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Many Banks May Resume Dividends

 
 
Elle
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      01-15-2011, 12:27 AM
http://www.nytimes.com/2011/01/14/bu...vidends&st=cse

I trust like everyone here already read the above article or reports
of same. It is one of the few articles in the last several months that
gave me hope that things are truly getting better and this country is
not going into a Great Depression. Great debt maybe but not a great
depression.

I held onto most of my bank stock through the dividend slashing and
downturn, taking quite a beating both income and principal wise for a
period. It will be interesting to watch (1) how bank stock prices rise
(presumably), in response to improved earnings and also perhaps
dividends; and (2) how quickly the dividends return to their levels
before the slashing. I figure the latter may be years for BAC and C.

The fraction of my portfolio in bank stocks will however forever (I
hope!) remain lower than before this Great Recession. I am guilty of
having bought into businesses whose financials I am least able to
understand. The rule of diversifying based on risk saved me.
"Diversify" is the one piece of advice I have for any amateur who
invests or any layperson interviewing financial advisors. I am pretty
proud of this, especially since my one eccentric but beloved relative
with all the bucks said I should drop the huge position in CDs. Ha. I
had a good laugh at the height of the crisis. Since then I have taken
some of those CDs, as they matured, and moved them into nuts and
bolts, old companies, Ben Graham style. Round 2 of the competition
between little Elle and beloved eccentric relative begins. :-)

Hope all are well.

 
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Igor Chudov
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      01-15-2011, 06:18 AM
On 2011-01-15, Elle <(E-Mail Removed)> wrote:
> http://www.nytimes.com/2011/01/14/bu...vidends&st=cse
>
> I trust like everyone here already read the above article or reports
> of same. It is one of the few articles in the last several months that
> gave me hope that things are truly getting better and this country is
> not going into a Great Depression. Great debt maybe but not a great
> depression.
>
> I held onto most of my bank stock through the dividend slashing and
> downturn, taking quite a beating both income and principal wise for a
> period. It will be interesting to watch (1) how bank stock prices rise
> (presumably), in response to improved earnings and also perhaps
> dividends; and (2) how quickly the dividends return to their levels
> before the slashing. I figure the latter may be years for BAC and C.
>
> The fraction of my portfolio in bank stocks will however forever (I
> hope!) remain lower than before this Great Recession. I am guilty of
> having bought into businesses whose financials I am least able to
> understand. The rule of diversifying based on risk saved me.
> "Diversify" is the one piece of advice I have for any amateur who
> invests or any layperson interviewing financial advisors. I am pretty
> proud of this, especially since my one eccentric but beloved relative
> with all the bucks said I should drop the huge position in CDs. Ha. I
> had a good laugh at the height of the crisis. Since then I have taken
> some of those CDs, as they matured, and moved them into nuts and
> bolts, old companies, Ben Graham style. Round 2 of the competition
> between little Elle and beloved eccentric relative begins. :-)
>
> Hope all are well.
>


Very nice. Good thinking. I bought into Wells Fargo in 2009 and it now
represents a significant part of my brokerage account, approximately
15%.

I expect it to earn about $5 per share in a couple of years, and thus
even at 32 it is very conservatively priced. I will probably diversify
and sell part of it, if it goes above $60.

i

 
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Elle
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      01-15-2011, 03:04 PM
On Jan 14, 11:18*pm, Igor Chudov <(E-Mail Removed)> wrote:
> I bought into Wells Fargo in 2009 and it now
> represents a significant part of my brokerage account, approximately
> 15%.
>
> I expect it to earn about $5 per share in a couple of years, and thus
> even at 32 it is very conservatively priced. I will probably diversify
> and sell part of it, if it goes above $60.



WFC and JPM have a P/E, return on assets, and return on equity that
are not non-sensical. Compare to BAC and C.

Financial education-wise it was still very interesting to me when even
the likes of WFC reduced its dividend significantly. I expect BAC and
C to recover as well, though granted WFC never seemed to be in as much
trouble.

 
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dapperdobbs
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      01-16-2011, 02:43 PM
On Jan 14, 7:27*pm, Elle <(E-Mail Removed)> wrote:
<...>
> The fraction of my portfolio in bank stocks will however forever (I
> hope!) remain lower than before this Great Recession. I am guilty of
> having bought into businesses whose financials I am least able to
> understand.

<...>

WFC kept WB stock options (prorated and repriced) in order to
adequately compensate WB management for achieving their long-term
objectives in the best interests of the shareholders.

There was nothing I saw in WB 10K filings to indicate it had a
potential loss of $800 billion dollars (out of total assets of $837
billion). I perused these for a few hours to arrive at an approximate
maximum liability of $24 billion - the same number a Bloomberg
reporter subsequently came up with as a result of her perusal. I
consider bank reporting to be entirely fictional, that is, to be
politically correct, "creative." It is a very low form of creativity.
New regulations are inadequate and weak and deferred for many years,
to begin with. Yet banks now seek through international lobbying of
regulatory bodies to dilute them even further, to allow the same
undisclosed derivatives transactions that brought on the financial
crisis to begin with. I consider the NYT article to be merely bank
lobbying PR.

 
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Elle
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      01-16-2011, 04:48 PM
On Jan 16, 7:43*am, dapperdobbs <(E-Mail Removed)> wrote:
> WFC kept WB stock options (prorated and repriced) in order to
> adequately compensate WB management for achieving their long-term
> objectives in the best interests of the shareholders.
>
> There was nothing I saw in WB 10K filings to indicate it had a
> potential loss of $800 billion dollars (out of total assets of $837
> billion). I perused these for a few hours to arrive at an approximate
> maximum liability of $24 billion - the same number a Bloomberg
> reporter subsequently came up with as a result of her perusal. I
> consider bank reporting to be entirely fictional, that is, to be
> politically correct, "creative." It is a very low form of creativity.
> New regulations are inadequate and weak and deferred for many years,
> to begin with. Yet banks now seek through international lobbying of
> regulatory bodies to dilute them even further, to allow the same
> undisclosed derivatives transactions that brought on the financial
> crisis to begin with. I consider the NYT article to be merely bank
> lobbying PR.



Your opinions are gold to me. Fortunately(?) my bank stocks are worth
so little at this point that I do not tarry over selling them. Looking
at the bright side, their history was free(?) education at this point,
and it keeps me humble. About eleven percent of my portfolio of
stocks, CDs and money markets was in banks before the crash. Five
percent was in WM (ouch). Igor has the backbone to hold 15% in banks.
Now I know why P/Es historically are well below the average for the
S&P. Risk. Or else like you suggest George: They are bloody houses of
cards.

Love my (nuts and bolts) Ingersoll Rand's (IR) history, even with the
dividend cut. Plus being nuts and bolts, I sleep better holding it and
similar stocks. :-)

Otherwise I am leary of the manufacturing stocks that have to do a lot
of financing. E.g. automobile stocks and places like CAT. General
Electric is irritating for its huge switch some years ago from
building things other than, again, financial houses of cards.

So are my impressions as a layperson whose main strategy is
diversification and betting on the economy (and greed of the public to
live better) as a whole.

 
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Igor Chudov
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      01-17-2011, 03:27 PM
On 2011-01-15, Elle <(E-Mail Removed)> wrote:
> On Jan 14, 11:18?pm, Igor Chudov <(E-Mail Removed)> wrote:
>> I bought into Wells Fargo in 2009 and it now
>> represents a significant part of my brokerage account, approximately
>> 15%.
>>
>> I expect it to earn about $5 per share in a couple of years, and thus
>> even at 32 it is very conservatively priced. I will probably diversify
>> and sell part of it, if it goes above $60.

>
>
> WFC and JPM have a P/E, return on assets, and return on equity that
> are not non-sensical. Compare to BAC and C.
>
> Financial education-wise it was still very interesting to me when even
> the likes of WFC reduced its dividend significantly. I expect BAC and
> C to recover as well, though granted WFC never seemed to be in as much
> trouble.



Wells Fargo had to reduce its dividends due to TARP. They had no
choice.

Wells never did any of the stupid things that the other banks
did. They never went into dumb loan business, loaned money to
questionable countries, etc.

They stuck to what they knew, which is boring banking, safe lending,
cross selling of financial products, serving customers well etc. They
have the lowest cost of funds among major banks due to a well run
operation.

I expect that they will pay a $2 dividend per year when the dust
settles. They paid a $1.4 dividend before the crisis, but picked up
Wachovia on the cheap.

i

 
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dapperdobbs
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      01-19-2011, 12:48 AM
On Jan 16, 11:48*am, Elle <(E-Mail Removed)> wrote:
>
> Your opinions are gold to me.

<...>

Wish all of them were, actually.

You like nuts and bolts, eh?

http://www.marketwatch.com/story/fas...DFAST&sid=1895

The above is offerred principally for reading interest as it carries a
thorough financial reporting. Hope you enjoy it.

 
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