I like Citi down here. I own them in smallish though. I think the government sell out by late this year or early next.

I think they could end up going to $7.50
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My biggest position- long investment position- is bank of America. I figure they have all of 2010 writing off around another 30 billion and from then on they could have a decent balance sheet earning up to 4 bucks a share pro forma by the second 1/2 of 2011 and fully in 2012.

They are the most undervalued stock I see at the moment with book value at around 28 bucks a share which means they are trading at a discount to book at around 70% . Historically banks are as high as 1.7 times book value.

The stress test did actually make the banks face up to the toxic shit.

I think they’ll be as high as 55 bucks a share by 2012.

I bought this stuff so low that by 2012 their earning alone will be a huge slab of my entry price. I bought them well before john Paulson, so technically of the turn this makes me a superior trader than he is, although he owns around 1.8% of the bank. LOL.

Bac has around $60 billion of hard to value assets which was face value but the stress tests forced them to write around 30% of the value down even further than where they had.

their earning power alone could make them 30- 40 billion a year.

Stop reading all the doomsday fucekers on the web and listen to me. The US large banks are fine.

Why do you want to do that other than to provide liquidity in a price neutral manner? There was a clear asset price bubble that was a cause and helped sustain the pre crisis calamity. I think you’ve been sold a pup on the Austrian theory. Deflation may be necessary re valuations but it is not necessarily persistent. Some capital and assets have effectively been written off forever and so that scarcity gets built into the economy and pricing. Some of the inflation before the bust becomes permanent in prices.

The stimulus is indefensible in terms of job creation. There is no need to go over this. With stimulus, 8% unemployment, without 9%, actual – 10.2%.

“The CRA is a convenient scapegoat, the non-agency sector was responsible for the majority of the increase in mortgage finance (including non-prime), this was facilitated by easy money.”

No. That’s not what I’m doing, so why bring it up as a “scapegoat”? It’s a piece of the bewildering puzzle that is US mortgage policy.

If monetary policy is rendered ineffective by a rise in liquidity preference then we are left with fiscal stimulus to mitigate a deflation. The fiscal stimulus has not been ineffective, that policy has supported activity is in my mind beyond question the CBO puts job creation at between 1 and 2 million in Q4, however this is not the whole story the rise in activity in Q4 has likely assisted in the US emergence from deflation.

There is no argument about the necessity of QE, what is in debate is its effectiveness in promoting economic activity given financial conditions continue to tighten.

The CRA is a convenient scapegoat, the non-agency sector was responsible for the majority of the increase in mortgage finance (including non-prime), this was facilitated by easy money.

What I say next would be contentious to a supporter of the nutty idea of 100% backing if they didn’t pay attention to your efforts for me to refocus on the question at hand. The Fed had little choice but to engage in quantitative easing. This is what a private issuer of currency would do – provide liquidity. (This may be how a reference I made earlier led you to believe I wasn’t talking about the here and now).

I have a laundry list of reasons, macro and micro why I think it happened. Every time I bring say, the CRA as one of them, someone claims I’m making it out to be THE cause of the GFC. I’m not.

“Did Fannie and Freddie contribute by providing too much liquidity to the mortgage market? Of course. I just think that saying they, or the CRA were the major contributor misses the point.”

Sure it does but that’s not the point I was trying to make. 1. The CRA cannot be discounted. 2. The GSEs carried a large amount of the market with little regard to credit risk, along with being saddled with HUD provisions and GSE loans banks didn’t want.

But these of course are two of many reasons.

What do you know I don’t, SFDC?

Did Fannie and Freddie contribute by providing too much liquidity to the mortgage market? Of course. I just think that saying they, or the CRA were the major contributor misses the point.

You are correct. This however doesn’t mean the CRA is unrelated. They had charter provisions to buy up CRA loans banks didn’t want.

They had 70% of the entire mortgage market. This is not absolution by any means. 70% of the mortgage market was impacted by decisions made under that 2 trillion dollar line of credit.

The CRA may be a smaller player but it’s a bad idea and part of the reason why NINJA loans exist. The whole point being not the GSE gaff I made, but that the true extent of the CRA has been hidden in some sleights of hand. The mortgage company may not be subject to CRA, but the originator that wholesales to them often was.

“Free banking is not really a discussion for what happens in a financial collapse.”

No you asked for the Austrian solution. It isn’t deflation, but to make for price neutral liquidity provision. Free banking has incentives geared towards this. Deflation isn’t the solution. If asset prices fall, so be it. They need to.

“Free banking actually sounds to me like it wouldn’t make the fiancial markets anymore stable but also introduce cerdit risk into the currency.”

Our currency already has credit risk. The alternative is credit risk with market discipline.

Free banking is not really a discussion for what happens in a financial collapse.

Free banking actually sounds to me like it wouldn’t make the fiancial markets anymore stable but also introduce cerdit risk into the currency.