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Things are not so good at the Banks


monsoon

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BofA invested $2B in Countrywide last year in an effort, so they said, to shore up the market. It was really a marker thrown down by Lewis to allow him to later purchase the company at $18/share. Now that CW has gone south, that investment is worthless and BofA stock is worth 25% less than it was before they made this move. BofA is being forced to buy this company or completely lose it's 2 billion dollars. They don't really have any choice. However.....

Countrywide is in serious trouble and BofA is also getting a lot of political heat for giving golden parachutes to the management at CW that caused the mess in the first place. This is going to cause the bank untold problems with bad mortgages and cost them political friends they really need to get through it.

I might be missing something but it doesn't look like BofA is that much smarter either.

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BofA invested $2B in Countrywide last year in an effort, so they said, to shore up the market. It was really a marker thrown down by Lewis to allow him to later purchase the company at $18/share. Now that CW has gone south, that investment is worthless and BofA stock is worth 25% less than it was before they made this move. BofA is being forced to buy this company or completely lose it's 2 billion dollars. They don't really have any choice. However.....

Countrywide is in serious trouble and BofA is also getting a lot of political heat for giving golden parachutes to the management at CW that caused the mess in the first place. This is going to cause the bank untold problems with bad mortgages and cost them political friends they really need to get through it.

I might be missing something but it doesn't look like BofA is that much smarter either.

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Wach paid $24 billion for a $120 billion loan portfolio of which 60% is in California... a state where home values will probably drop to half what they were at the bubble's peak. I could easily see several billion more in losses coming over the next few years.

Wach could have just bought the Arena from Bob Johnson and paid for the entire 2030 plan a couple of times over, for that kind of change. :rolleyes: Maybe even finished 485 too.

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There was an economic advisor on MSNBC today that said average home prices in the USA have risen 87% since 2000. This is unprecedented in American history. He said it is an artificial bubble created by misguided Bush administration's singular focus to stimulate the housing market with very cheap credit and loose regulation. The purpose was to create an economy that looked good, which isn't because it was based on the concept of never ending rises in real estate prices. In other words a pyramid scheme. The Easter Island syndrome.

An 87% appreciation in prices can't be justified in an economy where the average household income has actually dropped during the same period. Its not sustainable. It was a 100 year bubble that won't be repeated in the lifetimes of anyone here.

It's all starting to unravel now and anyone that has made a purchase of a home in the last few years, especially one in a quickly appreciating neighborhood is going to get burnt by the decline. The bigger causalities however will be the banks who are the real owners of all of this depreciating property and are going to bear the brunt of the mess hey helped create. I don't see how Charlotte's banks, which are mainly consumer banks, are going to get through this without major adjustments.

It's also going to directly affect plans for downtown Charlotte which has been mainly built on the gains of this bursting Bush bubble.

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He said it is an artificial bubble created by misguided Bush administration's singular focus to stimulate the housing market with very cheap credit and loose regulation. The purpose was to create an economy that looked good, which isn't because it was based on the concept of never ending rises in real estate prices.
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Perhaps the most intriguing part of this mess to me is the parallels between the Tech industry in 2000 and the banking sector today.

I remember a number of students at Chapel Hill and State telling me that companies such as Cisco, Nortel, Lucent, etc. had begun rescinding job offers as early as November of 2000. By then, most of us knew the Naz party was over, but the fact that many Silicon Valley Cos had completely shut down their college recruiting operations gave us an early taste of how bad things were going to get.

Fast forward to now, and so far this year I know that BB&T has discontinued its I-Banking Program, at least for this year, National City has completely done away with graduate school recruiting, BofA has scaled down to recruiting from only the "core-est" of its core schools, and just today, I was forward an email from a grad student at a very prestigious university informing him that his MBA Internship position with Wachovia for the summer has been cancelled (FYI, most MBA programs will go on summer break in the next 4 weeks, so this guy is in bad shape).

Good tech earnings today don't distract me from the notion that the "bottom" in the banking sector could still be a year or more away, and that's if the US doesn't pull a Japan and try to disguise bad numbers.

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There was an economic advisor on MSNBC today that said average home prices in the USA have risen 87% since 2000. This is unprecedented in American history. He said it is an artificial bubble created by misguided Bush administration's singular focus to stimulate the housing market with very cheap credit and loose regulation. The purpose was to create an economy that looked good, which isn't because it was based on the concept of never ending rises in real estate prices. In other words a pyramid scheme. The Easter Island syndrome.

An 87% appreciation in prices can't be justified in an economy where the average household income has actually dropped during the same period. Its not sustainable. It was a 100 year bubble that won't be repeated in the lifetimes of anyone here.

It's all starting to unravel now and anyone that has made a purchase of a home in the last few years, especially one in a quickly appreciating neighborhood is going to get burnt by the decline. The bigger causalities however will be the banks who are the real owners of all of this depreciating property and are going to bear the brunt of the mess hey helped create. I don't see how Charlotte's banks, which are mainly consumer banks, are going to get through this without major adjustments.

It's also going to directly affect plans for downtown Charlotte which has been mainly built on the gains of this bursting Bush bubble.

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I still talk to A2 on a somewhat regular basis....hopefully this is the only predicition he gets right (though he did tell everyone on here to buy silver, which would have been smart).....his current predicitions for the economy is probably more pessimistic than anything being reported in the mainstream media.....
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"It's also going to directly affect plans for downtown Charlotte which has been mainly built on the gains of this bursting Bush bubble."

This line cracks me up. "Bush bubble". Ah how we forget that the entire Democratic party was equally behind this. All I can say from my professional opinion is that we can not recruit enough people for Wachovia right now. IT unemployment is at an all time low. .09% unemployment! This is a great time. Not doom and gloom.

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"It's also going to directly affect plans for downtown Charlotte which has been mainly built on the gains of this bursting Bush bubble."

This line cracks me up. "Bush bubble". Ah how we forget that the entire Democratic party was equally behind this. All I can say from my professional opinion is that we can not recruit enough people for Wachovia right now. IT unemployment is at an all time low. .09% unemployment! This is a great time. Not doom and gloom.

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Yes of course there has been a substantial amount of overseas outsourcing, but that is mainly the repeatable technical tasks and day to day support. Frankly, the stuff that US College graduates won't do. The real demand is in the Analysis and engineering. Mostly, every thing that has been outsourced has been the undesirable work. It's like outsourcing ditchdigging, the comment also reminds me of a South Park episode were the mantra was "They took our jobs"....

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Bank of America is announcing some really bad earnings today. A while back BofA made a big deal out of investing in Chinese Construction Bank, the 2nd largest bank in Communist China. This was supposed to extend the reach of the bank beyond the borders of the USA and give it opportunity for more growth. BofA now finds itself in the bad position of having to raise billions in capital money and as a result is rumored to be in talks with the communists to sell off its stake in that bank.

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Yes of course there has been a substantial amount of overseas outsourcing, but that is mainly the repeatable technical tasks and day to day support. Frankly, the stuff that US College graduates won't do. The real demand is in the Analysis and engineering. Mostly, every thing that has been outsourced has been the undesirable work. It's like outsourcing ditchdigging, the comment also reminds me of a South Park episode were the mantra was "They took our jobs"....
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Bank of America is announcing some really bad earnings today. A while back BofA made a big deal out of investing in Chinese Construction Bank, the 2nd largest bank in Communist China. This was supposed to extend the reach of the bank beyond the borders of the USA and give it opportunity for more growth. BofA now finds itself in the bad position of having to raise billions in capital money and as a result is rumored to be in talks with the communists to sell off its stake in that bank.
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Is there anything that some of you guys can't in some way blame on Bush? And to believe that you know what his intentions were is funny.

I personally think that the loons that blame everything on Bush or the Republicans can't get a good grasp on reality. There is blame on both sides, as previously stated. Just because Bush has strong convictions that may not jive with your "lifestyle" doesn't mean you should blame all of society's problems on his policies.

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Is there anything that some of you guys can't in some way blame on Bush? And to believe that you know what his intentions were is funny.

I personally think that the loons that blame everything on Bush or the Republicans can't get a good grasp on reality. There is blame on both sides, as previously stated. Just because Bush has strong convictions that may not jive with your "lifestyle" doesn't mean you should blame all of society's problems on his policies.

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.....

I personally think that the loons that blame everything on Bush or the Republicans can't get a good grasp on reality. There is blame on both sides, as previously stated. Just because Bush has strong convictions that may not jive with your "lifestyle" doesn't mean you should blame all of society's problems on his policies.

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