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  • normlasky normlasky Aug 20, 2011 4:13 PM Flag

    Might hit my $18 target after all...

    Yes, it might hit $18 or lower. Reminiscent of March of 2009.

    The djia has tanked nearly 2000 pts since July 22 driven largely by gridlock in dc, concerns that the 30% marks on piigs debt ought to be double and some weak economic data (philly fed survey of -37 which historically shows virtually no correlation to the pmi data.)

    Last month, I was about 40% cash and this month have spent about 60% my cash position on banks, transports, industrials. I've been adding bbt, c, pnc, ms, ffch, fdx, ba, de, cmi, cop, mrk, intc, ge, aa and some others.

    I think the economic situation is ok. Rail and car sale data is fair. Retail and food sales for July 2011 per us census bureau were up 8.2% vs. last year. Loan data from fed continues to show modest low growth. I think it's noteworthy that residential mtgs through August 10 are up about $30 billion or 2% from 6/30/11. Due to massive refinancing. First time positive net loan growth in mortgage loans in few years. Credit quality continues to get better. Unrealized gains on banks investment portfolio have now reached $29 billion in August of 2011, or about 4% of their tangible capital. Look for a rebound in personal income. Last month was only up .1% but I think it's due to the fluff in the stats.

    I think bank m&a in the near term will become much more active - sti, rf, snv, hban, hcbk, fitb fhn and many others are selling below tangible book value. On the other hand, I think the value of branch banking is getting less important as on line banking continues to expand.

    If I were Kelly King I would look at acquiring small banks that sell at substatial discount to tbv, generate solid nim, reasonable noninterest income to expense, plain vanilla portfolio, good ALL and are located in growing regions. FFCH is a good case in point. $2 billion loan portfolio. 75 branches located on the coasts of sc and nc where retirees relocate. Solid nim at 383 bsp. Sells at 50% of tbv. Good noninterest income to expense. #2 in deposit share in Charleston. Owes no tarp money. Seems to me acquiring a bunch of these is better than taking on a big rats next like rf or snv but I suppose it all depends on share price.

    Of course, it would be nice if King were to publicize that fact that bbt 2nd qtr. earnings would have been close to $1 share instead of $.44 under a "normalize situation" where loan losses are say 70 bsp per year and investment securities have normal durations vs. short term.

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    • Curious as to why you think the economic condition is ok? The FED seems to disagree as they just announced holding interest rates near 0 until 2013. Added to that - many firms (ie MS) are cutting GDP predictions just not for the US, but the world.

      And the outlook by companies this qtr were very mixed and earnings projections are getting cut. I would say odds for another dip in the ongoing Depression are increasing daily.

      • 1 Reply to inlet_boater
      • "Curious as to why you think the economic condition is ok?"

        Imo, we're going to see 1% to 2% growth until housing recovers. I think double dip is unlikely even with the unbelievable fear being created by the media. Of course, it does not help our economy to give the tea party folks credibility. Implement their policies and this country will end up in a new great depression.


        Why?

        1. Annual Worldwide and US population are increasing 2% and 1% respectively.

        2. Balance sheets of consumers and corporate America are vastly improved since Lehman. Corporate cash will start to approproach $2 trillion over the next couple of years. Consumers delinquencies will hit record lows which will drive bank earnings to all time record highs. BB lastest move will result in large mortgage refinancing this quarter which will continue to improvement consumer's balance sheets.

        3. Automotive spending and capex are still running well below trend line. US car and light truck production will hit 12.6 million vehicles in 2011 but that's still only about 70% of trend line.

        4. US multinationals are doing incredibly well thanks to Asian growth which will largely drive modest real personal income growth in the US.

        Yes, there are a host of problems. Obama has screwed up by failing to define problems so his solutions are off target. Obama did not create this mess. The real culprits are Greenspan, Bush, Congress and the rating agencies. Maybe his attempt to create a public private residential trust will improve housing prices and get that part of the economy growing again. John Allison, you may recall, suggested this 3 years ago.

        Based on what I've read I think his job plan is off target. Yes, improving roads, bridges and schools are important but we need to pay for them. No better way to pay for them by converting 50% of our transporation fleet to natural gas and get off foreign oil. Our trade deficit is around $600 billion or 4% of gdp. Boone Pickens has a great plan but it has fallen on deaf ears to date.

        And lastly the deficit solution is simple. Stop screwing around. Implement Simpson - Bowles. Why Obama is trying to re-invent the wheel is a mystery. It's his own commission.

 
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38.09+0.10(+0.26%)Aug 29 4:01 PMEDT