Author Topic: Are big banks value traps ?  (Read 25656 times)

DooDiligence

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Re: Are big banks value traps ?
« Reply #90 on: March 06, 2020, 06:55:01 AM »
There's no value without fear.

I got shaken out of Davita & Express Scripts before they got run up.

Screw it, I'm hodling.
AFL // BRK.B // CLB an incredibly stupid move // DIS // EW // GPC // MO an incredibly stupid ex-CEO // NVO // PSX // ULTA // VDE // VLGEA // WFC

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Cigarbutt

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Re: Are big banks value traps ?
« Reply #91 on: March 06, 2020, 07:23:28 AM »
There's no value without fear.

I got shaken out of Davita & Express Scripts before they got run up.

Screw it, I'm hodling.
Apologies for often spreading (spouting nonsense type) questionable value information.
The idea is to help shape the risk-reward curves (on an individual basis), given wide-ranging perspectives.

Take WFC for instance, keeping in mind what John recently described in terms of the five pillars of earnings strength, mixing the latest Crédit Suisse memo with the end of year results.
https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/presentations/2020/credit-suisse-conference.pdf
There is a lot to like with WFC and I would bet that it will do better than the markets over a thirty-year period.
However, one of the potential scenarios implies a negative rate environment (thought to be essentially impossible just a few days ago) and an associated deleveraging environment (thought to be impossible now).
FWIW and to help judge the relevance of this post, I've found the markets to be extremely boring in the last few years and that includes the state of mind at the time of this writing.
I also take my Martini shaken, not stirred. :)

sleepydragon

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Re: Are big banks value traps ?
« Reply #92 on: March 06, 2020, 07:36:54 AM »
I think the Fed made a big mistake cutting rate.
Look at the bank stocks. They need to health banks at time like this. Instead they are trying to pop up PE firms.
Now banks are toasted. Soon they have to call Buffett to bail out.



meiroy

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Re: Are big banks value traps ?
« Reply #93 on: March 06, 2020, 07:48:47 AM »
I'm not so sure they are value traps, if you buy them cheap enough, though I do agree there will be farther rate cuts.

1.  They have MASSIVE political power.
2.  There's a coming housing tailwind with demand far greater than supply.
3.  ^This with lower rates might impact NIM but revenue would increase (assuming there is a sufficient amount of not-dead people to purchase houses).
4.  Quite a while ago, banks like JPM and GS have started to move away from NIM. It doesn't mean they will succeed.
5.  Worried about Dimon. 
6.  Banks stocks being bashed is a sort of protection against the Dems taking office though it's highly doubtful Biden would be hostile and Warren is out, not to mention Sanders is highly unlikely.




« Last Edit: March 06, 2020, 07:51:27 AM by meiroy »

LC

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Re: Are big banks value traps ?
« Reply #94 on: March 06, 2020, 08:25:31 AM »
Quote
I also take my Martini shaken, not stirred. :)
How cavalier!
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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stahleyp

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Re: Are big banks value traps ?
« Reply #95 on: March 06, 2020, 02:35:49 PM »
Buffett seems to think interest rates will stay low. What is he seeing that others aren't?
Paul

DooDiligence

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Re: Are big banks value traps ?
« Reply #96 on: March 06, 2020, 04:26:35 PM »
There's no value without fear.

I got shaken out of Davita & Express Scripts before they got run up.

Screw it, I'm hodling.
Apologies for often spreading (spouting nonsense type) questionable value information.
The idea is to help shape the risk-reward curves (on an individual basis), given wide-ranging perspectives.

Take WFC for instance, keeping in mind what John recently described in terms of the five pillars of earnings strength, mixing the latest Crédit Suisse memo with the end of year results.
https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/presentations/2020/credit-suisse-conference.pdf
There is a lot to like with WFC and I would bet that it will do better than the markets over a thirty-year period.
However, one of the potential scenarios implies a negative rate environment (thought to be essentially impossible just a few days ago) and an associated deleveraging environment (thought to be impossible now).
FWIW and to help judge the relevance of this post, I've found the markets to be extremely boring in the last few years and that includes the state of mind at the time of this writing.
I also take my Martini shaken, not stirred. :)

You have absolutely nothing to apologize for.

I welcome positive & negative viewpoints, especially from people like yourself who are much more intelligent & informed than I am.

This downturn is a gut test for me & I've got my big boy pants on.

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BTW, I officially claim credit for calling the market top.

I'm all in on VLGEA.

No more extra FOMO cash.
Severe downturn 100% assured.

Waiting for CNBC to call for an interview  :)

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I'm not selling anything, thanks to the fact that I'm adhering to a basic tenet that requires me to maintain 18 months worth of expenses in cash.

In another 14 months I'll have finished the associates degree & If the markets are still in turmoil, I may go back to work offshore so that I won't have to sell anything that I don't want to.

My investment horizon is long & I take full responsibility for any realized or paper losses.
I give all the credit for any gains to luck.
AFL // BRK.B // CLB an incredibly stupid move // DIS // EW // GPC // MO an incredibly stupid ex-CEO // NVO // PSX // ULTA // VDE // VLGEA // WFC

Investable cash 16% + 18 months of survival $

Spekulatius

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Re: Are big banks value traps ?
« Reply #97 on: March 06, 2020, 05:06:56 PM »
Well, my call was apparently correct, even though possibly for the wrong reasons. Saved me a few buckshot losses for sure.

If we indeed follow the European playbook, we will see the banking industry grinding along with low ROE and real estate (especially residential) shooting up, just like what happened in Germany and to some extend France. If I were Millennial, I would really Start taking notice and get on the bandwagon, and take advantage of thr low interest rates and refinance the hell out it as. I bet we are seeing rates in the low 2% later this year, that ought to make owning RE competitive in all but the most pricy areas.

If I were the Fed, I would announce a floor for interest rates to save the banking system. I don’t know what the number would be, but it should be positive, They should just state that they never cut the rate below 0.5% or something like that and keep it positive. I don’t really think that cutting further is doing anything and I think the cut below 2% is already not really helping anything other than getting asset inflation in areas where you probably don’t want them.

At some point, the banks are becoming bargains. I am not sure we are there yet. Perhaps WFC at or below tangible book value is that point. Smaller banks will hurt a lot and will be forced to merge. lots of jobs will be lost as a consequence of that and most likely, salaries in this sector will be permanently lower too over time, making it much less attractive for employees (the same happened in Europe by the way). Investment banks ironically and credit card companies probably do better and may even benefit from lower interest rates. In my opinion, GS right now is more interested than WFC and trades already at a discount to tangible book.
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bennycx

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Re: Are big banks value traps ?
« Reply #98 on: March 06, 2020, 05:19:03 PM »
Buffett seems to think interest rates will stay low. What is he seeing that others aren't?

Where did you get that? My impression is that he thinks it will rise eventually

stahleyp

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Re: Are big banks value traps ?
« Reply #99 on: March 06, 2020, 06:00:34 PM »
Buffett seems to think interest rates will stay low. What is he seeing that others aren't?

Where did you get that? My impression is that he thinks it will rise eventually

He's said it lots of times during interviews. Kept talking about how the stock market is cheap if interest rates stay low. I don't think he would say that if he though interest rates were going to go up over the intermediate/long term.

He even said this in the recent letter:

"Forecasting interest rates has never been our game, and Charlie and I have no idea what rates will average over the next year, or ten or thirty years. Our perhaps jaundiced view is that the pundits who opine on these subject reveal, by that very behavior, far more about themselves than they reveal about the future.

What we can say is that if something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time
perform far better than long-term, fixed-rate debt instruments."

If something close to current rates should prevail. That's the key which makes me think that he thinks those are the odds.

Paul