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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (43765)	8/7/2011 11:28:48 PM
From: E_K_S	Read Replies (1) of 78743

Hi Paul - Citibank is the only bank I still own (it's in the IRA w/ a much higher cost basis) but just as you stated "it's a black box", I would never add more shares until (1) it is split up into separate operating companies I can understand or (2) at least the U.S. residential housing market stabilizes. Here is a link to a post that gcrispin posted on the Fundamental Value Investing thread today regarding BAC. I know BAC has significant exposure to the bad loans they still hold but now the Gov (Fannie Mae & Freddie Mac) is making them buy back loans they previously considered sold and off their books. Apparently several more of these "put back" loans are going to further sour they balance sheet. Message 27549839 I still think the housing market needs to drop another 20% to clear out all of the foreclosure inventory (including the shadow foreclosures) and according to the article, BAC has figured in their loss estimate at most a 3% decline in real estate prices. I found this quote from Morningstar that gcrispin posted to be quite concerning: "...For instance, the bank is estimating a 3% decline in home prices for 2011 and a 1% increase in 2012. For every percentage point it is off, the bank will need to take more than $550 million of pretax losses just on pre-existing problem loans and put-backs (and this figure does not include the greater severity of losses on mortgages that are still performing at this point but may go bad in the future). Additionally, we continue to wait for a foreclosure settlement with the state attorneys general that could cost Bank of America several billion dollars by our estimates...." I am not sure of Citicorp's exposure to the mortgage industry but IMO BAC is going to report a lot more losses before it is over. Citicorp has to be in the same boat. --------------------------------------------------------------------------------------------- These are my top picks for tomorrow. AGL has made it back on my list. I like their intrastate natural gas pipelines and distribution facilities when I compare them to SEP & TCLP. My last buy was $35.00/share. Their LT Debt to annual net income is about 50% higher than SEP or TCLP but still in the low territory for a utility. Their PE and Forward PE is the lowest in the group at 13.07 and 11.65 respectively. finance.yahoo.com With Oil now below $84.00/barrel (Bloomberg shows $83.99 real time), I just might have my chance at a few MHR shares below $5.00. My last sale on MHR was in May at $5.50/share and I would like to buy these shares back. Although the risk/reward probably does not match up to C I consider the downside risk small especially when I factor in the quality of the assets I am buying. EKS

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