What are you buying today?

[Spekulatius]

5 hours ago, dealraker said:

Ah ha!  My first co-owner of CATY!  CATY was written up in Outstanding Investor Digest in 1994 and it was beyond incredible to read.  The bank was earning almost 20% on equity selling for book value.  There were earthquakes, recessions, fires, OJ riots, etc. knocking stuff all down and around.

 

All while the east coast banks, small banks, were earning 10% of equity and selling for 2.5 to 5 times book value based on Eddie Klutzfield (Crutchfield) being willing to pay up and flush all the equity and expenses down in a one-time charge such that "I can pay 5 times book and make it all work out."  So Eddie at First Union went through 20 years of no book value growth (those flushes...ya know) and eventually was "earning"  (fake earnings, fake ROE) 30% on equity (there wasn't any equity).

 

Ole Buffett once said, "Librarians read financial statments; investors need to know what the figures mean."  30% on equity for First Union was just 30% on evaporation.  

Yes, I recall I looked at them when you mentioned the stock a while ago. having lived near the Bay area, I was somewhat familiar with them and I think my inlaws have an account with them.

 

They have pretty good metrics profitability (mid thirties efficiency ratio) due to having somewhat of a moat with Chinese people preferring to bank with them.

 

it was simply something that I knew and have checked for pitfalls when the hell broke loose. Same thing with USB where I added to my position.

 

Given more time, i would possibly pick up some spicier stuff  like $ZION but I simply did not have enough time to double check the FFIEC filings, 10-K's transcript to get confidence here. I'd rather play it safe then getting into some gotcha's because I venture into something that I haven't fully checked out.

[Gregmal]

Added some MANU sub $20. Flirted with the idea of some USB but just couldn’t get excited about it 

[yesman182]

1 hour ago, Gregmal said:

Flirted with the idea of some USB but just couldn’t get excited about it

Since they closed on union bank and have an increased presence in California. I thought they might be interested in a fire sale of SVB. 

[dealraker]

1 hour ago, Spekulatius said:

Yes, I recall I looked at them when you mentioned the stock a while ago. having lived near the Bay area, I was somewhat familiar with them and I think my inlaws have an account with them.

 

They have pretty good metrics profitability (mid thirties efficiency ratio) due to having somewhat of a moat with Chinese people preferring to bank with them.

 

it was simply something that I knew and have checked for pitfalls when the hell broke loose. Same thing with USB where I added to my position.

 

Given more time, i would possibly pick up some spicier stuff  like $ZION but I simply did not have enough time to double check the FFIEC filings, 10-K's transcript to get confidence here. I'd rather play it safe then getting into some gotcha's because I venture into something that I haven't fully checked out.

Well one of the things that stands out today is the eloquent writing of those sensing some major catastrophe as is evidenced with our COBF "Is The Bottom Almost Here?" thread.   If it isn't worthy of being labeled as a broad financial crisis then these bank stocks should do quite well I think.  I had bought some BAC at $33 a few weeks ago and added some below $30, then added a some TFC.  These are tiny compared to my CATY and EWBC holdings from decades ago, but they do count.  I think the odds are with solid banks being good investments.   

Edited March 10, 2023 by dealraker

[Paarslaars]

Added to BAC and BRK today, started a position in KKR.

[Dalal.Holdings]

I bought some CASH today. I hold some USB but didn't add today nor jump into other banks. 

 

My worry about some of the banks with unrealized held-to-maturity asset losses is:

 

Banks make money off the yield curve...What if this time a yield curve inversion does not lead to a recession (leading to short terms rates falling and reverting of the curve) ? What if an inverted curve lasts for some time and grows more inverted ?

 

It seems strange but economy is still hot even with an inverted curve which means the curve can get even steeper in terms of inversion as Fed raises further. I don't think the current environment can be compared with any recent recession given the persistence of inflation as well as a strong economy in the face of rapidly rising interest rates. I think many people take it as a given that inversion is indicating an upcoming recession and fall in rates. I think long dated bond yields are way too low.

 

I can't believe institutions and people bought and are buying long dated bonds at low rates given no one knows how high and for how long the Fed has to go to neutralize inflation. My fixed income duration does not go beyond T-Bills and I-bonds (12 months).

Edited March 11, 2023 by Dalal.Holdings

[Gregmal]

24 minutes ago, dealraker said:

Well one of the things that stands out today is the eloquent writing of those sensing some major catastrophe as is evidenced with our COBF "Is The Bottom Almost Here?" thread.   If it isn't worthy of being labeled as a broad financial crisis then these bank stocks should do quite well I think.  I had bought some BAC at $33 a few weeks ago and added some below $30, then added a some TFC.  These are tiny compared to my CATY and EWBC holdings from decades ago, but they do count.  I think the odds are with solid banks being good investments.   

I cleaned up on the financials in the GFC aftermath trade but I still have trouble getting excited about them. I may mock all the drama queens and yes, it’s amusing to me how earnings revisions weren’t quite doing enough to get below 4000 SPY so we needed to drum up a banking crisis, but largely, things just aren’t exciting one way or another for the most part. A banking crisis that walloped much of the inflationista playbook at that, imagine? Lol.
 

Even here, banks look like 10-20% annualized returners which is fine, but there’s an awful lot of bagholder risk on the table too. BAM is just a clear no go for me at this point. I keep trying to find reasons to sell Fairfax, but can’t because it’s so damn solid and still not a glam stock, and otherwise am starting to buy MKL and hopefully another crack at Berkshire a little lower. But the range of outcomes on the traditional banks just seems to be gyrating all over. Powell is totally hypnotized on this idea that people having jobs and getting paid more is bad even though we are on the verge of a massive collapse in inflation and possibly even deflation. It’s all just a peculiar situation. So generally after much pontification, I just have been doing nothing but continuing to be long well located shelter and 1%er prosperity.

Edited March 11, 2023 by Gregmal

[Spekulatius]

I am fairly sure the yield curve inversion will at some point revert whether we get a recession or not. Even if we don’t get a recession over time, the higher interest rates will reduce inflation and that will likely revert the yield curve into a more normal shape. The current shape is the result of the Fed tightening very quickly.

 

I also think that current event in banking will reduce lending, simply because banks are going to be more concerned about the liquidity buffer. When you look at bank balance sheet, the liquidity has been drained because deposits have been mostly flat and lending has continued to increase at healthy rate, probably caused by inflation.

 

As we know , the current holdings of under water MBS and treasury also has sterilized part of the banks balance sheet, as selling them would cause losses denting regulatory capital and banks don’t want that.

Edited March 11, 2023 by Spekulatius

[Dalal.Holdings]

28 minutes ago, Spekulatius said:

I am fairly sure the yield curve inversion will at some point revert whether we get a recession or not. Even if we don’t get a recession over time, the higher interest rates will reduce inflation and that will likely revert the yield curve into a more normal shape. The current shape is the result of the Fed tightening very quickly.

 

I also think that current event in banking will reduce lending, simply because banks are going to be more concerned about the liquidity buffer. When you look at bank balance sheet, the liquidity has been drained because deposits have been mostly flat and lending has continued to increase at healthy rate, probably caused by inflation.

 

As we know , the current holdings of under water MBS and treasury also has sterilized part of the banks balance sheet, as selling them would cause losses denting regulatory capital and banks don’t want that.

I agree that reduction in lending will help reduce inflationary pressure. I am not sure if the curve will automatically revert however. Even today there is demand for long dated bonds for some reason because everyone expects the Fed to loosen with an impending recession that everyone thinks is right around the corner.

 

One wildcard is fiscal (deficit) spending by the government. Elizabeth Warren grilled J Pow on raising rates but J Pow did not mention that the same Senate that was grilling him played a huge role in creating and perpetuating inflation. Warren and Sanders in particular want to continue deficit spending under the guise of "Inflation Reduction Act", loan "forgiveness", and other spending which means monetary is the only thing working against inflation today. The government continues to spend more than it takes in which only makes the inflation part worse.

 

Whether the higher interest rates alone can reduce inflation is still a question for me (without fiscal tightening). So far it has not been as effective as the Fed would have hoped. In the 70's before Volcker, Fed Funds went double digits and could not slay the beast...

 

Edited March 11, 2023 by Dalal.Holdings

[Dinar]

1 hour ago, dealraker said:

I think it is basically inevitable that some sort of come to Jesus moment arrives as to debt and interest rates.  Unlike 99% of others as more of a "have" instead of "have not" in the equation - I expect to pay far more in taxes and get far less in returns, and gladly so.  Investors/business people generally condemn anything taking their share and it isn't political necessarily, it is just disgust at how they think the outflow goes either to benefits or defense- depending on their slant.

 

But it is what it is.  And I'll bet too we have a near government debt default- or at least a meaningful and painfully extended parade of such.  Those rushing to the guv for safety, same bunch of course that eternally benefit from but "hate" guv, does amuse me.  But in the end I have my own thesis and it isn't based on either politics or fear.  It is:

 

This time there is no place to hide so hiding is a worthless endeavor.

 

As usual, life is great...if you can stand it.  I will, as always, hide out in stronger businesses and deal with the outcome.

 

It was almost exactly 30 years ago and three of us were flying in to Omaha for that soon-to-be famous gathering and oh boy was it windy. We were held in the sky for about an extra hour because of turbulent gusts.  We were on a puddle jumper 20'ish seater with only a quarter of the seats taken and two pilots for some reason.  But all of us could see right through the cockpit out the front window, just as could the non-working pilot sitting in the seat on the opposite row just in front of me.

 

This non-working pilot had his head in his lap.  Yep head burried completely.  As we looked out the front glass of the plane the runway veered past right-left over and over again.  And I mean violently right-then-left.  Seemed like a long experience, almost endless one.

 

The plane went straight down the runway for a very smooth landing.  As we walked out the door of the plane I asked the two pilots - who were laughing - about the landing.  They said, "Windiest ever for us, no doubt."  

 

My attempt today at eloquent penning.  Things will work out and fear plus pain will likely be involved.  You'all keep figuring it out and I'll keep reading...8th row, isle seat A.

 

 

The biggest risk to this country in my opinion, is complete disrepect for work and normalization of welfare.  Welfare started as aid to widows with children during the Great Depression.   It used to be shameful to shop with food stamps, now it is an accepted practice.   I will gladly pay taxes so that kids from poor neighborhoods are protected from crime and go to good schools.  I do NOT want to pay tax so that: 

a) Welfare, Medicaid, free housing, free phones, free food  & other benefits are given out to those who refuse to work but continue to breed

b) NYC spends $40K per pupil per year on education, of which $10K reaches the school, and $30K is consumed by central bureaucracy

 

[Dave86ch]

Bitcoin

[RedLion]

19 hours ago, Gregmal said:

I cleaned up on the financials in the GFC aftermath trade but I still have trouble getting excited about them. I may mock all the drama queens and yes, it’s amusing to me how earnings revisions weren’t quite doing enough to get below 4000 SPY so we needed to drum up a banking crisis, but largely, things just aren’t exciting one way or another for the most part. A banking crisis that walloped much of the inflationista playbook at that, imagine? Lol.
 

Even here, banks look like 10-20% annualized returners which is fine, but there’s an awful lot of bagholder risk on the table too. BAM is just a clear no go for me at this point. I keep trying to find reasons to sell Fairfax, but can’t because it’s so damn solid and still not a glam stock, and otherwise am starting to buy MKL and hopefully another crack at Berkshire a little lower. But the range of outcomes on the traditional banks just seems to be gyrating all over. Powell is totally hypnotized on this idea that people having jobs and getting paid more is bad even though we are on the verge of a massive collapse in inflation and possibly even deflation. It’s all just a peculiar situation. So generally after much pontification, I just have been doing nothing but continuing to be long well located shelter and 1%er prosperity.

I’ve been thinking of adding to Fairfax even though this goes against the grain at all time highs and higher price to book than recent past. Still, their setup for earnings looks great, and their leverage with float is a lot higher than BRK or MKL at a lower valuation. 
 

I think apo is under appreciated as a beneficiary of rising rates. The annuity contracts are longer term capital than banks and can be reinvested in assets with similar duration as well as some degree of floating rate assets. Annuity sales are probably going to accelerate with higher rates and market turmoil. Maybe it’s because I’m more comfortable with this subsector, but I see this as a better play than most banks. 
 

I think a combo of APO/KKR/BX is a lot more attractive than BAM/BN right now. I’ve diversified out of my high exposure to BAM/BN (down to a little under 5% mostly BN), and am seriously tempted to swap for extra apo/kkr/bx basket, but it’s all in a taxable account with a much lower cost basis since I’ve held most of this for a number of years. 

[kab60]

I think $tslx is interesting. It's a very well-run BDC with 1,15xdebt/equity, funded by well-staggered, unsecured debt and it has a ton of liquidity. It has paid up for that liquidity over the years to be able to strike if there was ever any stress. Almost every loan they hold is first lien and floating, so they're benefiting from higher rates. It's not gonna be a home-run, but it has beaten the S&P500 since inception, and I'm sure they'll find interesting things to do in the current malaise.

 

I'm also drawn to SLM Corp., but that's a longer pitch, and there's a trifecta of risks; funding, political as well as credit. I do think odds look pretty attractive though. Generally, a basket approach probably makes sense. Would suck to hold the one regional bank caught in a meme-instigated bank run!

 

 

[KJP]

Western Alliance, which is probably the kiss of death for the bank.

[Viking]

BAC, WFC, C, SU

 

All down more than 5%. It looks to me like the big banks will be the big winners. The business at all the small banks that are going under will need to squish somewhere.

Edited March 13, 2023 by Viking

[Castanza]

TFC, USB, BAC

 

Call KRE 6/20/25 $50 at 5.50

Call TFC 1/17/25 $40 at 3.70

[Spooky]

BAC

[Spooky]

Some more BN

[Santayana]

Fairfax

[Sweet]

Couldn’t help myself, but I bought a micro position in Western Alliance - less than 1%.

 

Its really a lotto play, I admit to know very little about the business, and I think there is a very high chance it goes to zero.

[Kupotea]

Large buys of SU, CVE, VET, TCW, NE, STNE.

 

Counterintuitive market reaction and I think there's a good chance the recession sensitive/inflation trades rally hard over the next few months.

[Valuebo]

Bought way too many bac calls at 28 and a bit. 

 

Market doing it's well known 'sell first, think later' again. 

Edited March 13, 2023 by Valuebo

[Gregmal]

Coupang, Procore, Markel

[Saluki]

TV, VTS and OXY on the dip (when you can add to a position at a few hundred basis points lower than Buffett was buying last week, it's a good day.  Some FFXDF and I have a resting bid on JOE with an 7 handle that hasn't been hit but it got close today. 

[FCharlie]

Truist (BB&T/SunTrust)

 

1997 $31

2023 $31

 

I bought this morning.