https://risksandreturns.com/category/banking/ In search of asymmetric trading opportunities… en-US https://risksandreturns.com/2008/10/12/the-credit-market-panic-will-soon-subside/ https://risksandreturns.com/2008/10/12/the-credit-market-panic-will-soon-subside/ Sun, 12 Oct 2008 11:06:38 +0000 The credit markets have come to a standstill as evidenced by the skyrocketing TED spread. This is the difference in rates between three-month LIBOR and three-month T-bills and is a gauge of how fearful banks are to lend to one another. https://risksandreturns.com/2008/08/27/the-us-banking-system-faces-collapse/ https://risksandreturns.com/2008/08/27/the-us-banking-system-faces-collapse/ Wed, 27 Aug 2008 20:43:23 +0000 Over the last 6 weeks financial stocks have rallied prompting some market commentators to declare that most of the losses banks will suffer during this downturn have already been written off. I strongly disagree believing that we are still in the early innings of this credit crisis and things are likely to get much worse before they get better. Let me explain. https://risksandreturns.com/2008/06/03/interview-with-mohamed-el-erian/ https://risksandreturns.com/2008/06/03/interview-with-mohamed-el-erian/ Tue, 03 Jun 2008 11:43:28 +0000 There was an interview in Barron’s over the weekend with PIMCO’s Mohamed El-Erian in which he prescribes to investors how to approach the troubled financials. Here is an excerpt: https://risksandreturns.com/2007/08/28/the-financialization-of-the-us-economy/ https://risksandreturns.com/2007/08/28/the-financialization-of-the-us-economy/ Tue, 28 Aug 2007 19:52:17 +0000 A couple of insightful posts by Sudden Debt here and here elucidate how dependent the US economy has become on a growing financial sector: https://risksandreturns.com/2007/08/07/an-overview-of-mortgage-securitization/ https://risksandreturns.com/2007/08/07/an-overview-of-mortgage-securitization/ Tue, 07 Aug 2007 20:37:21 +0000 Here are a couple of simple graphical representations of the mortgage securitization process: https://risksandreturns.com/2007/07/27/residential-mortgage-backed-securitization-process/ https://risksandreturns.com/2007/07/27/residential-mortgage-backed-securitization-process/ Fri, 27 Jul 2007 18:40:21 +0000 Came across this graphic which depicts the securitization of RMBS: https://risksandreturns.com/2007/02/18/the-subprime-market-implosion-and-its-consequences/ https://risksandreturns.com/2007/02/18/the-subprime-market-implosion-and-its-consequences/ Sun, 18 Feb 2007 20:57:19 +0000 The subprime mortgage market has been dominating news lately with signs that rising defaults and delinquencies are wreaking havoc on the mortgage industry. Here are some of the headlines: https://risksandreturns.com/2006/12/11/doubling-down-against-the-brokers/ https://risksandreturns.com/2006/12/11/doubling-down-against-the-brokers/ Mon, 11 Dec 2006 20:18:19 +0000 Fueled by stronger than expected earnings and a rising stock market the brokers have rallied by 15-20% since I mentioned that I was going to short them. However, my long-term view of the sector is unchanged. The economy will suffer a housing-led recession in 2007 that will hurt the brokers’ profits significantly. The current rise in their share prices could mean a greater fall once the stock market begins to decline. https://risksandreturns.com/2006/12/05/increasing-subprime-mortgages-delinquencies/ https://risksandreturns.com/2006/12/05/increasing-subprime-mortgages-delinquencies/ Tue, 05 Dec 2006 12:22:47 +0000 The WSJ reports that delinquencies on subprime mortgages have been increasing at a troubling rate recently. https://risksandreturns.com/2006/08/29/shorting-the-brokers/ https://risksandreturns.com/2006/08/29/shorting-the-brokers/ Tue, 29 Aug 2006 20:55:07 +0000 Earlier this month Marc Faber caught my attention for predicting that the stocks of brokers are set-up for a fall similar to the stocks of the home builders 12 months ago. An article in yesterday’s Barron’s discusses this idea in greater detail;