Upside Down Mortgage

Archive for March, 2009

Wells Fargo Subprime Exposure

I am trying out a rather risky investment thesis by investing in financial stocks. I have begun to start building a position in the major financial stocks. I believe that the last few weeks have presented some good buying opportunities for financials. The three financial stocks that I have invested in are Wells Fargo, JP Morgan and Bank of America. 

Wells Fargo is probably the best capitalized of the major banks. The recent addition of Wachovia has given Wells Fargo about 800 billion in deposits. Wells Fargo size is a major competitive advantage. They have a Tier 1 capital ratio and a solid balance sheet. Wells is currently the 2nd largest bank in the US in terms of market cap. Wells also has excellent management. Wells Fargo management have already accounted for a 74 billion dollar writedown of Wachovia’s total loan portfolio. This should reduce Wells exposure going forward. Wells stock has held up pretty well over the last few months compared to its peers. Wells has historically had a 22% profit margin and solid ROE of 18% over the last five years. It doesn’t hurt that Warren Buffett loves Wells Fargo and has owned it for years.

JP Morgan Chase should emerge from the financial crisis as the dominant player in the banking industry. JP Morgan got a steal with the acquisitions of Washington Mutual and Bear Stearns for well below their true value.  JP Morgan has the largest deposit base of any bank in the country which gives it a strong capital base. JPM has solid management that has delivered an 18% profit margin over the past 5 years. The return on equity averaged 10.5%.  I think this will increase in the future as Jamie Dimon and company realize the synergies of the Washington Mutual acquisition. JP Morgan currently sells well below its book value and pays a healthy dividend.

Bank of America is definitely the riskiest of the 3 banks. From its purchase of Countrywide just before the subprime crisis to its pending merger with Merrill Lynch, Bank of America has made some questionable moves. The Countrywide and Merrill Lynch deals that appeared cheap before now look severely overvalued. Bank of America’s shares have plummeted and this may provide an opportunity. The stock was selling for $10 recently which is well below its book value. Bank of America has historically averaged a 16% ROE and a 27% profit margin. I think that the Bank of America name is a major competitive advantage. Bank of America has a huge deposit base and the BOA name has significant goodwill. I think the Merrill Lynch acquisition will be a valuable brand for Bank of America long term. But I am not so sure about the Countrywide acquisition. Countrywide has a damaged brand name due to its heavy association with the subprime crisis. However, I do think with their ability to access capital and their strong brand name Bank of America will remain a viable entity.

These 3 stocks will probably continue to face difficult circumstances in 2009. I do think that over the long term these banks will benefit from the financial crisis and emerge with even greater market share and a stronger financial structure.

About the Author:

Mark is the founder and president of New Horizons Financial Management. New Horizons is an independent investment advisory firm that provides personalized consulting services in investment and asset management. Mark has a degree in finance and has worked in investment management for the past 5 years. Mark has written a personal finance column for Baltimore and Washington metropolitan newspapers. Mark writes a financial blog at BuylikeBuffett.com.

Article Source: ArticlesBase.com - Financial Stocks: Danger or Opportunity?

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Housing Bubble Wiki

Question: Where did cons get the myth that the economy was fine until the dems took over Congress?

The present problems existed long before January 2007:

http://en.wikipedia.org/wiki/United_States_housing_bubble

Gasoline prices began to rise after Katrina in August 2005.

There are many other examples.

Smells like regurgitated Hannity or Limbaugh to me.

Are cons simply up to their old tried and true trick of denying responsibility anyway they can - even by a bald-faced lie easily disproved?

Answer: if you've been watching the numbers... it's been going on since 2005... foreclosures creeping up... unemployment creeping up... dollar creeping down...

these number just didn't jump 3-5 percent overnight... or even over a year...

THESE NUMBERS ARE WHAT THE DEMS RAN ON TO GET ELECTED IN 2006... how could they have ran on something that didn't exist until they got into office?

and this is the BIG QUESTION:

HOW can a do-nothing congress ruin things... when more government is the thing that ruins things... and if they haven't did anything, as Republicans say... then aren't we just going by the old Republican rules?

their propaganda is out of joint... something is wrong...

either gov. can regulate things and help business and the dems haven't done anything... and that's bad... and we need more government regulation...

or gov. should just stay out... and since the dems haven't done anything, that's a good thing... and this is just a "correction" that has nothing to do with the gov.

pick one fellas...

'Obamanomics' Conned Again!

Mortgage Relief Requirements

Question: What if my mortgage is not backed by Fannie or Freddie and I want to apply for relief?

I meet all requirements except that my loan is not backed/owned by Fannie Mae or Freddie Mac. I repeat, all other requirements are met. Do I have any options? I could really use the restructuring, My income has fallen about 60% and I am burning through what little is left of my savings very quickly.

Answer: You need to contact your lender. The stimulus plan includes the provision of awarding lenders 1500 to restructure your loan.

Senate Democrats Announce Subprime Mortgage Relief Legislati