Amid the Rally, I Look at the Doo Doo 32 and Their Receipt of the TARP
As I sit back and look at the market go through its bear rally, performing a myriad of what if scenarios on my various bearish positions and generating cash where feasible by selling off profits, I revisited the Doo Doo 32 and a few big name banks. I say to myself, "This year will not be as easy as last year, now that nearly everybody should be aware of the extent of the problem, and the violent bear market rally/option spreads that makes shorting and put buying very expensive." Then I listen to talking heads in the media and the "everbull", long only professionals. I ponder, "Hmm, maybe there is a little low hanging fruit to be had after all". To be sure, we will have to sit through this bear market rally which has to hurt anybody not in all cash or hedged, and there seems to be a willingness of traders to push this one relatively far. The FACTS still remain though, if the stocks of the BoomBustBlog bear targets move much farther, this could very well be another repeat of last year's triple digit performance. Yes, it's risky, but risk is the price of reward, isn't it.
With that disclaimer espoused, let's look at how accurate my longer term thesis have fared. The graph below was taken from the Doo Doo 32 article.
In order to determine how likely the aforementioned event is, let's create a metric by which Reggie Middleton measures risk. This metric will be units of risky or non-performing assets as a percentage of statutory equity. This, of course, can be refined by removing goodwill, Bullsh1t, and the various accounting pollutants to plain old economic earnings, but less just start with this. When applying Reggie's Risk Metric to the graphs above, we can identify more banks.
Looking at risk from this perspective, we not only see who has no clothes on when the tide goes out, but also how well (un)endowed they are in addition.
Now, compare the companies from the Doo Doo 32 article and the allocation of the TARP program below (sans the companies that have already failed or have been driven into other firms), and you will see that I am on to something. After all, the Doo Doo 32 article was penned on May 22, 2008, about 7 months ago. This was despite the fact that Treasury Secretary Paulson assured all of us that the worst was behind us (see The credit crisis is (not) waning and then Reggie Middleton says don't believe Paulson: S&L crisis 2.0, bank failure redux).
|Allocation of TARP Capital Injections ($ billions) 100% = $250 bn|
|Others (201 in total count)||$ 48|
|Bank of America/Merrill Lynch/CountryWide||$ 25|
|JP Morgan Chase/Bear Stearns/WaMu||$ 25|
|Wells Fargo||$ 25|
|Godlman Sachs||$ 10|
|Morgan Stanley||$ 10|
|US Bancorp||$ 7|
|Sun Trust||$ 5|
Now "the worst is behind us" Secretary Paulson wants to claim the balance of the TARP that is not already spent. WHY??? Well let's look at it visually.
Big on this list are the recipients of much of my research from early last year. Never let it be said that I don't have a clue about what's going on.
- Countrywide vs WaMu 9/8/2007
- Banks, Brokers, & Bullsh1+ part 1
- Is Lehman really a lemming in disguise?
- Is this the Breaking of the Bear?
- Doo-Doo bank drill down, part 1 - Wells Fargo
- Doo Doo Bank 32 Drill Down 1.5: Wells Fargo Bank
- Doo-Doo Bank 32 drill down: Part 3 - SunTrust Bank
- The Anatomy of a Sick Bank!
- The newest Goldman Report: the Goldan Boys as a Bank Holding Company
- The Riskiest Bank on the Street
- Riskiest Bank on the Street update for my subscribers
- Anecdotal observations regarding Bank of America
- I know who's holding the $119 billion dollar bag! / Comments by Reggie Middleton
Well, I have some other thoughts on certain financial institutions, the first of which is available below (with at least one other following). Subscribers can view my opinion here. I trust you will find the inconsistencies that I have found to be quite interesting. You will also be wise to beware of those "name brands" that are "too big to fail"! Keep the recent post, "The banking backdrop for 2009 " in mind as you read the following: