Comments on: Traders Forecast Banking Stress to Last To End of 2010

By: Anonymous

Anonymous — Fri, 18 Jul 2008 05:15:00 +0000

That’s the sort of thinking that has gotten the US in the mess it is in. Run companies on a short term basis, to please Wall Street, rather than do what is best for the business.

By: Anonymous

Anonymous — Fri, 18 Jul 2008 04:27:00 +0000

Maybe I am old fashoined, but I don't see increasing a dividend when earnings are falling as a good move in general, and in particular in an environment as fraught as this one. Presumably, it was done with the intent of boosting the stock price.

I disagree. The dividend increase was not that significant in dollar terms. However, it was significant for its shock factor.

I think it was done with the intent of gaining market share while their competition is weak.

By: Anonymous

Anonymous — Thu, 17 Jul 2008 19:06:00 +0000

If Wells Fargo gets cheap enough, we’ll all be able to afford it. It’s only the fourth inning in this financial debacle. The Fed and Congress are proving useless and, in fact, making things worse by throwing good money after bad.

Wells Fargo is one of the better banks, but with no help from the government, the effect of a deep recession on employment and the consumer’s ability to pay, more subprime and ALT loans going bad, as well as A loans defaulting, due to falling property values (those who put down 10-20% will be walking next) increasing loan to value ratios, Wells Fargo will be in dire straits.

By: Anonymous

Anonymous — Thu, 17 Jul 2008 16:15:00 +0000

Money market rates and yields are very low today and with more bank consolidation, rates and yields will go lower, which will make extend time and challenge to obtain future cash flows. This is essentially a liquidity trap that will take several years to recover from.

By: Andrew Clifford

Andrew Clifford — Thu, 17 Jul 2008 15:40:00 +0000

We keep seeing distressed companies pay dividends even though they desperately need the capital. Keeping the share price propped up ahead of any capital raising is a good theory. More pressing is that directors renumeration (bonuses and share options) are tied to share price. So they are incentivised to act in their own interests, against the interests of the company. Particularly if the company has been run into the ground and the game is almost up.

By: Anonymous

Anonymous — Thu, 17 Jul 2008 14:46:00 +0000

Are you guys maybe too focused on Wells’s Balance Sheet? Even after a $3bn provision (including 1.5bn provision build) they still made almost $2bn. They have pre-tax pre-provision income of $5.6bn (over $20bn annualized). Yes, they do have alot of crappy loans. But they are also still making a crap load of money, even after amortizing all of those crappy loans.

Anyone who thinks this goes to into the “nickles and dimes” is delusional. Buffett has a ton of cash ($40bn+) and he has a long demonstrated love affair with this bank. He’ll buy it all if it gets cheap enough.

By: Hubert

Hubert — Thu, 17 Jul 2008 12:05:00 +0000

2 notes on that "Naked shorting short list":

How come nobody (except David Merkel) notes the irony that some of those 19 institutions are prime brokers which made a shitload of money by circumventing naked short selling rules?

I am not an expert on this and I would welcome arguments on the short covering rush we see now:
Even the people who borrowed the shares they sold short now are in trouble - there is no brokerage guarantee that the shares stay borrowable - and they now face competition from Naked shorts for their shares. Artificially compressed into a few days this is explosive stuff.
I guess Richard Kline is right about the drift down but until option expiration tomorrow or early next week we could see fireworks on the upside thanks to skillfull manipulation.

By: Anonymous

Anonymous — Thu, 17 Jul 2008 11:02:00 +0000

“I don’t see increasing a dividend when earnings are falling as a good move in general.”

Me neither. The market saw it as a strong statement of confidence — and it is. But managements have been mistaken before. COO Howard Atkins implied in a CNBC interview, using roundabout language, that Wells Fargo expected a bottom in housing not too long from now.

Please tell me that Wells Fargo management didn’t grant themselves options with Tuesday’s close as the strike price!

By: Ranger Turtle

Ranger Turtle — Thu, 17 Jul 2008 10:59:00 +0000

Wells Fargo isn’t even getting the protection that other banks are getting on the newly announced SEC Naked Short Seller Protection List!

Goldman is protected but not Wells or Wamu or Wachovia.

By: Richard Kline

Richard Kline — Thu, 17 Jul 2008 10:56:00 +0000

Sooo the major ‘positive’ for Wells in Q2 is that they awarded _themselves_ a 60-day mulligan on booking delinquincies, if I read this. And the only minor positive is that they boosted loss reserves for equity seconds by a measly billion. Well, one wouldn’t want to scare off potential suckers, ahhhhh ‘investors’ during the all important courting season, now would one? Anyone wanting equity in Wells can buy it in six months for nickels and dimes to present face; why buy now, what’s the rush?

On another note, I found the list of No-No Shorts put out by the Wealth Protection Squad at the SEC interesting: it announces in effect the nineteen international major lenders which are by consensus too big to fail. Interesting omissions from that were WaMu, Wachovia, and if I’m remembering HBSC, something I noticed but regarding which Mike Shedlock has popped up a post on as well. We can expect full public bailouts at many of the Sacred Nineteen in time to be at least proposed, but evidently the remainder have been left to the zombies. Nasty bit of triage, this.