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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (32237)	10/4/2008 1:13:48 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78802

Paul, I can't blame you with STT. scary volatility. Bought. some again after selling in the high 50's at 52$ and 46$ this stock goes on "hellrides" almost every other day now without obvious reason. Business, IMO is intact. 2/3 if fee income - the dull business of custody and investment services which is very profitable and has been for many many years - and secondary their are a bank. there are no big issues in this business either but (a big one) they do manage a 28B$ SIV that appears to be a source of problems. They say they do not own it, but who knows. This thing is in the hole by about 1.6B$ (per 6/30/08) but isn't probably more by now. They provide some support (a few 100M$ in commercial paper financing) and help to run it. Legally they are probably not the owner but who knows about the contractual terms? Luckily they raised 2.5B$ in June issuing shares at 70$, which as they claim is enough to consolidate the SIV and still be well capitalized. library.corporate-ir.net So I say they should survive - they have the capital to do so and even more importantly they have a profitable business that does not need a lot of capital to run and is very profitable. But who knows, their could be a run on the back or the SIV is far worse than expected and we get the FED's coming in and taking this bank over too. I think there is a chance that this could happen but it's less than 10%, IMO. In my opinion almost any bank could implode in the US except USB and WFC; even JPM and BAC. Here is my list of risk factors: C: , many bad loans and weak earnings and risk of worldwide recession which traditionally has hit banks with international business very hard. JPM , seems to have a bulletproof west lately but they also have a huge credit card business and a ton of derivatives on their book. In fact the derivatives on their book far exceed tangible equity. Are they a risk? I don't know but I do not understand why they keep so many on their balance sheet. BAC: thin tangible equity blanket and MER takeover = risk Compared to that STT looks like a decent bet playing the Russian roulette game with financials.