SubscribeBanks failing, so they are changing the rules….
June 19, 2008
The Wall Street Journal is telling us that there is a new game being played by banks to help make their book of businesses, “look” better. It is a desperate move but the problem is the lack of regulation that continues to allow for this latest form of unethical behavior.
In January, Astoria Financial Corp. told investors that its pile of nonperforming loans had grown to about $106 million as of the end of last year. Three months later, the thrift holding company said the number was just $68 million.
How did Astoria do it? By changing its internal policy on when mortgages are classified on its books as troubled. The Lake Success, N.Y., company now counts home loans as nonperforming when the borrower misses at least three payments, instead of two.
This type of blatant disregard for the consumer and shareholders will continue as the FED and the Treasury turn a blind eye. Yet, the truth is that this immoral and I daresay borderline criminal action will continue. Let’s face it, there is really no teeth and not enough of a deterrent that provides for a second thought by any of the laws on the books today.
As long as off-balance sheet deals and creative bookkeeping is allowed, feel confident that this will go on indefinitely.
On the other hand, if the banks continue to operate under the current rule set, how long will they be able to stave off the inevitable if their book of business is failing. AND, one more thought…are we all culpable as well as it is somehow in our best interests that they stay solvent and therefore ignore the obvious?
What can we as investors do anyway except vote with our buy or sell orders?
Stocks: (NCC) (WM) (COF)
TDI Episode 48: LIARs, VISAs and BEARs - OH MY!
March 17, 2008
Guests: Zach Scheidt, Harry Dent and David Gaffen. Markets and the future with all that occurred this week is our initial topic. David Gaffen of the Wall Street Journal along with Harry Dent, famed author and economist, provide some clues as to where the
markets and the economy is heading.
Zach discusses VISA IPO and the state of the market provides some great tips on profiting from IPOs. Are we going to crash or have we reached bottom? We introduce, The ZachZone in this episode, a segment to become a regular part of The Disciplined Investor Podcast. This is an episode that will help you profit.
One hedge fund Zach manages strictly invests in IPOs as well as new equity issues. Zach brings great insight along with a refreshing and honest view of what is billed to be the BIGGEST IPO in history. VISA is being touted as a top play by the investment bankers, even in this horrible market. Yet, we look a bit deeper to see if this is
actually something that will be of benefit. (visit ZachStocks)
Zach is the founder and Managing General Partner of Stearman Capital, LP. After graduating with honors from Lee University, he attended Georgia State University at night while beginning his career in the securities industry. He received his MBA in 2001 and also achieved the Chartered Financial Analyst designation in 2003.
Zach is also an avid writer and periodically publishes articles on individual securities as well as sector and general market themes. He is a regular contributor to Seeking Alpha and has been quoted in numerous financial publications including the Wall Street Journal, TheStreet.com and Yahoo! Finance. A participating member of the Atlanta Society of Financial Analysts, Zach maintains an active profile in the Atlanta investment community.
IPO Sites Mentioned: IPOCentral, Yahoo! IPO, StreetInsider, MorningNotes* (*premium)
Stocks Mentioned in this and recent episodes: (V) (BSC) (LEH) (SPY) (SAFM) (GS) (MER) (QID) (SKF) (QQQQ) (IBKR)
on Thursday, March 20th. CLICK HERE….
Guests scheduled for upcoming Episodes: Bill Cara, Mike Huckman, Robert Reich
Milli Vanilli Government: Latest Casualties - Bear and VISA
March 17, 2008
There is something odd, yet comforting when I watch a classic Bruce Lee or Godzilla movie. The people’s lips are moving and while I hear words, the two don’t quite match up. In spite of that, somehow it works anyway and is a reminder that what is happening on the screen is far fetched and should not be confused with reality. Perhaps a good lesson applied to last Tuesday’s $200 billion announcement to Sunday’s $2 news.
As I read the horrifying news of JP Morgan (JPM) and Bear (BSC), I suddenly thought about the (former) masters of the lip-sync world, Milli Vanilli. Remember them? Rob and Fab were the gorgeous singing duo who had a hypnotic effect on a global scale. When they sang, fans were awed. When they danced…well, actually let’s not go there.
Where are they now? As soon as they were outed in 1989 during a live MTV performance of their hit song, Girl You Know It’s True, they fell quickly and painfully. It was a sad end to one life and the two careers of men who will forever be remembered as talentless puppets.
Our trusted government and its agencies have now taken over as the Milli Vanilli of Finance. Who in the hell is calling the plays? Who is making these abhorrent decisions to hide information from the public and allowing for a multi-billion dollar company to to fail over a weekend? How are we going to have trust in the system if they pull a fast one like this? It is now more obvious than ever that we are in bad shape and the lack of either:
1) The people in the know, knowing or
2) Trust for the system
is going to hit hard. Bear Stearns (BSC) is another casualty that could have been avoided. But, instead of going through steps that could have been taken as that is meaningless at this point, maybe we should be thinking about what else is coming and work on a plan to protect ourselves. Thinks about it…it is now every person for themselves as lips are moving by Ben-n-Bush, though they are not saying anything.
So, as a protective measure, use a hedge against a market nosedive - assuming it is not too late. As was suggested on 3/12/08 (Bernanke’s Junk Exchange), look at (SDS) (SKF) and (QID) as some short-ideas that will give you the best bang for the short buck. Don’t stop there though as there is surely going to be further fallout.
Lehman (LEH) is in the same trouble as Bear since they have somewhat similar business models. JP Morgan is absorbing a massive amount of debt that will continue to be difficult to value. Look no further than the Bank of America (BAC) and Countrywide (CFC) fiasco as a foreshadowing of what is in store for JPM. While the far future may be lined with profits, JPM shareholders will need strong constitutions during the short-term. Be careful to hedge these positions if for some reason you do not want to sell outright.
During the next few days, amazing trading opportunities will probably arise as rumors and speculations will run Read more
Bernanke’s Magic Hat
March 14, 2008
“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.” Lincoln’s Second Annual Message to Congress, December 1, 1862.
Just as President Abe Lincoln inherited a country at a historic crossroad, so has Chairman Ben Bernanke. Lincoln thought well outside the box by and was able to reach into his hat-o-tricks and pullout some magic. Fortunately, his efforts eventually united a broken and disparate country laying the foundation for greatness. Now it is Mr. Bernanke’s turn.
So far, Academic Ben has shown some magic of his own. Reaching deep inside, we see that his hat-o-need-a-miracle is full of all sorts of wondrous solutions…..From traditional rate cuts to tapping the lesser known discount window and all the way back again, the Fed Chief has been wrangling with just how to get some breathing space between today and an eventual foreclosure of the good-ole U. S. of A. In an effort of global proportions, the latest move to avert an all out economic nosedive was to bring together a global consortium of governments in the hopes of providing the liquidity to allow for the banking sector to work its way through the short term. The unfortunate fact is that it appears as if Mr. Bernanke is not convinced that the U.S. can actually pull this one off alone.
According to Bloomberg reports,
In a Florida speech directed to bankers last week, he Fed Chairman Ben Bernanke requesting that lenders “forgive portions of mortgage debt held by homeowners at risk of defaulting.”
This is not a good sign as it is smelling like our sugar-daddy is running out of ideas and we dare say…options. This last move was historic in size and depth. “What else is does Bernanke have in his tall hat?” is weighing on the minds of many investors. Here is a novel idea…how about an immediate pullout of U.S. troops from IRAQ which, at last report, was costing us….(from nationalpriortities.org )
There is a growing concern that there will be a failure and that the latest moves are set to help avert the impending reality. Rumors aside, the probability is growing that a major catastrophe is brewing and the longer the credit markets are locked-up, the higher the likelihood.
Do not confuse this and assume it is the rant of a perma-bear, looking to profit from scare tactics. Rather, I hope it is the voice of financial responsibility and the economic reality. We are still setting up for problems if this latest magic trick does not quickly do the job by acting like Super Drain-O in unclogging our financial plumbing.
What is left to be yanked out of Bernanke’s Hat? Perhaps rate cuts that will lower mortgage rates for the new legion of renters. As this would bring down the dollar’s value, we could find ourselves looking for Read more
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