Two Views on Bear Stearns
As much as I hate to see bankers, especially greedy, righteous, probably criminal bankers get bailed out, the Fed probably did the right thing last weekend by orchestrating the bailout of BSC. The question remains whether this, and its other actions of loosening collateral requirements at the Fed, will be enough to restore confidence and liquidity in the system.
It's too easy to pick on Cramer but here's a video of him telling people not to worry about Bear Stearns just a few days before it comes crumbling down. I think most people realize the risk in listening to this blabber mouth.
This video should be contrasted by a very good interview of previous Fed Chairman Paul Volcker. He gives his opinion on the bailout and the status of the problem and he gives good ideas about regulating the so-called shadow banking industry. This guy is great. Well worth the 6 minutes.
I don't know if we're at the bottom of this market yet, but man what's Google trading at? I just used google search, blogger, and youtube to embed that video and make this rookie post! Technology made easy.
posted by Des @ 3/23/2008 08:28:00 PM
3 Comments:
Man, you guys were active this weekend! I loved both clips. BTW, GOOG is at $460, a bargain!
I do like what Volker had to say about the Ibanks/brokers. Since the Fed is backing all the risk, there will likely be more regulation in that sector to control risk. I've heard/read that more than once. One investing thesis was to load up on regional banks which do not have much exposure to leveraged assets. Those which make profits by borrowing at 2.5% from the Fed and lending at 6% to consumers stand to gain most from this low interest rate environment. I'm looking for the financial ETF which excludes the Ibanks.
I've been looking at the ETF symbol KRE. I find it hard to believe the regional banks have little exposure to some of the toxic stuff. I mean everybody and their uncle seems to be caught up in some of this ABCP or other derivative. Having said that, the valuation in KRE is pretty compelling - it's dividend yield is north of 10% and I read somewhere that their P/B was 1.2 (I'll have to find the reference).
What I haven't had a chance to do was to look at its top five holdings and try to get a grasp on how much of their profits came from plain old borrowing short and lending long.
Do you think lower earnings as a result of a slowing economy has also been factored into the current price?
http://www.ssgafunds.com/etf/fund/etf_detail_KRE.jsp
As an Efficient Market guy, I always think everything is factored into the price! :) I graphed KRE vs KCE (the captial markets ETF) and found interesting movement. Over the past 3&6months KRE looks to have bounced off the bottom, while the KCE seems to be hitting new lows; probably because it holds names like BSC, LEH, ML, and JPM, while KRE does not. I think we have some time to track this divergence and jump in when the time is right.
Post a Comment
Subscribe to Post Comments [Atom]
<< Home