Credit Default Swaps – A Disastrous Unwind
October 21, 2008
Although mortgage backed securities and mortgage related assets have plagued the financial sector for the past 12-14 months, the sector is about to come under considerable pressure because of a uniquely structured product called a credit default swap or CDS. The government’s decision to allow Lehman Brothers to fail last month may be just another decision in this stressed market that is about to come back to haunt them. Read more
Citi Posts Another Loss
October 17, 2008
Citigroup [C: 7.08, -0.06 (-0.84%)] reported third-quarter results today before the bell. After writedowns of $4.4 billion and weak revenues virtually across the board, the bank reported its fourth straight quarterly loss of $2.81 billion, or 60 cents a share. This compares with last year’s third-quarter net income of $2.21 billion, or 44 cents a share. Revenue dropped 23% to $16.7 billion. However, the results were better than analysts had expected. Read more
JPMorgan Hit by Declining Earnings
October 16, 2008
As the Dow opened only modestly lower to start yesterday’s trading session, J.P. Morgan [JPM: 29.25, -2.10 (-6.70%)] surprised analysts when they reported positive earnings of $527 million, or $0.11 a share. Even though it represented an 84% drop from last year’s earnings of $3.37 billion, or $0.97 a share, the average consensus estimates from analysts were expecting a loss of $0.21 on revenue of $16 billion. Read more
PNC: Success in Subprime
October 10, 2008
The subprime crisis has decimated large financial institutions and has ultimately transformed the current financial services landscape as we known it. Tarnished assets have continued to grow and develop on balance sheets across the markets as mergers and acquisitions, along with governmental action, has been a necessity to keep the economy afloat. In what seems like the blink of an eye, Fannie Mae [FNM: 0.82, +0.09 (+12.33%)], Freddie Mac [FRE: 0.82, +0.09 (+12.33%)], Lehman Brothers, Wachovia [WB: 0.00, N/A (N/A)] ,AIG [AIG: 1.66, -0.03 (-1.78%)], and Merrill Lynch [MER: 0.00, 0.00 (0.00%)] all have had to call upon the help of the government or another firm to salvage themselves. Read more
Worldwide Action, Interest Rate Cut
October 9, 2008
Many investors woke up yesterday morning to a surprising news headline that six central banks moved in coordination to cut their respective interest rates. The coordinated effort came from the central banks in the U.K., Canada, Sweden, Switzerland, and the U.S. The 50 bps cut stimulated the pre-market trading, which led the futures to the major U.S. indexes higher. Read more
Credence in Capitalism
October 8, 2008
My interest in writing this piece was sparked by a spirited debate with a fellow Bullish Banker regarding the implications of the financial crisis on the next President Elect. Upon watching the debates, it is clear neither candidate wants to address how such a financial bailout (and overall financial deterioration) will affect their campaign promises. The bottom line in all of this financial noise is that the standard of living must come down. The American consumer (yes with the help of the investment banks) is now being disciplined for their largesse over the past several years, which in the end is what drove speculation in many of the markets that have now become the problem. The deficit at the national level was not the problem as it turns out; it was the deficit at the consumer level. Read more
Bank of America, A Desperate Move for Capital
October 7, 2008
In an unexpected announcement, Bank of America [BAC: 13.98, -0.35 (-2.44%)] released their 3rd quarter earnings results and announced that they will be cutting their dividend and issuing new common shares to raise capital. After an interview on CNBC yesterday, CEO Ken Lewis stated that a dividend cut wasn’t completely out of the picture, and that they would do what was best for the company going forward. Bank of America was obviously in worse condition than he made Read more
Citi Left Deserted as Wachovia Falls for Fargo
October 6, 2008
This past week has been chaotic for the markets, for investors and for Citigroup [C: 7.08, -0.06 (-0.84%)]. Announced on Monday, Wachovia’s operations excluding Wachovia Securities and Evergreen Asset Management were sold to Citigroup. The deal was brokered by the FDIC over the weekend of September 28th and 29th to prevent any further shockwaves in the financial markets and the economy. The deal was at a fire sale price of $1/share for Wachovia’s assets, including the toxic waste that has corroded a significant portion Read more
BlackRock: Navigating the Financial Markets
October 3, 2008
With the recent volatility in the financial sector, choosing a sound investment has become an increasingly daunting task. However, BlackRock still offers some hope. While the stock is down about 10 % YTD, it has fared much better than the Financial Sector SPDR, [XLF: 12.45, -0.21 (-1.66%)], which is currently down around 30% YTD. BlackRock, [BLK: 138.78, -0.34 (-0.24%)], which offers investment management, risk management and advisory services to institutional and individual investors worldwide, has assets Read more
Goldman Sachs, A Great Deal for Buffet
September 25, 2008
Warren Buffet, who has been regarded as one of the most powerful men in the world, and also one of the wealthiest, struck again to buy a stake in investment banking giant Goldman Sachs [GS: 88.78, +2.02 (+2.33%)]. Buffet has steered away from many Wall Street firms in the past year, but this deal was one that he couldn’t miss. The deal, which has struck a lot of controversy from Goldman Sachs’ shareholders, is a very expensive one for Goldman to do. Lloyd Blankfein, the CEO of Goldman, was extremely worried that the markets didn’t think their balance sheet Read more
 
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