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Minyanville's wise professor, Mark Bloudek, dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
I've been doing precious little in this market, but one stock I've been tracking closely is Wachovia Corp. (NYSE: WB). Why would I pay more mind to Wachovia than to other banks? Because it bought Golden West Financial in May of 2006 for $25 billion. And where did Golden West have most of its exposure? That's right, California.
Last night I was looking through the median home price data in the Multiple Listing Service (MLS) in various California cities and noticed some shocking price drops. The median home price offers in San Francisco dropped $10,000 in one week. Ditto for Orange County. In Los Angeles, the figure was a startling $13,000. I went back to check when the market topped in these areas and found that every one of them peaked in -- drum roll, please -- May of 2006.
When the mortgage crisis first started, the theme I used to locate short opportunities was California exposure. Two companies that came to mind in the early days were Washington Mutual (NYSE: WM) and Countrywide (NYSE: CFC).
In terms of identifying a trading opportunity, the question with Wachovia is, how much has been priced in since declining precipitously from early May? And can Wachovia remain a standalone bank in the face of rapidly declining asset (read: home) prices in California after its acquisition of Golden West? Finally, is Wachovia the weakest of the big banks?
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Reader Comments (Page 1 of 1)
6-22-2008 @ 1:02PM
paul juliet said...
That comment about is worth what I paid for it.
"nothing". Wachovia is corrupt and according to their own executives...a company in crisis.
It is probably the next "Bear Stearns".
I will email you back when it all happens with a "i told you so" email.