Bbt has 3 excellent recent presentations on their website:
1. 10/26/11 - Outlook for 4th Qtr
2. 11/1/11 - Bank of Atlantic
3. 11/3/11 - Bank Analyst Presentation
I recommend all investors read these presentations.
Interesting to contrast these presentations to the opinion of Inlet Boater who says we're likely going into a recession and bbt is going to tumble. Or Nobankerplease who says that Bbt is hoarding money and not making loans. Or the vast majority of the stock analysts like the neanderthal man over at Credit Suisse who is forecasting very little improvement in credit costs in 2012 vs. 2011.
Who do you trust?
Norm claims I said BBT stock would tumble. Here is what I really said: "My point is - BBT can not be expected to perform well during a recession". In other words history teaches us financials (including BBT) will probably under perform during a recession.
I have been saying for months you needed to use caution regarding investments in BBT. If you bought above $25 last spring how is your investment working out for you? I have not bashed management or the company, but merely expressed my concern in regards to performance in the prevailing economic environment.
Norm has over estimated the recovery in BBT earnings for months. Go back thru past mesasages and check it out for yourself.
So who do you trust? A respected organization like ECRI? Someone whose caution on this company has been proven right? Or, someone who has consistently been too positive on performance (talked their investment instead of reality)?
It is you $s - you decide. I am avoiding financials so it is no sking off my back. If you are a trader and time it properly you can make $s on BBT (I would suggest the current range is $21 or a little less to $24 or a little more). I have a friend who has held BBT and made $s selling calls and/or shorting against the box whenever it got above $23. But be careful this could change.
Not that it matters anymore Inlet but bbt has taken around $400 million of additional marks on their reos September YTD. That's equals around $.17 cents per qtr. At 9/30/11, there marks on reos is around 60%. If you anticipated this, you are indeed clairvoyant. I certainly did not.
Read Clark Starnes 11/3 presentation. Many analysts are going to wake up soon and realize that Credit Suisse's credit cost projection for 2012 is vastly overstated. The provision for bad debt expense in 2012 will drop significantly from around 120 bsp in 2011. Credit Suisse predicts it will be the same next year. Baloney!
On top of this Clark Starnes said in his presentation that foreclosure expense (primarily additional marks) and other reo expense (professional services, personal etc.) will drop in 2012 by $700 million. This is on top of the provision for bad debt expense reduction which I think will drop by $200 to $300 million vs. 2011. Starnes said that early stage delinquencies at 9/30/11 are at the same level as 2006.
Awful big numbers which I believe you and the street still do not understand.
I suggested you post economic data to back up your opinion of a worldwide downturn. No response.
Given your viewpoint have you considered buying some credit default swaps? You can buy them without owning the bonds. You might want to consider that Lehman default credit swaps totaled around $400 billion at the time of their demise. Only $7 billion was actually paid out. The balance was netted out. Since 2008 regulations on credit default swaps have been tightened by a factor of 1000.
Good article on front page of today's wall street journal on european banks. As I said yesterday, they are working out of their bank loans, increasing capital and de-risking some. In a few years, their balance sheets will be greatly improved similar to the improvement US banks made since 2008.
There's an old saying about lousy stocks on Wall Street: "If you liked XYZ at $50, you must love it at $25." Along those same lines, it could be argued that if you think stocks are cheap now, just wait until you see how cheap they are when earnings estimates come down.
According to Mike Mullaney, portfolio manager at Fiduciary Trust, earnings estimates for next year have to come down another 15% before stocks should be considered cheap.
"It's not pretty, 925 (on the S&P 500) is kind of the going rate on a worse case scenario among strategists if we do go into a recession period," Mullaney says. "Most likely there will be blood in the water at that point in time, and most likely that would be a good entry point."
Mullaney won't consider the market cheap until he sees 25-30% drop in the S&P pushing it to levels not seen since mid-2009. But he's not suggesting that stocks are expensive on a historical basis because 12-times estimated earnings is far cheaper than the long term averages.
Since he believes that bull markets typically start from single-digit PE multiples, Mullaney is holding off and hiding out in what he considers a relative safe area: Large cap, high yielding, multi-national stocks. "The only fly in the ointment of late is that the multi-nationals are becoming more daunting to pick stocks," he admits.
While he's waiting for the washout, Mullaney is increasing his exposure to Emerging markets and putting up to 8% of the funds money into a managed commodity fund that can be both long and short. He says he'll gain confidence when ''all the optimism has been weaned out of the market place," adding that "we're not there yet."
=>"According to Mike Mullaney, portfolio manager at Fiduciary Trust, earnings estimates for next year have to come down another 15% before stocks should be considered cheap."
This makes no sense at all unless stocks are currently considered 'super cheap'. Hope Mullaney misspoke or maybe didn't say it at all. The reporter could have screwed it up.
I suggest you look at 2011 projections and compare it with actual performance by some of these agencies. Their record is not good.
Then there is ECRI:
The Economic Cycle Research Institute is, according to their own website, the "world's leading authority on business cycles" whose "state-of-the-art analytical framework is unmatched in its ability to forecast cycle turning points." Furthermore, The Economist magazine has stated that they are perhaps "the only organization to give advance warning of each of the past three recessions; just as impressive, it has never issued a false alarm."
Two months ago, the ECRI made a very definitive and unwavering recession call going even so far to state that "there’s nothing that policy makers can do to head it off." Since then, the markets have rallied strongly on the heels of recent positive economic data, leading many in the mainstream financial press to accept that the U.S. has narrowly averted an impending recession and will begin to see growth. Not so, says Lakshman Achuthan, ECRI's chief economist and spokesman; citing under no uncertain terms that "nothing has changed our view".
Who should I trust? Organizations like IMF, World Bank and others with very questionable records or ECRI?
As to economic data - how about the #s out of China last week - not so good. Or, how about the manufacturing #s out of Germany today - not so good. You know (as well as I do) I can find #s to support my opinion (same as you can find #s to support your opinion). The question is - who provides the better interpretation of the totality of #s. I suggest it is not the IMF or World Bank.
Anyone who looks at unemployment of 9% (and total unemployment, underemployment and workers who have given up somewhere between 16-20%) and claims we don't face the real possibility of another recession is drinking the agencies kool-aid.
For those out of work a year or longer - they will tell you we never got out of a recession and are in a depression.
Now I see why Inlet is so keen on the ECRI. They also don't provide the analystical details behind their calls. Nothing like good sound independent thinking Inlet.
Below is an except from ECRI. Says we're probably going to see negative economic growth this quarter 2011 and throughout 2012. Declining productivity? We're at a record high. Exccessive indebtedness? Consumer indebtedness is at lowest level since 2000. Elevated inventory? Inventory turnover ratio is at the best level in history. Contracting real wages? Not according to bureau of labor statistics. What garbage. Suggest you stick with your charts Inlet.
"The ECRI doesn't provide the general public with the analytical details behind its calls, but earlier this month the Hoisington Investment Management quarterly report a similar forecast for negative growth with an interesting analysis that warrants close reading. Here is the opening paragraph and a snippet near from the conclusion:
Negative economic growth will probably be registered in the U.S. during the fourth quarter of 2011, and in subsequent quarters in 2012. Though partially caused by monetary and fiscal actions and excessive indebtedness, this contraction has been further aggravated by three current cyclical developments: a) declining productivity, b) elevated inventory investment, and c) contracting real wage income....
In summary, the case for an impending recession rests not only on cyclical precursors evident in productivity, real wages, and inventory investment, but also on the dysfunctionality of monetary and fiscal policy.
The full report in PDF format is available at the Hoisington website."