307 on: March 05, 2020, 05:12:05 PM »
I've traded out my regional banks now completely for BAC and JPM.  Of course now I get news that Jamie Dimon had a heart procedure.

Banks, then any REITs relating to hospitality/travel/entertainment are being pounded.   I'm down nearly 40% on some cruise stocks I bought as they were falling.

There's real money to be made, but I can only take so much risk now as a retiree.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #308 on: March 05, 2020, 05:52:07 PM »
I've traded out my regional banks now completely for BAC and JPM.  Of course now I get news that Jamie Dimon had a heart procedure.

Banks, then any REITs relating to hospitality/travel/entertainment are being pounded.   I'm down nearly 40% on some cruise stocks I bought as they were falling.

There's real money to be made, but I can only take so much risk now as a retiree.

I'm not retired yet, and have mostly stuck to my views that the market has been overpriced, over-hyped, and is ripe for a fall. Being the skeptic usually doesn't pay off.  But sometimes it does. 

Sorry for Jaime Dimon.  JPM was already down to 10.X PE this afternoon.     
« Last Edit: March 05, 2020, 05:53:59 PM by Buffaloski Boris »

tooqk4u22

  • Handlebar Stache
  • *****
  • Posts: 2272
Re: Bank Stocks
« Reply #309 on: March 06, 2020, 11:28:00 AM »
JPM is solid.  I do like Citi at the 60-65% price/book and its really close to that now, but more for trading than long term hold. 

I am really toying with Wells Fargo - so much pain and negative history but now new CEO, high dividend that is safe, and now below book.  Also plenty of room to cut costs. 

I am not crazy about regionals, USB is way to interest rate sensitive, very conservative and slow growth - and their expenses are rising, historically USB is cheap with employees and ran at about 53%, now at 59% and rising, which is in line or still below peers.  Good people need to be paid.   To my point about wells they are at 71%, so either time to cut if you're not going to grow revenue to reduce the ratio. 

Banks are really a flyer right now - low rates is one thing but the real risk is if economy slides because of all this for an extend period then defaults will rise (from near zero now) and that could be a problem. But they are all well capitalized and would just slow down buying back stock.




 


talltexan

  • Magnum Stache
  • ******
  • Posts: 3105
Re: Bank Stocks
« Reply #310 on: March 09, 2020, 10:20:48 AM »
That $WFC dividend is pretty Phat. Hard to resist.

ctuser1

  • Pencil Stache
  • ****
  • Posts: 610
Re: Bank Stocks
« Reply #311 on: March 09, 2020, 10:34:11 AM »
BAC is @ 8.14 PE right now.

I will probably refinance at some point of time in the next month or two. I'm very very very tempted to do a cash-out refi up to 80% LTV and dump it all in BAC.

I must resist trigger finger for single stock picks! Maybe use VFH instead!

habaneroNorway

  • Pencil Stache
  • ****
  • Posts: 510
Re: Bank Stocks
« Reply #312 on: March 09, 2020, 11:52:36 AM »
When fed cuts to zero or similar that E is gonna change. Zero rates and a flat yield curve is very bad for banks. Plus the funding spreads blow out etc. There is a reason why banks tank extra hard now.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1902
Re: Bank Stocks
« Reply #313 on: March 09, 2020, 02:56:42 PM »
When fed cuts to zero or similar that E is gonna change. Zero rates and a flat yield curve is very bad for banks. Plus the funding spreads blow out etc. There is a reason why banks tank extra hard now.

And small business loans - the junk bonds you canít see.

Grafter

  • 5 O'Clock Shadow
  • *
  • Posts: 41
Re: Bank Stocks
« Reply #314 on: March 09, 2020, 08:31:19 PM »
Cfr took it in the shorts today, which isn't that surprising with the oil situation.  Though I've been nibbling on bac  and wfc on the way done.  Just need to decide if I want to put in another limit order at another 10% to current prices.

Grafter

  • 5 O'Clock Shadow
  • *
  • Posts: 41
Re: Bank Stocks
« Reply #315 on: March 09, 2020, 08:47:37 PM »
GlassFish - a bit late, but see https://mobile.twitter.com/TimyanBankAlert/status/1223778094378553344. For some info about the changes to the control rules.  Though I am curious if you jumped into the small bank activist fund, or want learned talking to them.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #316 on: March 10, 2020, 04:17:47 AM »
Just figured I'd wade back in here.

Still a little overweight in BAC, JPM, and BOH.   Yesterday was wild.

Banks are all about the price you pay, they are subject to so many things that can shock their prices.  Interest rates, overall economy, regulatory environment.   I like some banks here, but like the REITs better right now.   Shocking to see 2013 prices on some well run banks yesterday.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1902
Re: Bank Stocks
« Reply #317 on: March 11, 2020, 07:19:59 PM »
With volatility at 2008 panic levels, itís probably time to write some put options at outrageously low strike prices. If you really would like to own a bank stock that is.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #318 on: March 12, 2020, 01:41:10 PM »
Just buy the stock.

At this point we're at panic levels on everything minus a few mega cap companies.

Financials, restaurants, banks, REITs...

The pain is indescriminate

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #319 on: March 12, 2020, 01:58:12 PM »
Just buy the stock.

At this point we're at panic levels on everything minus a few mega cap companies.

Financials, restaurants, banks, REITs...

The pain is indescriminate

JPM at 90?  Just dammmmnn.  Was at 86 earlier. 

bwall

  • Pencil Stache
  • ****
  • Posts: 742
Re: Bank Stocks
« Reply #320 on: March 13, 2020, 08:10:54 AM »
Just buy the stock.

At this point we're at panic levels on everything minus a few mega cap companies.

Financials, restaurants, banks, REITs...

The pain is indescriminate

Indiscriminate, relentless and remorseless. Don't be fooled by today's (Friday's) suckers rally, aka 'dead cat bounce'.

We're going lower still. If you're trading, use an up day like today to get out at a better price. You can always buy back in next week lower.

We'll keep going lower until we get a vaccine or the virus has run it's course. Until then there are lots of scary articles that have yet to be published.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #321 on: March 13, 2020, 08:52:28 PM »
Just buy the stock.

At this point we're at panic levels on everything minus a few mega cap companies.

Financials, restaurants, banks, REITs...

The pain is indescriminate

Indiscriminate, relentless and remorseless. Don't be fooled by today's (Friday's) suckers rally, aka 'dead cat bounce'.

We're going lower still. If you're trading, use an up day like today to get out at a better price. You can always buy back in next week lower.

We'll keep going lower until we get a vaccine or the virus has run it's course. Until then there are lots of scary articles that have yet to be published.

Can I get an Amen? 

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1902
Re: Bank Stocks
« Reply #322 on: March 13, 2020, 09:16:12 PM »
Just buy the stock.

At this point we're at panic levels on everything minus a few mega cap companies.

Financials, restaurants, banks, REITs...

The pain is indescriminate

Indiscriminate, relentless and remorseless. Don't be fooled by today's (Friday's) suckers rally, aka 'dead cat bounce'.

We're going lower still. If you're trading, use an up day like today to get out at a better price. You can always buy back in next week lower.

We'll keep going lower until we get a vaccine or the virus has run it's course. Until then there are lots of scary articles that have yet to be published.

Can I get an Amen?

You're waiting to buy stocks until the pandemic is 100% over? Is the plan to read on the news that the pandemic is over, and then buy stocks at or below today's prices?

bwall

  • Pencil Stache
  • ****
  • Posts: 742
Re: Bank Stocks
« Reply #323 on: March 15, 2020, 02:32:03 PM »
Just buy the stock.

At this point we're at panic levels on everything minus a few mega cap companies.

Financials, restaurants, banks, REITs...

The pain is indescriminate

Indiscriminate, relentless and remorseless. Don't be fooled by today's (Friday's) suckers rally, aka 'dead cat bounce'.

We're going lower still. If you're trading, use an up day like today to get out at a better price. You can always buy back in next week lower.

We'll keep going lower until we get a vaccine or the virus has run it's course. Until then there are lots of scary articles that have yet to be published.

Can I get an Amen?

You're waiting to buy stocks until the pandemic is 100% over? Is the plan to read on the news that the pandemic is over, and then buy stocks at or below today's prices?

No, I didn't say 100% over.

For example, for all I know, a vaccine could be announced tomorrow. This would be a massive buy signal, but the pandemic would still rage for a week or two (or more) as the vaccine would still have to be produced at scale and distributed. This takes time and in the meantime people would still continue contracting the disease and dying of it. But, the market would be buy-able and would go up in the face of this bad news because the calvary is on the way.

Alternatively, we don't get a vaccine. New reported cases go up, and up, and up, the market will drop, drop and drop. Then one day, the number of new reported cases has peaked because, well, everyone who's going to get it has gotten it. THIS is the buy signal. People will continue to contract the disease and die from it in the meantime, because it's not over.

So, no, at no point did I ever say 'wait for it to be 100% over, at which point (but not before!) you can buy.'

bwall

  • Pencil Stache
  • ****
  • Posts: 742
Re: Bank Stocks
« Reply #324 on: March 15, 2020, 02:36:30 PM »
Just buy the stock.

At this point we're at panic levels on everything minus a few mega cap companies.

Financials, restaurants, banks, REITs...

The pain is indescriminate

From my perspective, we've just entered bear market territory. The bear market won't end until the last bull has been converted into a bear, as the old adage goes.

Time will tell.

tooqk4u22

  • Handlebar Stache
  • *****
  • Posts: 2272
Re: Bank Stocks
« Reply #325 on: March 16, 2020, 10:20:34 AM »
JPM is solid.  I do like Citi at the 60-65% price/book and its really close to that now, but more for trading than long term hold. 

I am really toying with Wells Fargo - so much pain and negative history but now new CEO, high dividend that is safe, and now below book.  Also plenty of room to cut costs. 

I am not crazy about regionals, USB is way to interest rate sensitive, very conservative and slow growth - and their expenses are rising, historically USB is cheap with employees and ran at about 53%, now at 59% and rising, which is in line or still below peers.  Good people need to be paid.   To my point about wells they are at 71%, so either time to cut if you're not going to grow revenue to reduce the ratio. 

Banks are really a flyer right now - low rates is one thing but the real risk is if economy slides because of all this for an extend period then defaults will rise (from near zero now) and that could be a problem. But they are all well capitalized and would just slow down buying back stock.



Ha, glad I got too lazy to fiddle with individual stocks since posting this.     

Buuuutttttt, if I liked in then I should like even more now...probably still won't do anything and just stick to rebalancing index funds.

RobertFromTX

  • 5 O'Clock Shadow
  • *
  • Posts: 23
Re: Bank Stocks
« Reply #326 on: March 27, 2020, 12:23:20 PM »
@Katmandew  Realize you and I are both heavily weighted in a single privately owned bank. Seems like a good place to be in to be honest. Considered an essential business, have the full backing of the Fed, etc. I'm sleeping well at night.

JetBlast

  • Bristles
  • ***
  • Posts: 367
Re: Bank Stocks
« Reply #327 on: April 01, 2020, 10:00:24 AM »
Iím doing a little sniffing around the big banks now. Short term looks shaky though theyíre much better capitalized than 2008. Long term, the big banks almost certainly wonít be allowed to fail, just like last time.

Not interested in trying to pick winners between Wells, Citi, USBank, BofA, and Chase.  I think buying a basket of them all to hold long term looks pretty reasonable though.

Also thinking about adding some residental equity REITs for my Roth.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1902
Re: Bank Stocks
« Reply #328 on: April 01, 2020, 02:40:55 PM »
Iím doing a little sniffing around the big banks now. Short term looks shaky though theyíre much better capitalized than 2008. Long term, the big banks almost certainly wonít be allowed to fail, just like last time.

Not interested in trying to pick winners between Wells, Citi, USBank, BofA, and Chase.  I think buying a basket of them all to hold long term looks pretty reasonable though.

Also thinking about adding some residental equity REITs for my Roth.

Banks hold lots of consumer debt, mortgages, and businesses debt. This is not where Iíd place my bets right before a financial crisis that will exceed 2008, with monthly unemployment numbers growing by the millions. Shaky companies like cruise lines, hotels, auto makers, and airlines have already maxed out their revolvers per their contractual agreements with these banks, and those loans arenít getting paid back until - or unless - those companies can sell long term debt at IG rates! So why not just buy these stocks if youíre going to accept these risks anyway.

Iím also looking at residential REITs. They will have increased delinquencies and vacancies, and possibly lower rents, offset by people moving out of foreclosures. I think the key question is whether they need to tap the credit markets in the next two years, because the credit market might not be there for them! Short-term leverage could be a killer, bankrupting even highly profitable REITs.

Why not short the most vulnerable financial institutions, such as Capital One or Lending Club?

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 1249
Re: Bank Stocks
« Reply #329 on: April 01, 2020, 03:40:34 PM »

This is not where Iíd place my bets right before a financial crisis that will exceed 2008, with monthly unemployment numbers growing by the millions.
Thank you @ChpBstrd !!! Someone else finally said what Iíve been thinking! Iím so sick and tired of being the MMM eeyore on the economy. Now I can quote a MMMer of great repute and wisdom and say ďyup. I think weíre looking at something worse than 2008. Donít blame me, Iím just quoting @ChpBstrd !!!Ē

Thanks for taking the hit for the team! 😆😆

ctuser1

  • Pencil Stache
  • ****
  • Posts: 610
Re: Bank Stocks
« Reply #330 on: April 02, 2020, 10:00:44 AM »

This is not where Iíd place my bets right before a financial crisis that will exceed 2008, with monthly unemployment numbers growing by the millions.
Thank you @ChpBstrd !!! Someone else finally said what Iíve been thinking! Iím so sick and tired of being the MMM eeyore on the economy. Now I can quote a MMMer of great repute and wisdom and say ďyup. I think weíre looking at something worse than 2008. Donít blame me, Iím just quoting @ChpBstrd !!!Ē

Thanks for taking the hit for the team! 😆😆

The real crisis in 2008 was NOT the financial losses everyone incurred. It was that the entire system could collapse, sending us back to an economy based on bartering.

The money market already broke the buck in 2008: https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp. The payments and settlements processes, the SWIFT network, etc, were not too far out of that infections reach. All it would have taken was to let the crisis of confidence and trust to run unchecked for a bit longer and poof - your $ would no longer be worth a $. Ergo - you are back to bartering.

Anyone who knew how the econo-financial world worked were shitting elephant sized dumps in their pants back in 2008.

Mere recession and financial stress just like 2008, or even 2X 2008, is not going to make the system sweat much. A lot of safeguards have been put in place since 2008 to handle precisely this type of stress.

It *is* possible that an order of magnitude worse mother of all great depressions to still wipe the system out. It just isn't likely.

If we had the current economic crisis before 2008, when everything was a lot more fragile, then we would be having a different discussion.

.....(disclaimer).....
My own position on this current "recession"/"depression" has evolved since 2 weeks ago. It is a lot worse than I *thought* back then. I still don't see any potential for systemic risks.

JetBlast

  • Bristles
  • ***
  • Posts: 367
Re: Bank Stocks
« Reply #331 on: April 02, 2020, 10:25:30 AM »
Banks hold lots of consumer debt, mortgages, and businesses debt. This is not where Iíd place my bets right before a financial crisis that will exceed 2008, with monthly unemployment numbers growing by the millions. Shaky companies like cruise lines, hotels, auto makers, and airlines have already maxed out their revolvers per their contractual agreements with these banks, and those loans arenít getting paid back until - or unless - those companies can sell long term debt at IG rates! So why not just buy these stocks if youíre going to accept these risks anyway.

How much of that is already baked into the prices? 

Wells and Citi are down around 50% this YTD.  USB  and B of A are off roughly 40%.  JPM is the best right now, only down 36%.  I'm probably a little early, as the bad economic news continues with unemployment rising, but I think it is at least time to start considering when you want to enter into financials again.  At this point investors are expecting big write downs to the loan portfolios at banks, along with squeezed net interest margins. 

It depends on how deep and long lasting you expect this downturn to be.  If it's worse than 2008, then yeah, you don't want to buy banks now.  If it isn't as bad though, the time to buy may be approaching. 
 

 

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #332 on: April 03, 2020, 04:57:46 AM »
Banks hold lots of consumer debt, mortgages, and businesses debt. This is not where Iíd place my bets right before a financial crisis that will exceed 2008, with monthly unemployment numbers growing by the millions. Shaky companies like cruise lines, hotels, auto makers, and airlines have already maxed out their revolvers per their contractual agreements with these banks, and those loans arenít getting paid back until - or unless - those companies can sell long term debt at IG rates! So why not just buy these stocks if youíre going to accept these risks anyway.

How much of that is already baked into the prices? 

Wells and Citi are down around 50% this YTD.  USB  and B of A are off roughly 40%.  JPM is the best right now, only down 36%.  I'm probably a little early, as the bad economic news continues with unemployment rising, but I think it is at least time to start considering when you want to enter into financials again.  At this point investors are expecting big write downs to the loan portfolios at banks, along with squeezed net interest margins. 

It depends on how deep and long lasting you expect this downturn to be.  If it's worse than 2008, then yeah, you don't want to buy banks now.  If it isn't as bad though, the time to buy may be approaching. 
 

I think the right questions are:

1) How badly will the bank balance sheets be hurt (some, but this isn't 2008)
2) Are banks the best risk/return calculation for your money right now.  They're really leveraged businesses.

I just think there are some better risk/returns out there now with more upside than most of the banks (and I'm the one who started this thread).   You have some basically unaffected businesses down 30% and some affected but recoverable businesses down 50-70%.   Rates going to zero changes my opinion on buying at these prices.  I'm still long JPM, BAC, and BOH, but would not add more relative to the other deals available.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1902
Re: Bank Stocks
« Reply #333 on: April 03, 2020, 07:25:28 AM »
Banks hold lots of consumer debt, mortgages, and businesses debt. This is not where Iíd place my bets right before a financial crisis that will exceed 2008, with monthly unemployment numbers growing by the millions. Shaky companies like cruise lines, hotels, auto makers, and airlines have already maxed out their revolvers per their contractual agreements with these banks, and those loans arenít getting paid back until - or unless - those companies can sell long term debt at IG rates! So why not just buy these stocks if youíre going to accept these risks anyway.

How much of that is already baked into the prices? 

Wells and Citi are down around 50% this YTD.  USB  and B of A are off roughly 40%.  JPM is the best right now, only down 36%.  I'm probably a little early, as the bad economic news continues with unemployment rising, but I think it is at least time to start considering when you want to enter into financials again.  At this point investors are expecting big write downs to the loan portfolios at banks, along with squeezed net interest margins. 

It depends on how deep and long lasting you expect this downturn to be.  If it's worse than 2008, then yeah, you don't want to buy banks now.  If it isn't as bad though, the time to buy may be approaching. 
 

AIG still hasnít recovered from 2008.

Reminds me of my local Kroger, where they mark down spoiled milk to maybe 50 cents per gallon. Obviously thatís the price point where they can clear a few units, perhaps to people who arenít doing enough research before they purchase, but the markdown does not make it a good deal for me.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #334 on: April 04, 2020, 04:32:15 PM »
Pointing out AIG, Citi, or even STI before they sold is different...

They did highly dilutive share issuance at the bottom.  That'll crush existing investors forever.

I know, I'm watching CCL do that to my small amount of stock I own in it right now.   Bought at $45 and they just had to issue a bunch of new shares at $8.

bwall

  • Pencil Stache
  • ****
  • Posts: 742
Re: Bank Stocks
« Reply #335 on: April 05, 2020, 08:11:55 AM »
I know, I'm watching CCL do that to my small amount of stock I own in it right now.   Bought at $45 and they just had to issue a bunch of new shares at $8.

Ouch. That's painful. All cruise ship companies are down 75% or so from just.... 2 months ago? I think that of the dozen or so cruise ship lines, we'll see at least one bankruptcy. Who wants to get on a floating petri dish?

They've stopped sailing and who knows when they'll restart? They still have to keep a skeleton staff and pull regular maintenance, although in theory they can use the time to overhaul and update some ships. I'm sure they've cancelled a lot of their (massive) food orders, but they've got a lot on hand that they still have to store until they use. They'll be discounting cabins for a long time after this is over. Margins will be crushed for years.

Don't forget, even at $8/share, it can still go down another 90%. It's still not too late to sell.

habaneroNorway

  • Pencil Stache
  • ****
  • Posts: 510
Re: Bank Stocks
« Reply #336 on: April 05, 2020, 02:45:00 PM »

AIG still hasnít recovered from 2008.


Most large European Banks haven't either. Some of the big banks lost a fuckload of their value and never really recovered after the GFC.

ice_beard

  • Stubble
  • **
  • Posts: 133
  • Location: East Bay, CA
Re: Bank Stocks
« Reply #337 on: April 05, 2020, 03:20:37 PM »
I've been researching a lot this weekend and one trend I'm seeing over and over are regional and smaller banks near 52w lows.  ZION, UMPQ are examples.  52w lows are enticing price points... must be strong.... 

Many bank stocks are considered overweight or buys by VG, but clearly something is amiss.  Bigger banks also fell last week considerably.  FITB, C, etc fell considerably, not nearly as far as regional banks. 

Visa, mastercard, paypal, really anything that replaces cash transactions are overwhelmingly rated as buys on VG.  Would love to see them approach their 52w lows too.  Looking forward to an interesting week in the market.... 

bwall

  • Pencil Stache
  • ****
  • Posts: 742
Re: Bank Stocks
« Reply #338 on: April 06, 2020, 07:47:57 AM »
I've been researching a lot this weekend and one trend I'm seeing over and over are regional and smaller banks near 52w lows.  ZION, UMPQ are examples.  52w lows are enticing price points... must be strong.... 

Many bank stocks are considered overweight or buys by VG, but clearly something is amiss.  Bigger banks also fell last week considerably.  FITB, C, etc fell considerably, not nearly as far as regional banks. 

The reason that bank stocks are so low is that the net interest margin is approaching zero. Net interest margin is the spread between what they charge the borrower and what they pay for deposits. Around six months ago I believe the net interest margin was around 2%. Since then the FED has cut rates 1.25% (or so). So, banks will have a very hard time earning money for awhile.

In other words, there is a reason banks are at a 52 week low. Be patient. You're not going to be missing out on anything here for awhile.

Fishindude

  • Handlebar Stache
  • *****
  • Posts: 2279
Re: Bank Stocks
« Reply #339 on: April 06, 2020, 07:55:34 AM »
The reason that bank stocks are so low is that the net interest margin is approaching zero. Net interest margin is the spread between what they charge the borrower and what they pay for deposits. Around six months ago I believe the net interest margin was around 2%. Since then the FED has cut rates 1.25% (or so). So, banks will have a very hard time earning money for awhile.

In other words, there is a reason banks are at a 52 week low. Be patient. You're not going to be missing out on anything here for awhile.

Most banks don't even keep their residential mortgages since rates are so low.   They sell them off and handle the collection and processing for a fee which isn't all bad.   Banks just about have to do commercial lending to make any serious money.   The banks that are good at commercial lending are still producing good margins.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3430
  • Age: 38
  • Location: South Carolina
Re: Bank Stocks
« Reply #340 on: April 06, 2020, 07:59:44 AM »
I know, I'm watching CCL do that to my small amount of stock I own in it right now.   Bought at $45 and they just had to issue a bunch of new shares at $8.

Ouch. That's painful. All cruise ship companies are down 75% or so from just.... 2 months ago? I think that of the dozen or so cruise ship lines, we'll see at least one bankruptcy. Who wants to get on a floating petri dish?

They've stopped sailing and who knows when they'll restart? They still have to keep a skeleton staff and pull regular maintenance, although in theory they can use the time to overhaul and update some ships. I'm sure they've cancelled a lot of their (massive) food orders, but they've got a lot on hand that they still have to store until they use. They'll be discounting cabins for a long time after this is over. Margins will be crushed for years.

Don't forget, even at $8/share, it can still go down another 90%. It's still not too late to sell.

I know.  There's no rule that says I have to make the money back the same way.

That being said, having a successful share/debt offering at $8 means they're set to *not* sail for 2020.

I'll end up selling the shares this year and realizing the loss, just want to make sure I'm clear of the wash rule sales and have something better I'd rather do with the cash