Posted on 09/17/2008 1:56:04 PM PDT by Anti-Hillary
“The future of brokerage houses of size is dim, and eventually they all will be small or connected to a bank and regulated like a bank.”
A cigar for you. The shadow banking system will go out of business.
Any of these strong investment banks are looking for a weak commercial bank to buy cheap and get access to all that depositer capital down the pike.
It ain't nucleyar science is it?
This environment is really an unprecedented opportunity for banks, investment houses and insurance companies or even titans like GE or Microsoft or Exxon or Wal-Mart to pick up valuable properties cheap.
underwriting and M/A and whatnot is a whole lot different than just managing deposits and loaning money
The models will change, as will the shear size, simply because a big profit center will no longer be in their purview.
IBs are going to be forced under the regulatory umbrella now that their actions have compelled taxpayers to bail out the credit markets. The highly leveraged IB shadow banking system is where much of the damage to the credit markets is occurring. Maybe if we return to some version of Glass-Steagall then the IBs would be able to survive on their own. If not they surely will be tied down to a commercial bank where their activities will be far more restricted than they are today.
an argument can sure be made that Glass Stegall was not such a bad idea after all eh?
lol
“am so glad that Wachovia bought my bank (world savings and loan) a year ago or so. /sarc”
If I am not mistaken, it is the World Savings portfolio that Wachovia is choking on.
From WSJ website, about six weeks ago:
A lot of this pain can be traced back to Wachovia’s errant 2006 acquisition of mortgage lender Golden West Financial. The entire market value of Golden West–which Wachovia bought for $25.5 billion–has nearly disappeared. Even on the day the deal was announced in May 2006, investors hated it so much that they slammed $1 billion out of Wachovia’s market value. At the time, Wachovia had a market cap of $90.2 billion and predicted that with Golden West its combined market cap would be $117 billion; today Wachovia’s market cap is hovering around $25.87 billion, or just a little more than Wachovia paid to acquire Golden West. Wachovia this year procured a capital infusion of around $8 billion because of that pain. Wachovia’s net slid last year to $6.3 billion from $7.7 billion in 2006, mainly because of bad loans made by Golden West. Former Wachovia CEO G. Kennedy Thompson (left) lost his job last month in large part because of the fallout. And Wachovia’s stock price today–cover your eyes–was a piddling $12.24 at the open, or just about a quarter of the 52-week high of $53.10 in September.
Considering all these signs, it may be time to enshrine Wachovia’s acquisition of Golden West Financial as a Deal From Hell.
i have always shorted as a hedge for years
but....i got completely out of the market last month...not as a sage but because I decided to lower my debt in my operating businesses so I bought a few businesses for cash or low leverage and emptied my portfolios
except when I was given insider access to IPOs I as business owner have ALWAYS outperformed my portfolio managers
anyhow....do folks here think shorting is the real bogeyman
i say it was greed about folks buying homes they had no business buying and lenders soing likewise to unqualified borrowers.
what do most folks here think?
I believe that you are correct that the sub-prime is the mother of all of this. Unfortunately like the sub-prime customers it has had many many babies with many many daddies and getting it straighted out is going to long and painful.
Yes, I thought at the time that Glass-Steagall was being dismantled that it was a big mistake. The Depression Congresses didn’t wall off IBs just to be doing something. IIRC they studied the behavior of investment trusts during the 20s and decided that most everyone would be better off if their field of operation was limited.
Trusts and investment banks have different interests than commercial banks and the small fry that they serve. Letting IBs into the world of unsophisticated small borrowers has led to a predictable result. It’s like inviting coyotes to play with your pet dog.
There are a few investors here who know about short selling, but not too many. I think the average person has no clue, and I doubt they think about it much.
The greed on the buying side was mostly house flippers who took advantage of the sub prime mortgages to flip houses with zero down. It was very, very popular and now you hear them wailing. The ones who got stuck holding the bag will pay. The others are flat lucky.
The sentiment here is all over the map as usual. Some have a deep understanding, and follow finance, some are populists and/or libertarians and blame evil fiat money and the like.
When the rest get their 401K statements, you may see some more anger expressed. In general, Conservatives here do not like government interfering with the private sector, but I suspect those 401K losses (40% or more) may change that.
it will be sorted out who has exposure there
Bank America is exposed.....wait and see what happens there.
I meet with banks and brokerage firms in the course of business all week, I’m just regurgitating what the tell me
I’m a borrower...commercially, I own apartments, a car wash chain, self storage, strip malls, that sorta thing....for folks like me this is been good actually, banks are soliciting me since I have a good track record and they are not loaning so much to entry level residential now
jumbo loans are hard to come by too I hear.
I had lunch yesterday with a mortgage broker who usually places a billion a year in loans for warehouses and commercial development...he says it’s very slow.....his insurance companies and pension funs he goes to for loans are fat but very hesitant unless the deal is AAAA
lots of great opportunity out there for folks with cash to spend
we all knew the boom turned bubble would burst but I confess I did not know it would be this heavy...
Naked shorting is a real problem. Shorts that fail to deliver but are allowed to continue to naked short can wreck a company. As long as the SEC ignores FTD then naked shorting is a real problem for small cap firms, or even large firms that are known to be troubled. Naked shorting and failure to deliver is essentially counterfeiting.
Same thing with NorWest buying out Wells Fargo.
Mish concludes:
A merger of Wachovia and Morgan Stanley would be a merger of the weak with the pathetically weak. Conditions are such that it is very difficult to tell who is who.Along the way, in his analysis, Mish rips the latest earnings statement of Morgan Stanley, claiming it took advantage of "a financial loophole to write off the value of its debt."While both companies have a questionable future, a merger has a certain future: a complete collapse of the combined entity. I doubt this merger takes place.
Mish claims he's been told that in an unsuccessful attempt Tuesday evening to discuss a merger of Morgan Stanley with Citigroup, Mr. Mack (CEO, Morgan Stanley) told Mr. Pandit (CEO, Citigroup): "We need a merger partner or we’re not going to make it."
When both the New York Times and Mish agree on something, odds are pretty good it is accurate.
MS is not going to merge with Wachovia; I have it on good authority. It’s simply a rumor because certain executives were seen lunching together.
When there is blood in the streets, that’s the time to buy.
- John D. Rockefeller.
That was regarded as gospel by most of the successful brokers at Wiley Bros. - the ones with the discipline to mind their research religiously. Congrats on your doing well with less spare time than they have.
You're right about the home-lending problem...you might notice that every market crisis comes from less regulation than what's needed to curb the human tendency toward gluttony. The Republicans don't seem to realize that their love affair with de-regularization always comes back to bite them in the ass because those durned schools teach too many blue-collars how to read how the huge contributors can't resist taking advantage.
I wouldn't get cocky about beating a few brokers/advisers in a short run when they're there for the long run. They sometimes succumb to greed and smoke being blown up their behinds like most others which leads to errors. You want the ones who've been through it all and still retain their certification. Those clinical, insulting bastards running on three hours of sleep and caffeine injections, there's your boys.
And as I work for you I'm going to sleep now.
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