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HOT TOPIC Would like some opinions on banking stocks

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Russ H

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Wow, Exact-- you're the first person I've heard about who is investing for the long term in this market.

Lots of money to be made (and lost) in short term plays. But long term? It will be an interesting ride.

-Russ H.
 

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Exact

New Contributor
Mar 3, 2009
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Hi Russ,

I'm not sure how you define short term and long term, but for the most part, I think it will take the banks up to several years to recover to anything like their previous share prices. I've tried my hand at day trading, but found it to be too much of a crap shoot. For example, you might have found the perfect turnaround stock or short, but then the market moves against you and all the fundamentals go out the window. I've had some luck with slightly longer short term investments such as buying silver @ $9.00 per ounce and uploading it 2 months later at $14.00 per ounce. I just purchsed a put option on BBBY, which I think has nowhere to go but down, and am expecting to see profits within the next 3-6 months. What kind of short-term investments did you have in mind?

Best,
E
 

kidgas

Contributor
Jul 25, 2007
532
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Indiana
As mentioned on another thread, I made some adjustments to FAS today. I purchased back all the Apr calls and sold half May 7 and half May 9. The total out of pocket cost ended up being 0.41/share for 1.58 of equity. Of course the catch is that the equity can evaporate. However, all the calls are ITM with the 7s being quite a bit so. Thus, the delta should be fairly high so that any loss in FAS would be mostly offset by the decrease in premium of the May 7 calls. I could look for an opportunity to swing trade the calls if necessary.
 
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Rawr

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As mentioned on another thread, I made some adjustments to FAS today. I purchased back all the Apr calls and sold half May 7 and half May 9. The total out of pocket cost ended up being 0.41/share for 1.58 of equity. Of course the catch is that the equity can't evaporate. However, all the calls are ITM with the 7s being quite a bit so. Thus, the delta should be fairly high so that any loss in FAS would be mostly offset by the decrease in premium of the May 7 calls. I could look for an opportunity to swing trade the calls if necessary.

Sounds fascinating, but I don't understand :(

Are you making money, I hope? I am riding FAS till 12 (if it goes there tomorrow or this week) and then slowly moving away from the computer and that rollercoaster.
 

kidgas

Contributor
Jul 25, 2007
532
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Indiana
Actually, no I am not making money yet. If things ended as they were now, I would sell half FAS at 7 and half at 9 for an average sell price of 8. My basis is 9.97 so I would actually lose money. However, I am not looking at the end until July when the puts expire. When I entered the original position, I looked to hold until July. Given what I know now about the nature of a leveraged ETF losing value over time, that was a mistake. I certainly won't repeat that again.

Nevertheless, I believe that I will ultimately make some money over the next 3 months. OOPS...I mean't to say that the equity that I paid for today CAN evaporate. If FAS drops to 5 again, then that out of pocket 0.41/share was wasted. But, I could buy back some calls and sell lower strikes (roll down). Right now, there is little for me to do until May unless FAS drops 30-40%.
 

CommonCents

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Apr 14, 2009
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Ahhhh Goldman Sachs.

If you read the fine print, Goldman changed their fiscal year to a calendar year. Conveniently leaving out the month of December in their YOY comparisons.

Yep, you guessed it, December was loaded w/ over a BILLION in losses, but nary a mention of it by the MSM pump and dumpers.

Of course Goldman needed to pump things up w/ their $5billion stock offering to raise money to pay off their tarp and probably sell a few insider shares to the poor public.

The positive side on GS is they are so intertwined in the government they might even be able to keep up the scam for some time.
 

CommonCents

Silver Contributor
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And not to mention the billions they got from the AIG scam, I mean bailout.

Without those two nuggets Goldman wouldn't have earned a dime and been able to peddle another $5billion in stock.

This sounds like the setup by Blackstone when it went public. Not a good lookin chart since the IPO.
 

randallg99

Bronze Contributor
Aug 9, 2007
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I wanted to point out that C's recent sale of one of their assets happened to be the only profitable part of their business and the only salable part.... (SMith Barney) ...

read this again. C just sold the only part of their company that showed profits.

C is screwed.

and to think I have been trading blocks of it daily....

capturing 20 cents here and there has supported my lifestyle in the last couple of months. the liquidity in C is unreal

that said, I still don't like the banking sector.... recent news of Wells showing profits was nothing more than accounting manipulation and a lot of red flags are popping up... and lot's of bad loans still have to be mitigated despite the "feel good" press release



and speaking of GS, there is a lot of speculation that they've been involved in stock manipulation and such... but the key is not to care about that crap and make the money from the momentum.


side note: also bought sizable long term position in ANH today.
 

kwerner

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Randall - What is it in particular that you like about ANH for a long term hold?
 

randallg99

Bronze Contributor
Aug 9, 2007
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Randall - What is it in particular that you like about ANH for a long term hold?

ANH is a REIT - but not a property holder. True definition of REIT is a corporate structure that pays out 90% of its cash flow in forms of divvy, which property owned corporate entities find very enticing to pass out divvy income, especially now in the low tax dividend environment.

mortgage reits own securities that are valued more or less at bond rates... swapping out the short rates for the long rates gives you a spread

For a period of time, there was an inverted yield curve that annihilated the entire MReit sector. (short rate vs. long rate) and many companies went adios

Today? the spread is as wide as the grand canyon. Short rates have become so low (thanks, USA gov't) and regardless of the long rates, the spreads are huge! When the long rates creep higher, it's going to be a money factory for these kinds of companies

I am looking for conservative income producing vehicles. Since most of the fannie and freddie notes all but federally guaranteed these days, why not invest in the companies that buys, holds and sells them as much of the risk has all but evaporated. Most likely they'll never go under as a result. But don't look to shoot the moon with a 50% gain either-

these are very complicated companies to understand because there are many technicalities involving prepays, repo rates, book values, bond markets, interest rates, etc. I had a lot of success with them in the late 1990s going into 2003.

from Y! Finance:

Anworth Mortgage Asset Corporation is a real estate investment trust. It invests primarily in United States agency mortgage-backed securities issued or guaranteed by United States government sponsored entities, such as Fannie Mae or Freddie Mac, or an agency of the United States government, such as Ginnie Mae, including mortgage pass-through certificates, collateralized mortgage obligations, and other real estate securities, on a leveraged basis. The company’s portfolio includes agency mortgage-backed securities comprising agency adjustable-rate mortgage-backed securities, agency hybrid adjustable-rate mortgage-backed securities, agency fixed-rate mortgage-backed securities, and agency floating-rate collateralized mortgage obligations. The company qualifies as a REIT for federal income tax purposes. It would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.
 

Edge

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Sep 20, 2007
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Hey guys, after seeing the bottom drop out on Tuesday I put sell orders in @ $8. Hopefully there will be enough of a bounce to make it back, but that would have to be one heck of a bounce - that's around 40%!

I think it's doable, but it may take a little while. Wish I had waited just two days longer before jumping in. :smx4:
Did you get out at $8 or are you still holding. Earnings on Monday, I think. What's next?
 

Edge

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bflash98

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Aug 28, 2007
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I'm in the opposite camp, I think a bunch of non-existing good news has been priced in:

Citigroup’s Earnings: More Fuzzy Math : NO QUARTER

Be careful listening to me right now though, i'm pretty biased with my current position. I've been painfully short for 2-3 weeks, hasn't been fun being wrong, but i'm staying short.
So that is what I was thinking this whole last week with the bank earnings. But if the regulators allow them to do the math this way will the problem ever come to light? With the relaxing of the market to market rule it seems that this is an effective of way of showing everyone that things are working and the banking sector is doing better.
 

kwerner

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Did you get out at $8 or are you still holding. Earnings on Monday, I think. What's next?
I wish I were still holding it. I got out at $7 when it began to rebound. That was one brutal roller coaster ride. :eek:

When I look at the prices of the banking sector stocks now, I think they're a little overpriced to be honest. I mean, I know we're out of the clear of the nationalization scare, and that was a big part of what was depressing the prices, but there's still a LOT of bad debt on the books and I think this bear market bull-run throughout the sector is just crazy.

Well, part of it's that I'm frustrated that I'm missing the boat too... :smug2:

I guess I'll just wait 'til they drop again.

* Side note * I think what's going on with GM's stock is ridiculous too - the government is basically saying that GM's going to go into BK, and the price will drop one day, then pick back up the next - see sawing back and forth. I mean, man you'd think it would be a penny stock with news like that coming out. I don't understand it.
 

MPinAZ

PARKED
Apr 20, 2009
7
0
8
Looks like financials may be putting in near-term top. I went short the financials on Friday via FAZ, volume picked up with minor further down side movement, 15 minute chart showed accumulation and reversal at the close with huge volume, divergences between indicators and price movement. The chart has a falling wedge pattern and if FAZ breaks out above $9 we could see a quick move to $15, if it moves through that resistence I am looking for $23.

But anything can happen, the market is indeed acting crazy. Would like to share opinions with others.
 

kidgas

Contributor
Jul 25, 2007
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Personally, I think for FAZ to hit 23 would be a miracle. Theoretically FAS and FAZ should be mirror images of one another. IF that is true, then the sum of their prices should always be equal minus a little bit for management fees. When they opened, they were each priced at $50 meaning that the sum of their prices should be 100. Well, since opening FAS is down 80% and FAZ is down about 80% as well. How can that be? One of them should be up. It is because they use derivatives and are only a short term trading vehicle. They are essentially for day trading. You can't hold them for very long on the long side at all without fighting a significant headwind. For FAZ to climb to 23, FAS would have to be negative and that isn't going to happen. Right now the sum of the two prices is 18.30. A price of 23 for either of them is impossible save for a reverse split.
 
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Edge

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Rawr

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Looks like the market has.
 

MPinAZ

PARKED
Apr 20, 2009
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I do agree the FAZ and other levered ETFs are for short-term trading. My typical holding period is short, but not always day trading.
 

lightning

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How do you guys feel about FAS and UYG after there big drop these past few days? (FAS is down from the $8.00 range on Friday to the $5.50 range today, and UYG is down from the $3.65 range last week to $2.75 today). I have been very wary of the financial sector these past few months but I am wondering if there is money to be made here in the short-term (taking advantage of these volatile "swings" from day to day)...
 

kidgas

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Jul 25, 2007
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You could make some money on a swing trade. I try to do that with some of my options. I bought back the May 10 FAS calls yesterday and will look to sell on good news. I would definitely leg into a position since I am not convinced that the general trend is still not downward.
 

Rawr

Gold Contributor
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I'm optimistic FAS - yesterday was a bunch of BEARSHIT with that fake report and bears hitting hard. But the info I'm seeing suggests financials want to go up, at least short term.

But Mike, if you do buy I'd do it today before MS tomorrow.
 

lightning

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Aug 24, 2007
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Good call guys! I did end up buying into FAS at 7.00, and sold today for a nice little 15% gain (not bad for 3 days) :) Thank you for the advice!

I am actually trying to get out of a couple of my positions now while the market is rallying today, as it seems like we may be heading for some rocky water next week. The more of a cash position I have in my account, the better prepared Ill be to buy in when the market lights up red again.

What are the boards thoughts?

What do you guys think of Ford (F) right now? I logged in today and couldnt BELIEVE the spike in price they saw! A buddy of mine bought 50,000shares of Ford a couple of weeks ago at $2.00, and he is literally dancing in our office today. He also will not sell yet, as he insisted that this is only the beginning, and that it will be a $7.00 stock next week!

As always, just curious what you guys think. :)
 

lightning

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Where are you guys hiding? :smx6:


I bought a 150 shares of GM for $1.60 a week or two back while fooling around one day (a grand total of a $240 lottery ticket), and I log in today to find out they are up to $2.27!!! Go figure! Now I wish I had bought thousands of em! :smx4: lol

Hows everyone else doing? Any feelings on the financials/auto sector this week?
 

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