22 replies to this topic

[colours]

So , in essence, the FED, through the discount window, has given the Banks the financial advantage to destroy their competitors in the mortgage business . Could this so - called ' credit crunch ' be little more than a contrived play of consolidation by the big banks ?

[mike123]

So , in essence, the FED, through the discount window, has given the Banks the financial advantage to destroy their competitors in the mortgage business . Could this so - called ' credit crunch ' be little more than a contrived play of consolidation by the big banks ?

These bankers are not that smart. BAC just tries to cover their @ss for now. Trouble is far from over.

[ogm]

So , in essence, the FED, through the discount window, has given the Banks the financial advantage to destroy their competitors in the mortgage business . Could this so - called ' credit crunch ' be little more than a contrived play of consolidation by the big banks ?

This is a process of natural selection. Capitalism.

Market has destroyed them not the competitors. Bad lending practices and poor risk management.

The Fed just gave the flexibility to the strongest. And the strongest apparently see value there.

If you're a smartest trader in the world and one day you leverage yourself 10 to 1 and make a wrong move.. you're wiped out. At the same time the more disciplined better capitalized guy, who has better risk management can come in and buy your portfoilio cheap when you're forced to liquidate for pennies under the stress of margin calls.

Thats what is happening here.. more disciplined, better capitalized banks are going to take advantage of the situation.

Look how much money Fortress, Blackstone, Citadel, KKR, Apollo have under management. Their funds under management have more then doubled over the past year. And they ALL already annouced they are buying the paper from the distressed guys.


Thats their new game, not LBO's but scooping up this distressed debt that overleveraged dummies like AHM are puking out for pennies.

Edited by ogm, 22 August 2007 - 06:32 PM.

[Cirrus]

So , in essence, the FED, through the discount window, has given the Banks the financial advantage to destroy their competitors in the mortgage business . Could this so - called ' credit crunch ' be little more than a contrived play of consolidation by the big banks ?

Exactly....

[IndexTrader]

Hmmm, do I smell a fox in the hen house?



M

Smart deal on BAC's part....7.25% convertible preferred stock, convertible into common at $18. Hard to go wrong with that. A FED approved private bailout.

IT

Edited by IndexTrader, 22 August 2007 - 08:52 PM.

[mike123]

Hmmm, do I smell a fox in the hen house?



M

Smart deal on BAC's part....7.25% convertible preferred stock, convertible into common at $18. Hard to go wrong with that. A FED approved private bailout.

IT

$11 Billion just a week ago was not able to bail out CFC. Why would you think $2 Billion will this week? Is BAC trying to get in front of the line to get cheap assets in the court house?

[IndexTrader]

Hmmm, do I smell a fox in the hen house?



M

Smart deal on BAC's part....7.25% convertible preferred stock, convertible into common at $18. Hard to go wrong with that. A FED approved private bailout.

IT

$11 Billion just a week ago was not able to bail out CFC. Why would you think $2 Billion will this week? Is BAC trying to get in front of the line to get cheap assets in the court house?

Countrywide won't be going broke in your lifetime. This situation will simply expand Countrywide's share of the market. This is a process that completes every cycle.

As you probably know, preferred stock is not a secured position in a bankruptcy hearing. I think this was simply an expression of confidence by BAC....the smart money in this case.

Confidence is the problem right now. As should be obvious, it's a small fraction of subprime loans that are bad loans. This is what the market is obsessing over right now. But it won't forever. I would imagine you know that many of these subprime loans are insured by mortgage insurers. What that means is that they are insured above 80% LTV. Obviously, then if the subprime borrower defaults, the lender takes the property back in foreclosure, but is only on the hook for those amounts UNDER 80% LTV. They're going to lose, but they're not going to lose the entire loan or even anything even close. And this is on a fraction of those loans.

I'm not saying the situation is a good one...it isn't. But it isn't the dire situation that you seem to be trying to make of it. We've been through these cycles before. We've had these types of loans on the books before, and they're gone bad before. Sooner or later investors will start to recognize that there is value in these subprime loans. If I had the type of major dough to do it, I would buy a large portfolio of subprime loans right now, albeit at a sharp discount, and do a workout on them, just as the Bass Brothers (and others) did in the last cycle.

Meanwhile, I think you'll find that over time a convertible preferred paying 7.25%, convertible at $18 will be a wonderful investment for BAC. By the way, if memory serves, that dividend is 80% tax exempt for a corporation.

IT

[selecto]

Buffett now owns a lot of BAC. Lately, there have been a number of rumors about him sniffing around Countrywide. Close. It seems quite unlikely the deal would have been done by BAC if Warren objected. Good enough for me,

[scott in Wisconsin]

Buffett now owns a lot of BAC. Lately, there have been a number of rumors about him sniffing around Countrywide. Close. It seems quite unlikely the deal would have been done by BAC if Warren objected.
Good enough for me,

I agree it's a great investment. But anyone could have been buying last week! I bought 400 shares of the preferred at the open last Thursday at $9.65. It closed the day at $13, and will probably close Thursday at $20. As long as they don't go broke, my rate of interest is over 18%. Forever. (Of course mine aren't convertible)

I bought more Tuesday at $15, but I wish now I had loaded up. I also own a bunch of TMA preferred I bought at $15 (paying 13%). And I have some COF preferred I bought at $20, paying over 9%. Hope they all make it!

Preferreds are so thinly traded, then when there is a scare, you can snap up some great returns. I just leave orders in way below the market, waiting for someone who needs to dump a bunch.
Scott

[IndexTrader]

Buffett now owns a lot of BAC. Lately, there have been a number of rumors about him sniffing around Countrywide. Close. It seems quite unlikely the deal would have been done by BAC if Warren objected.
Good enough for me,

I agree it's a great investment. But anyone could have been buying last week! I bought 400 shares of the preferred at the open last Thursday at $9.65. It closed the day at $13, and will probably close Thursday at $20. As long as they don't go broke, my rate of interest is over 18%. Forever. (Of course mine aren't convertible)

I bought more Tuesday at $15, but I wish now I had loaded up. I also own a bunch of TMA preferred I bought at $15 (paying 13%). And I have some COF preferred I bought at $20, paying over 9%. Hope they all make it!

Preferreds are so thinly traded, then when there is a scare, you can snap up some great returns. I just leave orders in way below the market, waiting for someone who needs to dump a bunch.
Scott

I'm not much of a fan of straight preferreds, but I have to say your Countrywide purchase sounds pretty good.

IT