How bad are things at Wachovia?
Submitted by
CalculatedRisk on Tue, 06/24/2008 - 8:08pm (45 comments)
in
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 20 members and 145 guests online.
Recent Recommendations
Isn't that a bit like hiring a pickpocket to be your tailor?
i'd like to hear some predictions from the forecasters here...
What big banks merge and with whom...and who goes bust?
I would say a lot of posters here could probably review their loan portfolio for a lot less cost. Then I realized that they most likely hired Goldman Sachs to hide, sell and play down the losses.
ew-home purchases declined to a 512,000 annual rate, according to the median estimate of 73 forecasts in a Bloomberg News survey, from a 526,000 pace in April. A separate report may show demand for durable goods stalled last month.
Falling property values, rising mortgage rates and stricter borrowing rules may keep potential buyers out of the market for much of 2008. Even as declines in housing hurt growth, Federal Reserve policy makers are forecast to keep the benchmark interest rate unchanged today on concern Americans are losing confidence that inflation will stabilize.
anyone got any short ideas.
I'm all back in cash now and the internets are still full of long ideas, but that doesn't fit my mindset.
tickers, basically. Not ETFs or indexes.
eg: I've been wanting to short MGM or WYNN for a while now but all it does is go down. I can't bring myself to pay the ask for a put. WM and Wachovia were lovely targets but they're so much in the dumps the slightest +ve rumor pops them 20% up.
I know this is late and outdated, but fits in with some posts and charts today:
The U.S. seems to differ from the rest of the world in how it computes its inflation rate in three primary ways: 1) hedonic quality adjustments, 2) calculations of housing costs via owners equivalent rent, and 3) geometric weighting/product substitution. The changes in all three areas have favored lower U.S. inflation and have taken place over the past 25 years, the first occurring in 1983 with the BLS decision to modify the cost of housing. It was claimed that a measure based on what an owner might get for renting his house would more accurately reflect the real world a dubious assumption belied by the experience of the past 10 years during which the average cost of homes has appreciated at 3x the annual pace of the substituted owners equivalent rent (OER), and which would have raised the total CPI by approximately 1% annually if the switch had not been made.
PIMCO - IO June 2008
Since I'm the only one here beating a dead horse, I do like what Gross said in his summary:
He suggests buying: commodity-based assets as well as foreign equities whose P/Es are better grounded with local CPI and nominal bond yield comparisons should be excellent candidates. 4) These assets should in turn be denominated in currencies that demonstrate authentic real growth and inflation rates, that while high, at least are credible. 5) Developing, BRIC-like economies are obvious choices for investment dollars.
I remember when they bought Golden West in '05.
At the time, it was clear to anybody who was paying attention to the quality of the loans at Golden West (like every Housing Bubble poster at every Housing Bubble site on the internet) that Wachovia was committing suicide with that one purchase.
These people are too stupid and too irresponsible to have any power at all in our economy.
It's like this we're letting this economy be run by a bunch of New Age "just believe and it will be so" true believers - people who will never ever take an objective look at facts and act accordingly.
at least they didn't hire lehma
According to estimates from Lehman Brothers, total commodity-based assets have mushroomed over the past two years. These assets grew from US$70 billion in January 2006 to US$235 billion through mid-April 2008. And in 2000, commodity indices barely managed US$20 billion - that's a spectacular 10-fold rise in less than a decade!
Maybe they are hiring GS's influence with Hank Paulson?
Justin - I would not short any of the financials right now, because there is too great a chance that any failures will be bought before they can fail. I think the time to short financials has passed.
Maybe tech?
Long gold seems to be a short bet on everything else, especially the US dollar.
The commodity market has seen its share of manipulation scandals allegations that executives at J. R. Simplot had tried to fix the Maine potato market in 1976, allegations that the Hunt family of Texas had manipulated the silver market in 1979 and, just last year, BPs settlement of federal charges that it had manipulated propane prices.
Certainly, there have been unusual price spikes in commodity markets, like the short, sharp roller-coaster ride that hit the cotton market in early March and the more recent gyrations in the oil markets that have alarmed some market participants.
While commodity market regulators regularly look for manipulative behavior, the C.F.T.C. took the unusual step in recent weeks of publicly confirming that it was conducting investigations looking for illegal activity in both the energy and agricultural markets.
Concern about manipulation is not misplaced, said Patrick Westhoff, an economist at the University of Missouris Food and Agricultural Policy Research Institute. But speculation doesnt equal manipulation, and I am concerned that theres been a confusion between the two concepts.
The stage of the speculation that is alarming Washington is the commodity futures market, which trades a financial derivative called a futures contract, an agreement for the future delivery of a fixed amount of a commodity at a certain price. The prices at which these futures contracts change hands are the benchmark for pricing commodities around the world.
Wachovia is probably going close to zero, just like Downey Savings. The payment option ARM will be vilified as the worst mortgage product devised by man. The thing I find most amusing is that Herb Sandler is still defending his sale of Golden West Financial as being is the long-term interest of Wachovia's shareholders and not the root problem of its business. I think he is delusional.
So if a CEO makes an aquisition that everyone tells him not to make and that aquisition runs the company into bankruptcy in less than 4 years, how much of a severance pachage should said CEO get? 50, 100, 200, 600 million dollars.
If you feel sorry for Wachovia please send your checks directly to them. Everyone should be emailing Ben Bernanke not to use our tax dollars for any sort of Wachovia bailout.
Federal Reserve Board: Contact Us
No - he's not delusional. It isn't just GW, it was Wachovia's policies for lending during said boom.
As a double homeowner with little income but good credit, I got thrown Helocs and loans from Wachovia, Wamu and Countrywide whenever I would say yes. The loan officer at Wamu doubled my Heloc when I walked in the door without even asking. And today, I got a "plastic fantastic" from Wamu - there term not mine. Its a mastercard on a Heloc for a house I sold in 2005. It is very tempting to see if the card will actually work...
Just go short the indexs, but if you don't like puts, think about Pro Funds shorts and double shorts for the indexes. These are usually in an IRA so they may not be suitable, but they have no time decay either. There are some troubling matters like who is on the other side of the bet thought. google it, and read about it. I just see the indexes circling the drain for a long time.
I've been wanting to short MGM or WYNN for a while now but all it does is go down.
Er, and the problem is what exactly?
SRN...
thought you were a straight shooter until you mentioned BRIC. All but the B are in serious mid term trouble...R can you say peak oil, our fields are in decline. I, gas subs are killing us, C rampant inflation will eventually win as it always does. I don't know enough about B to comment.
RAT...your name not mine. GB went on a spending spree but he did so with bipartisan support.
I am disappointed with the current dem approach that we shouldn't drill on coast or anwr because it will take to long to come online. we seem to believe that the tech world will bail us out in 5 years. I ask what if it takes 20? if that's the case wouldn't it be prudent to put another 1 to 2 million bpd in "possible" production in process now as a safeguard?
its a problem if it drops every day because my limit order never gets filled. I just prefer to buy when it pops up.
This was posted here a month or two ago, looks like its time for a repost.
this link
Wachovia's buy of Golden West turned into a golden shower, especially for their shareholders.
What's Goldman know about loans?
Why not hire UBS or Merrill? At least those guys know what a duck looks like.
The big rumor I'm hearing from WB employees is JPMorgan at $35. RBC is also in the running.
Why would JPM pay 35 dollars for this loser if they only paid 10 for BSC???
anyone got any short ideas...
The best shorts are probably already used up. Why not keep your cash and be ready to pick up the bargains that will appear in the next 12 months or so. There will be lots of financials selling for next to nothing, European financials especially attractive since they don't run on the dollar. Wait until everybody is in despair and thinks things will never improve. You need to be calm and wait.
"anyone got any short ideas"
Tough trade to be short here. Been covering shorts for three days now.
Dow is extremely oversold, S&P somewhat. Naz barely at all.
Anything could bounce us 600 Dow sticks higher right here.
I'm old-fashioned in that I like to go short things that are high and go long things that are low.
Fertilizer/ag showing some toppy behavior. Big number bumps yesterday didn't move the needle.
I've never made a dime playing amateur fed governor, but the basic materials stuff could get hammered on a hawkish statement.
I have a modest (2% of the trading account) hedged bet on this outcome.
"Walk-over-yah" is insane.
Just last week, they were STILL advertising "pick a payment" loans down here in "Bedlam by the Bay" (Maryland.) The happy gal in the ad described how she can just make minimum payments on her house as if it is a credit card, etc. Oh, but sometimes you can make more than the minimum payment... right, as if that ever happens! I wonder if the idiots at Wachovia considered what happens when everyone just makes the minimum payment, and then, when the loans resets, they make the ultimate in "pick a payment" choices and just walk away?
Insane... just completely insane!
I did business with the real Wachovia back in the 60s before they were bought out.They were the best bank I ever placed a loan with.
Banks = Dawn of the Dead
Is it time to start thinking about changing banks?
Wachovia is in a WORLD of trouble.
Wachovia's troubles exceed the World PAP. They have a host of issues with the performance of their own Alt-A originations and the dreck originated via Vertice. Don't forget their troubles with CRE and CDO's.
Then they have PR problems: Fucking over veterans, bilking the elderly and drug money laundering.
Throw in a complete lack of management/financial controls.
Goldman coming in signals Wach's complete and utter lack of understanding of their business.
Let the firesale begi
Wachovia, WAMU, National City, or TBD? A prediction--the Feds will permit an 'unassisted' bank failure to occur at a major regional institution that does not have a capital markets profile such that counterparty risk would raise issues of systemic failure.
If Bear Stearns was a measure of 'how small is too big to fail', I think a major regional will soon let us know how big you can be and still be small enough to fail. Of course, the logistics of the thing will have to worked out, but I guess that, in terms of triage, the next team sent out in one of these situations will consists of morticians, not EMTs.
"The best shorts are probably already used up."
We've got at least another 5-20 suckers rallies to go before index shorts get used up!
What? Wacho's bean counters can't count beans any more?
Why does Waho's need those expensive GS homeboys to count their own beans?
Bear was bought at 11 a share because it would have had to file BK; it was a bargain at the price, but couldn't pay its obligations or fulfill its counterparty responsibilities. It's an investment bank; if its assets are worth nothing, it's worth nothing because it has no actual business.
Good riddance, Bear was a bad apple anyway.
Wachovia is an actual bank, with branches, ATM's, etc. It has a revenue stream that doesn't depend on financial markets whatsoever, let alone mortgages. It is actually worth money, although it should be said that the liabilities it has taken on are extremely worrisome.
People talk about the Bear issue as if it was a taxpayer bailout; it wasn't. Another financial institution bought them without due diligence based on some securities deposited with the FRB that the FRB guaranteed. In all likelihood, Bear could have survived a BK reorganization with a positive value, but the Treasury and FRB told them they wouldn't let it happen.
Basically, the FRB and Paulsen told Bear "Sell out or we'll make sure you aren't worth more than 11 a share."
Goldman? What, they couldn't get someone more trustworthy, like Jack The Ripper?
GS are swine.
I think Wachovia has a For Sale sign out, who will buy them, well that's to be decided -- with input from Goldman of course. Wachovia has 1) no CEO and 2) Goldman poking around during DD on loan portfolios and god know what else.
Tommorow 6/26 is shaping up to be a rather ominous day if you are an employee of the former World Savings operation. Massive carnage coming down.
Bill Gross:
Great commentary, but I just can't get myself into investing in the commodities bubble. I think the third phase of commodities has already happened, ordinary investors jumped in long ago.
International value looks like a great buy now, with P/E of about 10. So does small-cap value. I agree with you that U.S. bonds have a negative yield, and will be sure to BRIC-up my portfolio eventually.
don't get it. WB is trying to figure out what did they buy into 3 years ago?
All the comments are great and insightful, they really are. But the flat bottom line is very very simple and doesn't require a MBA in business, Doctorates or anything of the sort. It requires one using their own mind to see things exactly for what they are. There is entirely too much 1) Greed 2)Corruption 3)Old Thinkers 4)Too many trying to sound more intelligent and articulate than others and not "sharing" knowledge to resolve real problems for the benefit of this country. This financial crisis did not happen yesterday. Its been happening behind closed doors. But since everyone is on a different agenda or their own agenda even, and not on the same page so to speak, nothing gets solved, the buckets been dipped in the well far too many times and the water is starting to evaporate. People may view this present crisis as "temporary" or even view it with some sort of humorous cockiness and arrogance, but the fact remains that this housing crisis, oil, and even the food crisis which seemed to have been shoved aside, is affecting real people and causing real deaths and there needs to be some iron-clad solutions.