November 8, 2007
I fell for it too. But only in a tiny way. I recently bought a few shares in Washington Mutual thinking they already had gotten hit and they were sporting a 7.5% dividend! Well, as soon as I heard the news that something was going on with the Attorney General in NY looking into fraudulent practices by WM, I bailed out. I lost some $2/share. It'll be in my Purchases and Sales tab. It's down $5/share more since I sold. It's hard to believe that their dividend is now over 11%, but who knows if that will be maintained? If we could only have a crystal ball and know if the bank is still on solid footing, that would be one heck of a dividend for a financial institution!
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THE COCKROACHES OF WALL STREET ARE COMING...
The 2003 invasion of Iraq will go down as one of the greatest "buy" signals for financial assets in the history of mankind.
Around that time, private-equity firms, hedge funds, mortgage originators, investment banks, and credit issuers began swimming in cheap money. The profits that poured into financial centers like New York and London are still trying to find a place to stay.
This boom showed up in a steady bull market in the iShares U.S. Financial Fund (IYF)... an ETF made up of financial titans like Citigroup, JPMorgan, Morgan Stanley, Goldman Sachs, and American Express. These are the companies that benefit when loans are paid back, when businesses expand, and when stocks and bonds are purchased... and these are the companies that suffer when idiotic loans are extended to all takers.
You can place these firms in "suffer" mode right now. These companies in aggregate have taken on too much risk, used too much BS accounting, bought too many garbage loans. They now sport the ugliest chart known to mankind. It will get worse... and more cockroaches will crawl out of this heap before it ends.
- Brian Hunt
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