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TranceAddict Investors Club @ Marketocracy (pg. 48)
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| Shakka |
| quote: | Originally posted by jerZ07002
I guess in a very technical sense you are correct because apparently the loan is non-recourse. However, the funding was provided to JPM for a period of 28 days on a secured basis. After that period JPM must pay the 30B to the fed or have the fed take possession of the security. I'm not aware that an announcement has been made about the value of the security; however, the fed did state that the security covers the loan. On top of that, JPM consistently deals with the Fed (because it is a commercial bank), and it is simply foolish to think that JPM will default on the loan and have the fed take possession of the security, especially considering the new credit facilities the fed has devised in recent weeks. |
No, it's really quite simple.
http://online.wsj.com/article_print...5705943813.html
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CREDIT CRISIS HITS WALL STREET
There is a silver lining for the Federal Reserve in the unprecedented $30 billion loan it has made to Bear Stearns Cos.: The central bank
As part of Sunday's agreement by J.P. Morgan Chase & Co. to buy Bear, the Fed agreed to "fund up to $30 billion of Bear Stearns's less-liquid assets," J.P. Morgan said Sunday. The funding facilitated the takeover of Bear while eliminating the risk that a different buyer would quickly dump the assets, straining markets that are already in disarray.
Officials told reporters at a briefing Sunday that the Fed was assuming responsibility for the management of the assets. Several people familiar with the matter said the funding is structured so the Fed assumes both the risk of those assets declining in value and the profit if they rise in value.
The composition of those assets hasn't been disclosed, but they are likely to include some of the riskiest of the firm's holdings. Bear Stearns was a major player in the market for risky types of mortgage-backed securities and held large volumes of them, one reason lenders and investors became so skittish about dealing with the firm. As such, the Fed's risk of loss is real.
On the other hand, the assets were valued at Friday's depressed levels, and the funding is overcollateralized, meaning Bear provided more than a dollar's worth of assets for each dollar the Fed lent.
The Fed can choose either to sell the assets on the open market or hold them to maturity. In either case, if the market proves to have been overly pessimistic, the Fed should realize a gain. If the market wasn't pessimistic enough or if the cost of administering and liquidating the loans proves high, it will cost the Fed money.
Any profit or loss ultimately ends up with the taxpayer. That is because the Fed earns interest on its $800 billion portfolio of Treasurys and short-term loans. After covering its expenses it remits the surplus to the Treasury. Last year, that came to $34.4 billion.
While most economists and politicians loathe public bailouts, it isn't uncommon for the federal government to ultimately make money on them.
During the 1995 peso crisis, the Clinton administration offered Mexico $20 billion in loans, with the country's oil revenues as security. The International Monetary Fund offered another $18 billion. Critics condemned the loans as a bailout. In the end, Mexico didn't require the entire amount, and the country's finances recovered. The U.S. ended up making a profit on the interest payments.
The government also turned a profit from the Air Transportation Stabilization Board, an entity set up after the Sept. 11 attacks to support the airline industry. The board ultimately provided a total of $1.56 billion in loan guarantees to six carriers. The government earned just under $350 million from fees and stock sales, according to the Treasury Department. |
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| jerZ07002 |
| quote: | Originally posted by Shakka
Officials told reporters at a briefing Sunday that the Fed was assuming responsibility for the management of the assets. Several people familiar with the matter said the funding is structured so the Fed assumes both the risk of those assets declining in value and the profit if they rise in value. |
that's certainly incomplete information and doesn't tell that much. How much risk are they assuming? How much benefit will the fed receive from asset appreciation? It's certainly isn't 100% because that's not financing, that's called a purchase. By definition the assumption of all the risk and all the benefit means you have ownership of the property. The JPMorgan press release states the funding is for a period of 28 days and secured by the assets. That's a wholly different picture than the wsj article.
| quote: | | New York, March 14, 2008 -- Today, JPMorgan Chase & Co. (NYSE: JPM) announced that, in conjunction with the Federal Reserve Bank of New York, it has agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days. Through its Discount Window, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase. Accordingly, JPMorgan Chase does not believe this transaction exposes its shareholders to any material risk. JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company. |
http://investor.shareholder.com/jpm...aseType=Current
i'm still waiting for the fed to release the details. |
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| Groundhog Boy |
Um, that's what they did on Friday, which is vastly different than they did on Sunday. On Friday, BSC was worth $30, on Sunday, $2. The Fed's backing on Friday still couldn't halt the run on Bear, which made Sunday necessary according to the Fed.
I don't profess to know the most about this buyout, which is what it is, but I can't understand why you're arguing with everyone when you've clearly admitted that this happened when you were out of the loop and you're using outdated sources to back up evidence. This whole thing happened so fast that the Friday articles were completely outdated by Monday morning. If Friday mattered on Monday, Bear's employees would be a lot happier (and a lot wealthier). |
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| jerZ07002 |
| quote: | Originally posted by Groundhog Boy
Um, that's what they did on Friday, which is vastly different than they did on Sunday. On Friday, BSC was worth $30, on Sunday, $2. The Fed's backing on Friday still couldn't halt the run on Bear, which made Sunday necessary according to the Fed.
I don't profess to know the most about this buyout, which is what it is, but I can't understand why you're arguing with everyone when you've clearly admitted that this happened when you were out of the loop and you're using outdated sources to back up evidence. This whole thing happened so fast that the Friday articles were completely outdated by Monday morning. If Friday mattered on Monday, Bear's employees would be a lot happier (and a lot wealthier). |
actually the fed hasn't released the details of the financing (at least i haven't been able to find them). The fed's statement on Sunday March 16th was:
| quote: | | The Board also approved the financing arrangement announced by JPMorgan Chase & Co. and The Bear Stearns Companies Inc. |
the announcement they are talking about is apparently the JPM release on March 14th. |
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| Shakka |
| quote: | Originally posted by jerZ07002
that's certainly incomplete information and doesn't tell that much. How much risk are they assuming? How much benefit will the fed receive from asset appreciation? It's certainly isn't 100% because that's not financing, that's called a purchase. By definition the assumption of all the risk and all the benefit means you have ownership of the property. The JPMorgan press release states the funding is for a period of 28 days and secured by the assets. That's a wholly different picture than the wsj article.
http://investor.shareholder.com/jpm...aseType=Current
i'm still waiting for the fed to release the details. |
I'm not sure why this is being debated. It's pretty straight forward. The Fed essentially bailed out Bear Stearns via a loan fronted through JP Morgan. In order for JP Morgan to do the deal and take on Bear's balance sheet risk, the Fed is assuming the credit risk (and nobody knows how much because much of it is illiquid, hard to trade assets that have no readily available market price, and which is one of the root causes behind the entire credit crunch) associated with those assets. The Fed is basically back-stopping Bear's balance sheet in the event that any of those assets goes bad. Given that the deal was put together in a matter of days, if not hours, it's no surprise that JP Morgan wouldn't just blindly accept the risk associated with such hard to analyze assets. That's it. Case closed. No more debate. Bear got bailed out, but Bear's equity holders did not. |
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| jerZ07002 |
| quote: | Originally posted by Shakka
I'm not sure why this is being debated. It's pretty straight forward. The Fed essentially bailed out Bear Stearns via a loan fronted through JP Morgan. In order for JP Morgan to do the deal and take on Bear's balance sheet risk, the Fed is assuming the credit risk (and nobody knows how much because much of it is illiquid, hard to trade assets that have no readily available market price, and which is one of the root causes behind the entire credit crunch) associated with those assets. The Fed is basically back-stopping Bear's balance sheet in the event that any of those assets goes bad. Given that the deal was put together in a matter of days, if not hours, it's no surprise that JP Morgan wouldn't just blindly accept the risk associated with such hard to analyze assets. That's it. Case closed. No more debate. Bear got bailed out, but Bear's equity holders did not. |
i really wasn't debating with you (if it appeared that way, which it must have because both you and GHB took it that way, that's not what i intended). however, i think the "officials" from that article were being overly simplistic in their characterization of the financing because that's not how financing works - a lender normally benefits from an increase in the value of the collateral insofar as their position is more secured. of course lenders can participate in asset appreciation, but not to the extent of the full appreciation because that would become a purchase (given a main characteristic of property ownership is the capture of the appreciation in the property value). we just don't know how much collateral the fed is getting in return for the loan and that is hugely important because the fed only stands to lose on the deal if (i) JP Morgan doesn't pay back the loan, and (ii) the fed can't recoup the value of the loan by selling the collateral. I was just trying to say that we shouldn't call this a taxpayer bailout because we don't even know if JP will default, and we don't know how much security the fed is taking. |
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| Krypton |
I have run the numbers of the BANKING SECTOR through my intrinsic strength model and here are my results. As you guys know, I have been working on this model for over a year now, and it has changed yet again. Now the intrinsic strength is an average of 3 sets of quantitative models which do fundamental analysis. They are the fundamental strength, the fundamental strength II, and the market grader strength. The two fundamental strength are two algorithms I developed for fundamental analysis and they use more than 100 variables taken from a company's financial statements. The market grader strength is taken from the market grader algorithm @ http://www.marketgrader.com. I have a membership through my broker tradeking.com. All 3 of these algorithms gives me a intrinsic value, which I am working hard to make more and more precise everyday. Without further ado, here are my ratings.
Ticker - Score - Grade - Rating
AVERAGE = 49% SELL
BSC - 38.95% - F - Strong Sell
LEH - 54.38% - D - Sell
BAC - 44.81% - D - Sell
JPM - 62.00% - C - Hold
C - 32.29% - F - Strong Sell
WFC - 61.05% - C - Hold
RY - 54.29% - D - Sell
WB - 46.81% - D - Sell
BK - 62.81% - C - Hold
TD - 61.14% - C - Hold
BNS - 51.43% - D - Sell
STI - 48.33% - D - Sell
KEY - 50.90% - D - Sell
CM - 45.62% - D - Sell
TCB - 54.48% - D - Sell
WM - 46.19% - D - Sell
GS - 69.57% - C - Hold
RF - 47.29% - D - Sell
MS - 30.19% - F - Strong Sell
MER - 23.95% - F - Strong Sell
I have found MER, MS, C, and obviously BSC to be the most vulnerable right now as they are the lowest grade, and the only ones with a strong sell rating. Goldman Sachs is the best I have found so far, as they have managed to bob and weave through the credit storm taking little damage relative to its industry peers. All in all, the banking sector has the flu, and the numbers don't lie. The average score is only 49% for the banking sector. If you are invested in it, just be careful.
To clarify my grading scale...
0.00% - F - Strong Sell
40.00% - D - Sell
60.00% - C - Hold
70.00% - B - Buy
85.00% - A - Strong Buy |
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| jerZ07002 |
| quote: | Originally posted by Krypton
I have run the numbers of the BANKING SECTOR through my intrinsic strength model and here are my results. As you guys know, I have been working on this model for over a year now, and it has changed yet again. Now the intrinsic strength is an average of 3 sets of quantitative models which do fundamental analysis. They are the fundamental strength, the fundamental strength II, and the market grader strength. The two fundamental strength are two algorithms I developed for fundamental analysis and they use more than 100 variables taken from a company's financial statements. The market grader strength is taken from the market grader algorithm @ http://www.marketgrader.com. I have a membership through my broker tradeking.com. All 3 of these algorithms gives me a intrinsic value, which I am working hard to make more and more precise everyday. Without further ado, here are my ratings.
Ticker - Score - Grade - Rating
AVERAGE = 49% SELL
BSC - 38.95% - F - Strong Sell
LEH - 54.38% - D - Sell
BAC - 44.81% - D - Sell
JPM - 62.00% - C - Hold
C - 32.29% - F - Strong Sell
WFC - 61.05% - C - Hold
RY - 54.29% - D - Sell
WB - 46.81% - D - Sell
BK - 62.81% - C - Hold
TD - 61.14% - C - Hold
BNS - 51.43% - D - Sell
STI - 48.33% - D - Sell
KEY - 50.90% - D - Sell
CM - 45.62% - D - Sell
TCB - 54.48% - D - Sell
WM - 46.19% - D - Sell
GS - 69.57% - C - Hold
RF - 47.29% - D - Sell
MS - 30.19% - F - Strong Sell
MER - 23.95% - F - Strong Sell
I have found MER, MS, C, and obviously BSC to be the most vulnerable right now as they are the lowest grade, and the only ones with a strong sell rating. Goldman Sachs is the best I have found so far, as they have managed to bob and weave through the credit storm taking little damage relative to its industry peers. All in all, the banking sector has the flu, and the numbers don't lie. The average score is only 49% for the banking sector. If you are invested in it, just be careful.
To clarify my grading scale...
0.00% - F - Strong Sell
40.00% - D - Sell
60.00% - C - Hold
70.00% - B - Buy
85.00% - A - Strong Buy |
what is your investment horizon? i would be more than willing to throw down a few months salary that this is a pretty decent time to invest in some of these financials if you have a long term horizon (if i had no school loans to pay off). Much of the losses these companies are taking are accounting losses, which aren't realized yet and the losses may never materialize. |
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| Krypton |
| quote: | Originally posted by jerZ07002
what is your investment horizon? i would be more than willing to throw down a few months salary that this is a pretty decent time to invest in some of these financials if you have a long term horizon (if i had no school loans to pay off). Much of the losses these companies are taking are accounting losses, which aren't realized yet and the losses may never materialize. |
I have two investment horizons depending on my point of view:
1. Quantitative - My investment horizon is 1 year at the most. This is because it very difficult to predict the future, even with all the data at my disposal.
2. Qualitatively - My investment horizon is 5, 10, 20 years or more. After making a quantitative analysis, then I make a qualitative analysis, and then decide whether the investment is a good long-term investment.
I would not buy any banking stocks with my money at this junction. Goldman Sachs, according to my calculations is the best quality banking stock, and is almost a buy, but not quite yet. I would hold off. But it's your money, my opinion..;) |
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| Krypton |
It's that time again guys! :wtf: :wtf: :wtf:
Give me your top 5 picks, and I will do a FULL fundamental analysis on them with my intrinsic strength model. I will also run 1 target price. Let us see who panned the best gold nuggets out of the river...
Rules:
1. 5 stock picks per person
2. 1 target price per person |
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| Krypton |
Here is my analysis on my favorite sector...Shipping, especially dry-bulk shipping. The average intrinsic strength is 67% which is a HOLD rating on the entire sector. This sector is the highest rated sector I have so far analyzed. You'll find great fundamentals and high value here. This list is ranked in highest to lowest. Use it wisely...
Stock - Intrinsic Strength - Grade - Rating
EXM - 93.74% - A - Strong Buy
NM - 89.86% - A - Strong Buy
DRYS - 86.10% - A - Strong Buy
TBSI - 84.38% - B - Buy
ESEA - 83.39% - B - Buy
FREE - 82.24% - B - Buy
NMM - 81.71% - B - Buy
DSX - 81.68% - B - Buy
TRMD - 80.23% - B - Buy
FRO - 78.29% - B - Buy
TNP - 76.76% - B - Buy
CKH - 76.71% - B - Buy
TNK - 74.05% - B - Buy
DAC - 73.98% - B - Buy
GASS - 70.48% - B - Buy
NAT - 68.48% - C - Hold
KSP - 64.10% - C - Hold
GLNG - 63.57% - C - Hold
HRZ - 59.05% - D - Sell
ALEX - 59.02% - D - Sell
QMAR - 58.81% - D - Sell
ATB - 57.93% - D - Sell
EGLE - 57.72% - D - Sell
DHT - 56.54% - D - Sell
PRGN - 51.52% - D - Sell
BHO - 50.14% - D - Sell
TMM - 47.81% - D - Sell
SSW - 45.48% - D - Sell
TK - 40.86% - D - Sell
TGP - 38.00% - F - Strong Sell
TRBR - 30.14% - F - Strong Sell
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| quote: | It's that time again guys!
Give me your top 5 picks, and I will do a FULL fundamental analysis on them with my intrinsic strength model. I will also run 1 target price. Let us see who panned the best gold nuggets out of the river...
Rules:
1. 5 stock picks per person
2. 1 target price per person |
Anybody? I'm about to be done... |
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| Shakka |
| Sure. Just for kicks, what does your magic box tell you to do with CBRL, ZLC, JPM or DISCA just to throw a few out there. I don't care about target prices--it's a moving target. |
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