If the market is open, the financials are down 10%. This will continue until we have another Bear Stearns-like failure. Bernanke has told us as much. Don't try to bottom-fish. These are failed business models.
Submitted: Jul 15, 2008
Views: 5368
Comments: 24
Likes: 2
The business model of leveraging credit upon credit has failed. It wasn't a Bear Stearns model, it was an industry. There were many culprits, banks without the intellectual capital to grow the business of the basis of investment banking or trading like Goldman, Morgan Stanley or JP Morgan, that just leveraged their balance sheet and kept leveraging and leverage. A crazy credit environment, a housing bubble and a strong economy all contributed to the environment. But, when you build with leverage on leverage, it doesn't take too much to bring down the house.
The house is falling now. These banks are down 10% every day. The model has failed and there is nothing left. This will continue until we see a major failure.
I believe that Citi will be bailed out by some middle eastern prince or sovereign wealth fund. I am sell certain of Lehman, Merrill and Wachovia. I think that one of these banks will fail and fail soon.
However, I could be wrong so I wouldn't dream of shorting one of these.
Related Articles:
Citibank Launches new Amex Card for Smith Barney and Private Clients by PhilR - Jun 24, 2007 Well Fargo Buys Wachovia, Trumping Citi's FDIC Deal by JRodgers - Oct 03, 2008 Vikram Pandit Begs for An Acquisition after $25 Billion in TARP Money and Prince Alwaleed bin Talal Money Spark A Crash by JRodgers - Nov 20, 2008 Goldman Sachs and JP Morgan are Saddled with Debt they Cannot Sell by JRubinstein - Jul 18, 2007 Richard Hormats, Vice Chairman of Goldman Sachs Discusses the Cost of War with Charlie Rose by MBANewlyMinted - Aug 02, 2007 Market Ripe to Sell Covered Call Options on Goldman Sachs by Sam Cass - Aug 14, 2007 Goldman Sachs (GS) In a Class of Its Own by Sam Cass - Sep 21, 2007 Wachovia Weekly Economic and Financial Commentary - July 20, 2007 by Sam Cass - Jul 26, 2007 Throw Out Wachovia and Bank of America and Grab a McDonald's Hamburger by MBANewlyMinted - Oct 19, 2007 Wachovia Bank by BankMan - Jun 21, 2008.
Email to someone |
Print Content |
Add to reading list
Comments Received:
news?
(Unregistered)
"This will continue until we see a major failure."
we've already seen a major failure. it's called bear stearns.
Posted: Jul 15, 2008
Aaron
(Unregistered)
I'd be shocked if Merrill or Citi failed. Lehman might go private if its stock keeps going lower. I think WaMu is most likely of the big ones to fail.
http://hubpages.com/hub/Which-banks-are-in-the-most-trouble-now
Posted: Jul 15, 2008
I don't consider WaMu to be a big one, but I do agree with Aaron that it will fail.
Posted: Jul 15, 2008
Thomas
(Unregistered)
Wachovia looks pretty bad but I don't think it will fail. It has a much more attractive franchise than Indymac and should be able to raise additional capital if needed.
They must really be regretting the purchase of Golden West financial.
Posted: Jul 16, 2008
Raj
(Unregistered)
Wachovia's stock just doubled this week.
Posted: Jul 18, 2008
Doser
(Unregistered)
Wachovia stock is still under 13 a share after a 76% decline. The option arm porfolio is going to sink their ship, bc they cant dump them at a high enough price and they were orginating them up through this month (July).
Posted: Jul 20, 2008
scott jones
(Unregistered)
I think wachovia will be bought out by another bank. Maybe Wells Fargo. They are going down fast. They won't be able to digest Golden West purchase. Bears, Leman Bros, WaMu, Wachovia is next! Beware!
Posted: Sep 14, 2008
Tonight we have an answer and it is Lehman.
Posted: Sep 14, 2008
Eric Peters
(Unregistered)
ON THE MONEY WITH LEHMAN, IS CITIBANK NEXT?
Posted: Sep 14, 2008
Good call. Only two left from your original list.
Posted: Sep 15, 2008
J Simpson
(Unregistered)
Sam Cass, Merryl Lynch was boughtout by BOC today also, so that makes two. Also Wachovia is likely to fail within the next 2-3 years.
Posted: Sep 17, 2008
V. Pandit
(Unregistered)
Citigroup is very well capitalized. Keep the short thought comments quiet. You are clueless.
Posted: Sep 17, 2008
A.G
(Unregistered)
Amazing!!! I wish I had read this in June!
Posted: Sep 22, 2008
A.G
(Unregistered)
please excuse the typo. I meant July. Anyhow what do you make of the current situation and would you still say that wachovia and citibank will fail within the next few months/years?
Posted: Sep 22, 2008
Bruno
(Unregistered)
no big bank has failed yet...only investment banks like Lehman that had no deposit base to tap when credit froze...Merrill did not fail it was bought at quiet a big premium over heir share price i might add.
wachovia and citi have loads of assets they can sell before having to fail, wachovia securities for one would attract a lot of interest...and wachovia has now for the first time in decades a solid CEO in charge, if paulson plans goes through they will also be probably one of the most beneficiated banks by it out there...all their core businesses are doing good except their troubled mortgage portfolio if they can dump that at adequate prices wachovia will be just fine...citi on the other hand will need major restructuring its just too big and burocratic.
anyway i believe both wachovia and citi are in the "too big to fail" category, lehman wasnt but these banks certainly are.
Posted: Sep 25, 2008
James H
(Unregistered)
Wamu bailed out by Chase...
Posted: Sep 26, 2008
WaMu failed and was then bailed out by Chase. The OTS took control.
Wachovia and National City are down sharply today. Wachovia has a bunch of mortgage junk on its books.
Citi will also come under pressure and will not be the same company by the end of this.
Posted: Sep 26, 2008
Citi just purchased Wachovia. Only Citi is left from your original list.
Posted: Sep 29, 2008
Mortgagemillions
(Unregistered)
You should've followed your guts you nailed every one. Unfortunately you were too right.
Posted: Sep 29, 2008
Larry
(Unregistered)
So who do you predict will be next given the recent turn of events?
Posted: Oct 12, 2008
SP
(Unregistered)
City is also coming...
Posted: Nov 22, 2008
SP
(Unregistered)
Sorry for typo Citi not City...
Posted: Nov 22, 2008
ARAB GUY
(Unregistered)
Citi will be backed by the Arab money, No worries!
Seriously Citi Bank is the best bank.
You fools worry about bank of America more because if they fail there won't be agroup of rich Arabs to bail them out!
Posted: Nov 23, 2008
Dhillon F.
(Unregistered)
Looks like 'ARAB GUY'is the one who is a 'fool' and 'V.Pandit' is the one who is 'clueless'. Without the government bailout citi would have gone down.
Posted: Nov 30, 2008
© Copyright 2008 JRodgers All rights reserved. JRodgers has granted BestCashCow.com, LLC non-exclusive rights to display this work on Bestcashcow.com.
