crazy_ate Posted August 18, 2007 Report Share Posted August 18, 2007 Watch for buying opportunities. Bill Miller Chairman and chief investment officer, Legg Mason Capital Management These sorts of things are what's known to the academics as "endogenous to the system"--that is to say, they're normal. They happen usually every three to five years. So we had a freezing up of the market for corporate credit in the summer of '02. We had an equity bubble just before that. In '98 we had Long-Term Capital. In '94 we had a mortgage collapse like we're having right now. In 1990 we had an S&L collapse. In '87 we had a stock market collapse. These things flow through the system, and they're part of the system. I saw one quant quoted over the weekend saying, "Stuff that's not supposed to happen once in 10,000 years happened three days in a row in August." Well, I would think that you would learn in Quant 101 that the market is not what's known as normally distributed. I'm not sure where he was when all these things happened every three or five years. I think these quant models are structurally flawed and tend to exacerbate this stuff. But these events represent opportunities. When markets get locked up like this, it's virtually always the case that you'll have opportunities if you have liquidity. Instead of worrying how bad it's going to get, I think people should be thinking about where the opportunities might be. The NYSE financial index is probably the best barometer of what's to come. The financials tend to be a very good indicator of where the market's going. They tend to lead the market because they're the lubrication for the economy. So I think the financial index will tell you if this thing is over, and so far it's telling you it's not over. It's still falling. But just as financials lead on the downside, they will lead on the upside. Linkster ---------------------------- I................uh.................agree Link to comment Share on other sites More sharing options...
wndysrf Posted August 18, 2007 Report Share Posted August 18, 2007 Looks like I got shaken out the day before the biggest, longest, Needle Bottom in history. No doubt, the market knows exactly how far to push the players out at the worst possible time. But that's OK, better safe than sorry. I'll be waiting for the market to climb back to the 200-day then I'll lay on some shorts and wait for the retest or lower lows. In the meantime, work at the bank has completely and totally exploded. The CMBS has been totally vaporized. Ergo, all deal flow on apartment building loans and commercial industrial loans has flooded back into the banks. I'm working on 11 deals now, all landed on my desk last week. Apartments are the really hot ticket. Rents here in L.A. are skyrocketing, and there is a huge surge to rehab older buildings, kick out old tenants, and jack the rents up bigtime. There are still many properties here which are way under rented. Our pricing is 200 b.p. over the 5 year CMT, which means we are now offering borrowers 5 year fixed rates at 6.3%. At 6.3%, these apartment buildings turn into cash flow machines, especially for those who have big 1031 exchange money to put down. Now that short term rates are also collapsing, we have dramatically lowered our money market and CD rates, and I bet we will get a flood of new cash rolling in the door as these clowns chasing the 5% money market yields at Countrywide and other esoteric money management firms will flee to the soundest and safest banks like ours. And it shows, as our stock has taken off...... And some of the strongest banks here in California like Wells Fargo have gone totally ballistic. Looks like there is going to be a huge cleansing and shaking out of lenders, which will be good for those of us banks who have clean portfolios. We are hiring 3 new business development officers next week, 1 girl from Wamu, and 2 others from Indy Mac. Needless to say, I'm going to be extremely busy, probably little time to trade. My plan is to keep it simple and trade some ETF's for some easy singles, no time to watch the tape 24/7 trying to hit home runs. Link to comment Share on other sites More sharing options...
wndysrf Posted August 18, 2007 Report Share Posted August 18, 2007 Meanwhile this thing keeps climbing into Outer Space, and the Summation Index is making all-time record lows. I suppose this trend can continue indefinitely..... Link to comment Share on other sites More sharing options...
wndysrf Posted August 18, 2007 Report Share Posted August 18, 2007 I listened to BobBrinker on the way home from the track. No doubt, that guy is pretty confident. Lots of panicked callers today. He's not very worried. He issued another in between newsletter "Special Bulletin" on Thursday night, citing another major buying opportunity. Only the third one issued since the March 2003 lows. The last one was just a few weeks ago, when the market got shanked the first time. I'll be ready to go long or short, either way. I just got the feeling that I got taken out of my longs at or near a major bottom. But at least my 401(k) plan remains fully invested. Link to comment Share on other sites More sharing options...
crazy_ate Posted August 18, 2007 Report Share Posted August 18, 2007 Now that short term rates are also collapsing, we have dramatically lowered our money market and CD rates, and I bet we will get a flood of new cash rolling in the door as these clowns chasing the 5% money market yields at Countrywide and other esoteric money management firms will flee to the soundest and safest banks like ours. 601194[/snapback] Exactly right......that's why I moved all my MMF $ and high-yield savings $ in so-so outfits (IndyMac, FNBO, Eloan, etc) into CD's (from more trustworthy outfits, HSBC, BofA, Citi, and local banks-- where I can go knock on the door if I have to, etc) at between 5.20 - 5.45 % laddered 6,9,12,18 months. Same thing for IRA, moved the cash portion from the Fidelity Cash Reserve (which is chock full of garbage) into CD's, also in a ladder -- keeping each CD at no more than $25,000 to $50,000 depending on the issuer. Took me ALL week to git-er done.....little clean-up next week and dat's dat......time to make some popcorn and watch the fireworks Link to comment Share on other sites More sharing options...
Schonthaler Posted August 18, 2007 Report Share Posted August 18, 2007 I listened to BobBrinker on the way home from the track. No doubt, that guy is pretty confident. Lots of panicked callers today. He's not very worried. He issued another in between newsletter "Special Bulletin" on Thursday night, citing another major buying opportunity. Only the third one issued since the March 2003 lows. The last one was just a few weeks ago, when the market got shanked the first time. I'll be ready to go long or short, either way. I just got the feeling that I got taken out of my longs at or near a major bottom. But at least my 401(k) plan remains fully invested. 601196[/snapback] ******************** Bob, did get a lot of odd ball callers. Some were pushing back on Bob. They were not the usual suck-up callers with soft ball questions. Link to comment Share on other sites More sharing options...
crazy_ate Posted August 18, 2007 Report Share Posted August 18, 2007 Apartments are the really hot ticket. Rents here in L.A. are skyrocketing, and there is a huge surge to rehab older buildings, kick out old tenants, and jack the rents up bigtime. There are still many properties here which are way under rented. 601194[/snapback] That's why I have a position in this.....in at $9 and change......8.7% yield Link to comment Share on other sites More sharing options...
sandy beach Posted August 18, 2007 Report Share Posted August 18, 2007 Looks like I got shaken out the day before the biggest, longest, Needle Bottom in history. No doubt, the market knows exactly how far to push the players out at the worst possible time. But that's OK, better safe than sorry. I'll be waiting for the market to climb back to the 200-day then I'll lay on some shorts and wait for the retest or lower lows. In the meantime, work at the bank has completely and totally exploded. The CMBS has been totally vaporized. Ergo, all deal flow on apartment building loans and commercial industrial loans has flooded back into the banks. I'm working on 11 deals now, all landed on my desk last week. Apartments are the really hot ticket. Rents here in L.A. are skyrocketing, and there is a huge surge to rehab older buildings, kick out old tenants, and jack the rents up bigtime. There are still many properties here which are way under rented. Our pricing is 200 b.p. over the 5 year CMT, which means we are now offering borrowers 5 year fixed rates at 6.3%. At 6.3%, these apartment buildings turn into cash flow machines, especially for those who have big 1031 exchange money to put down. Now that short term rates are also collapsing, we have dramatically lowered our money market and CD rates, and I bet we will get a flood of new cash rolling in the door as these clowns chasing the 5% money market yields at Countrywide and other esoteric money management firms will flee to the soundest and safest banks like ours. And it shows, as our stock has taken off...... And some of the strongest banks here in California like Wells Fargo have gone totally ballistic. Looks like there is going to be a huge cleansing and shaking out of lenders, which will be good for those of us banks who have clean portfolios. We are hiring 3 new business development officers next week, 1 girl from Wamu, and 2 others from Indy Mac. Needless to say, I'm going to be extremely busy, probably little time to trade. My plan is to keep it simple and trade some ETF's for some easy singles, no time to watch the tape 24/7 trying to hit home runs. 601194[/snapback] Really awesome update! "At 6.3%, these apartment buildings turn into cash flow machines" I'd love it, if you have the time, if you would walk us laymen through the numbers for a small investor wanting to buy into a "cash flow machine" and what he/she would see in cash flow in L.A. on his/her investment. Would you invest? Link to comment Share on other sites More sharing options...
sandy beach Posted August 19, 2007 Report Share Posted August 19, 2007 I listened to BobBrinker on the way home from the track. No doubt, that guy is pretty confident. Lots of panicked callers today. He's not very worried. He issued another in between newsletter "Special Bulletin" on Thursday night, citing another major buying opportunity. Only the third one issued since the March 2003 lows. The last one was just a few weeks ago, when the market got shanked the first time. I'll be ready to go long or short, either way. I just got the feeling that I got taken out of my longs at or near a major bottom. But at least my 401(k) plan remains fully invested. 601196[/snapback] ******************** Bob, did get a lot of odd ball callers. Some were pushing back on Bob. They were not the usual suck-up callers with soft ball questions. 601198[/snapback] I usually just listen to his Saturday monolog at 1:05PM - 1:20PM PDT and sometimes the interviews at the end of the show. But I left my iPOD at home and took the AM radio on my run today up in the S.F. East Bay Hills and listened to his show. It was a really odd show indeed. He had a couple of guys calling in about all the drugs and alcohol being done by mortgage brokers on the job and the about the deceit going on. Not your typical "Bob, should I buy a GNMA @ Vangauard?" kind of show. Link to comment Share on other sites More sharing options...
LeeWhee Posted August 19, 2007 Report Share Posted August 19, 2007 Watch for buying opportunities. Bill Miller Chairman and chief investment officer, Legg Mason Capital Management These sorts of things are what's known to the academics as "endogenous to the system"--that is to say, they're normal. They happen usually every three to five years. So we had a freezing up of the market for corporate credit in the summer of '02. We had an equity bubble just before that. In '98 we had Long-Term Capital. In '94 we had a mortgage collapse like we're having right now. In 1990 we had an S&L collapse. In '87 we had a stock market collapse. These things flow through the system, and they're part of the system. I saw one quant quoted over the weekend saying, "Stuff that's not supposed to happen once in 10,000 years happened three days in a row in August." Well, I would think that you would learn in Quant 101 that the market is not what's known as normally distributed. I'm not sure where he was when all these things happened every three or five years. I think these quant models are structurally flawed and tend to exacerbate this stuff. But these events represent opportunities. When markets get locked up like this, it's virtually always the case that you'll have opportunities if you have liquidity. Instead of worrying how bad it's going to get, I think people should be thinking about where the opportunities might be. The NYSE financial index is probably the best barometer of what's to come. The financials tend to be a very good indicator of where the market's going. They tend to lead the market because they're the lubrication for the economy. So I think the financial index will tell you if this thing is over, and so far it's telling you it's not over. It's still falling. But just as financials lead on the downside, they will lead on the upside. Linkster ---------------------------- I................uh.................agree 601193[/snapback] The financials BOTTOMED in March 2000. They didn't exactly lead folks out of the wilderness. If you were keying on the financials, you got your ass handed to you. The financials also bottomed in May 2004. Great time to buy? No, not really. The rest of the market kept making lower lows for three months. The Sow made lower lows for five months. I don't know why, but the financials have a funny habit of finding a bottom before the rest of the market. You can come up with your own thesis as to why. But if you're waiting for the financials to give you the high-sign to "buy, buy, buy", it has often been a head-fake par excellance. Funny that a guy who's been around as long as Billy Miller wouldn't know that. Link to comment Share on other sites More sharing options...
LeeWhee Posted August 19, 2007 Report Share Posted August 19, 2007 Looks like I got shaken out the day before the biggest, longest, Needle Bottom in history. No doubt, the market knows exactly how far to push the players out at the worst possible time. But that's OK, better safe than sorry.? I'll be waiting for the market to climb back to the 200-day then I'll lay on some shorts and wait for the retest or lower lows. In the meantime, work at the bank has completely and totally exploded. The CMBS has been totally vaporized.? Ergo, all deal flow on apartment building loans and commercial industrial loans has flooded back into the banks. I'm working on 11 deals now, all landed on my desk last week. Apartments are the really hot ticket. Rents here in L.A. are skyrocketing, and there is a huge surge to rehab older buildings, kick out old tenants, and jack the rents up bigtime. There are still many properties here which are way under rented. Our pricing is 200 b.p. over the 5 year CMT, which means we are now offering borrowers 5 year fixed rates at 6.3%.? At 6.3%, these apartment buildings turn into cash flow machines, especially for those who have big 1031 exchange money to put down. Now that short term rates are also collapsing, we have dramatically lowered our money market and CD rates, and I bet we will get a flood of new cash rolling in the door as these clowns chasing the 5% money market yields at Countrywide and other esoteric money management firms will flee to the soundest and safest banks like ours. And it shows, as our stock has taken off...... And some of the strongest banks here in California like Wells Fargo have gone totally ballistic. Looks like there is going to be a huge cleansing and shaking out of lenders, which will be good for those of us banks who have clean portfolios. We are hiring 3 new business development officers next week, 1 girl from Wamu, and 2 others from Indy Mac. Needless to say, I'm going to be extremely busy, probably little time to trade. My plan is to keep it simple and trade some ETF's for some easy singles, no time to watch the tape 24/7 trying to hit home runs. 601194[/snapback] Really awesome update! "At 6.3%, these apartment buildings turn into cash flow machines" I'd love it, if you have the time, if you would walk us laymen through the numbers for a small investor wanting to buy into a "cash flow machine" and what he/she would see in cash flow in L.A. on his/her investment. Would you invest? 601200[/snapback] Los Angeles is rent-controlled. You can't "kick out old tenants". It's the same way here in most of the major cities in the Bay Area (San Jose, San Francisco, Oakland, Berkeley, etc). So the upside is capped, although in most jurisdictions you can raise rent to "market levels" when tenants leave voluntarily (or die.) There might be opportunities in other SoCal cities (not L.A. proper) which aren't rent-controlled. We've unloaded 75% of our Bay Area apt holdings over the past two years in rent-controlled areas. The prices finally got so high that no one buying into these markets will be able to even generate the risk-free return for years to come. It might be different in SoCal. Link to comment Share on other sites More sharing options...
shorty Posted August 19, 2007 Report Share Posted August 19, 2007 Billy in trouble? Link to comment Share on other sites More sharing options...
shorty Posted August 19, 2007 Report Share Posted August 19, 2007 300 offices shut down overnight....is that a lot? Soon-to-be-Bankrupt Mrotgouge Borkery First Manus Lays Off 99 Percent of Its Nearly 6,000 Shysters, Closes More Than 300 Offices Link to comment Share on other sites More sharing options...
Schonthaler Posted August 19, 2007 Report Share Posted August 19, 2007 Link to Bloomberg Article Caroline Baum is Richard Russell's favorite columnist. Great article on the Great Depression impression made on Benny B. The fact that Caroline is talking about the Great Depression and the failures that the FED played to magnify the depression is very telling. Caroline is saying that Ben will not let it happen again. Unfortunately he may not be able to stop it. Link to comment Share on other sites More sharing options...
linrom Posted August 19, 2007 Report Share Posted August 19, 2007 This just in from the ........You Ain't Seen Nothing Yet Dept. How are the banks gonna avoid the bullet below? It's a little long, so I have only posted some of it.....but the concepts are well worth understanding. Bottomline is that if the firms that hold all this MBS, CDO, CLO, etc. crap have to mark it to market for 3Q earnings -- it's gonna be bad, real bad. What are they gonna do? Classify everthing as "Held-to-maturity", or just use boolsh!t "mark-to-model" - Securities held-for-trading are reported at fair value. These are securities bought and held for the purpose of selling them in the short run. Unrealized gains and losses are included in earnings. - Held-to-maturity securities are reported at amortized cost. These are debt securities that a company has the positive intent and ability to hold to maturity. - Available-for-sale securities are reported at fair value. These are securities not classified in either of the above. Unrealized gains or losses are excluded from earnings and are reported as a separate component of shareholders? equity. Full Text Here <--------- "A highly debated issue in the banking industry today, and one supported by the Securities and Exchange Commission (SEC), is centered around new accounting regulations that change the accounting valuation of securities for financial institutions. The most significant of the new Financial Accounting Standards Board (FASB) statements are FASB Statement No. 107, Disclosures About Fair Value of Financial Instruments, and FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities." Banks were required to use market values for investment securities portfolios prior to 1938. This practice was abandoned because regulators became extremely concerned with mark-to-market's negative effect on banks' financial performance and investment decisions.(3) For instance, the argument at that time was "that this accounting standard would encourage banks to focus on long-run 'intrinsic' values and to eschew the pursuit of speculative market gains."(4) Market value accounting has been debated by financial statement users as well as the accounting profession since the 1970's and 1980's. One reason for the push toward market-value accounting was after the federal government had to take over several insolvent financial institutions which had portfolios that had sunk below stated book values. The unfortunate consequence of using historical cost accounting was well demonstrated after the savings and loan debacle. To say that mark-to-market accounting is unpopular would be an understatement. Many argue that market value accounting is imprecise and does not provide comparable information. One reason market value accounting is considered inappropriate is argued by historical cost advocates who believe that mark-to-market accounting methods are irrelevant because they represent a liquidation value that in all likelihood will not be realized. Thomas Jones, Executive Vice President at Citibank, stated that "mark-to-market is a victory of liquidation accounting over going-concern accounting and doesn't necessarily reflect the underlying purpose of the assets. So I make the case that mark-to-market accounting is bad accounting, bad policy and bad precedent."(10) It is also argued that the SEC has taken away the financial institutions' ability to take the profits of the securities when it is most useful or convenient for the institution, especially when their earnings need a little increase. 601173[/snapback] Very interesting and certainly timely with the earnings coming up in October. However, the article is from 1995, so there are no new FASBs that deal with structured finance debt since FASB 115 and FASB 107. I suppose that it will continue to be up to financials to account for its debt as either mark-to-model; mark-to-market or cost basis. It is going to be risky to continue to hold bankers through the end of August. Maybe a good short opportunity on KRE and RKH after this rally. Link to comment Share on other sites More sharing options...
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