The Next Train Wreck

tabs · 03-17-2008, 01:40 PM

Citigroup....

kach22i · kach22i's Garage

I might still have some of their stock..........shiiiit!

Porsche-O-Phile · Porsche-O-Phile's Garage

Agreed.

Well, maybe not THE next, but they'll almost certainly be ONE OF the next ones.

Komenda Fan · Komenda Fan's Garage

I've long suspected that Citigroup would go the way of Enron... always seemed not quite right...

mattdavis11 · 01:48 PM

Not news. You're slipping.

The fire arm fiasco POP pointed out months ago told us that.

stomachmonkey · 03-17-2008, 01:54 PM

hmmm,

gotta couple hundred k parked there.

think the wife will be running around opening some new accounts tomorrow.

spread it around some.

Joeaksa · 03:34 PM

Would love to see it. I have a Citibank credit card and they bought my morgage from ABN-AMRO six months ago.

If either payment is one minute late they are on the phone, filling up the answering maching with messages "urgent that you call us" but then they are still trying to charge me 29% interest on the cc. Then they get pissed off when I do not carry a balance over from month to month...

Only bank I hate worse is Bank of America, the "illegal immigrants friend"...

Sapporo Guy · 03-17-2008, 03:59 PM

Quote:

Originally Posted by stomachmonkey

hmmm,

gotta couple hundred k parked there.

think the wife will be running around opening some new accounts tomorrow.

spread it around some.

Now, if a lot of people did the same thing at that bank ...
Sh@t would hit the fan!

the · 03-17-2008, 04:24 PM

Quote:

Originally Posted by tabs

Citigroup....

Why?

stomachmonkey · 03-17-2008, 04:36 PM

Quote:

Originally Posted by Joeaksa

Would love to see it. I have a Citibank credit card and they bought my morgage from ABN-AMRO six months ago.

If either payment is one minute late they are on the phone, filling up the answering maching with messages "urgent that you call us" but then they are still trying to charge me 29% interest on the cc. Then they get pissed off when I do not carry a balance over from month to month...

Only bank I hate worse is Bank of America, the "illegal immigrants friend"...

They bought out the mortgage on my fathers place.

You are right. They are quick to call.

Had one of them on the phone couple of weeks ago pushing for a check by phone.

Said no thanks, we'll just wait for the payment to show up.

She kept on pushing it, "you don't want this to reflect on your credit report".

I said lady, it's in my fathers name, he's dead, bad credit is the least of HIS problems.

MT930 · 03-17-2008, 04:52 PM

There are going to be many train wrecks in the near future. Find a safe place to watch. Seems alot of people did not know what their money was going in to.

lendaddy · 03-17-2008, 04:55 PM

Quote:

Originally Posted by the

Why?

They just bought my mortgage, this tells me everything I need to know.

strupgolf · 03-17-2008, 04:58 PM

The sh** is about to hit the fan, so cover your face.

MRM · 03-17-2008, 05:40 PM

I've been watcing Citibank for a few months now. I think there is another shoe to drop and the price will go lower, but I don't think they'll go out of business. Citibank has a long history of inovation, getting into trouble, inovation, getting into trouble . . . I'm tinking about mid summer it will hit bottom and will snap back when the yield curve normalizes and the financial stocks come back.

the · 03-17-2008, 05:49 PM

I would think that at the end of the day, this mess is going to kill, or at least severely maim, some of the financials. But they are competitors of each other. So for every one that dies, you'd think that one of the other would benefit. Bear Sterns dies, JPM benefits.

The weak get killed, the strong get stronger?

Where does Citi fit into that? They are an $18 stock today, but I doubt they will be at that price a year from now. The question is, will they be $30, $50, $5, or gone? I'd like to see the arguments.

tabs · 03-17-2008, 07:04 PM

Could be a shell of their former selves. Spinnofff Citi.

Racerbvd · Racerbvd's Garage

Quote:

Originally Posted by kach22i

I might still have some of their stock..........shiiiit!

A buddy had $30K in their stock, looks like that is gone

In the past 3 months, he lost $8K on them

the · 03-18-2008, 06:05 AM

they say the time to buy is when there is fear, and blood on the street.

is this that time?

MF Financial up 23% today. Lots of other financials up big today. Not everyone is going to go broke. There is big money to be made.

MRM · 03-18-2008, 07:02 AM

Wait till mid summer for the blood in the streets. This is the calm before the storm.

tshore · 03-18-2008, 07:03 AM

Quote:

Originally Posted by Wayne at Pelican Parts

No, the next train wreck, and the biggest of them all is Fannie Mae. Done deal, these guys were so highly leveraged in 2003 that a Harvard economics professor wrote a report about how they would be going bankrupt in the future. Read this, it's scary:

From 2003:

http://www.larouchepub.com/other/2002/2924fannie_mae.html

and

http://www.larouchepub.com/other/2003/3010ofheo_rpt.html

-Wayne

Wayne these links are to a site run by Lyndon LaRouche. He has been preaching imminant doom for decades. Without going into too much detail, it's safe to say that his views on many things are far, far outside the mainstream.

Even if we grant that a stopped clock is right twice a day, and that Fannie Mae (and Freddie Mac) should be better-capitalized, there is no way these companies are going to be the "next train wreck". While it is not impossible Fannie could fail, the events that would take Fannie down would crush many other major firms first.

Fannie Mae has about $44B in capital, according to it's latest 10k for 1997. Fannie lost about $2B last year, so at the rate of last year's losses it would take 22 years to deplete Fannie's capital base.

There are two potential threats to Fannie's solvency. First is that the rate of loss on the $2 trillion of Mortgage-Backed Securities (MBS) that it insures will increase substantially. If those loss rates hit a 1% annual rate that would about halve Fannie's capital. Offsetting that, the vast majority of that $2B is quite low risk - 80% loan-to-value loans or less, to borrowers with good credit scores. Historically, the loss rate on these gurantees (which Fannie reserves for) has been about 3 basis points, or .03%. In 2007 that rate increased to 13 basis points, or .13%. That's a big jump, but still far short of a level that would really threaten Fannie Mae.

The sceond threat is that the market value of its $290B available-for-sale MBS portfolio will decline, forcing Fannie to take a write-down that could materially eat into it's capital base. A big rise in interest rates could potentially cause this, but that's unlikely in the present environment. The other cause could be a huge widening in credit spreads on Fannie Mae securities. Those spreads did widen in 2007, they would have to widen about a further 700 basis points to reduce Fannie's capital by 50%. No sign of anything like that at this point.

One more thing to bear in mind: Although Fannie could use more capital (in my opinion), it has more than twice the capital, relative to its asset size, that it had in 2003. Unlike many other financial firms, Fannie Mae is probably on safer financial ground now than it was five years ago.