If not for the collapse of Washington Mutual (NYSE: WM) this week, I would probably not have posted this saga so soon after last Monday's report. However, since I was a shareholder of WaMu and thought there was value in it when I posted Chasing Value: Are you watching WaMu? I felt it was time to take my lumps.
I cannot go on ranting and raving about the failures and deceptions of others without making sure that I am forthright and transparent myself. I did post Chasing Value: Not -- WaMu one week later - ouch! but now WaMu is toast and so is some of my money.
Since I posted Serious Money: Tempting fate with 10 financials, the results of buying into the following pool of financial stocks at a time when the "hate 'em" factor was at a peak, with each passing day investors have found something more to hate.
The portfolio is losing 4.8% to date, not counting dividends. Some of my colleagues thought it was way too early to get back into the financial sector; seems that way now, and one read me the riot act for reporting the story so soon on MBIA Inc. (NYSE: MBI) being up substantially.
Surprisingly, even though Wamu is now history after the FDIC took over and JPMorgan Chase (NYSE: JPM) bought it out, and Lehman Brothers Holdings (OTC: LEHMQ) went bankrupt, I would have thought the results might have been even worse -- and that could happen before it gets better. This week six stocks are still up, two are down, and two are gone. The original prices are from July 29 and the follow-up is from September 26.
Failures:
- Lehman Bros. Holdings (NYSE: LEH) -- $16.88 down 75% from its 52 week high of $67.73; down and out -100%. Barclays bought assets in bankruptcy.
- Washington Mutual (NYSE: WM) -- $4.43 down 89% from its 52 week high of $39.48; down and out -100%. FDIC took over collapsing company and sold assets to JPMorgan Chase (NYSE: JPM) for $1.9 billion.
Treading water:
- Merrill Lynch (NYSE: MER) -- $26.25 down 67% from its 52 week high of $79.72; closed Friday at $27.36, up 4.23%. Being acquired by Bank of America (NYSE: BAC).
The vultures are circling:
- Gramercy Capital (NYSE: GKK) -- $6.72 down 77% from its 52 week high of $29.45; closed Friday at $3.68, down 45.24%.
- Wachovia Corp. (NYSE: WB) -- $15.70 down 70% from its 52 week high of $53.10; closed Friday at $10.00, down 36.3%
Questions exist:
- Citigroup Inc. (NYSE: C) -- $18.45 down 63% from its 52 week high of $49.90; closed Friday at $20.15, up 9.21%
- E*TRADE (NASDAQ: ETFC) -- $3.06 down 84% from its 52 week high of $19.39; closed Friday at $3.45, up 12.75%
- Newcastle Investment (NYSE: NCT) -- $5.88 down 72% from its 52 week high of $20.88; closed Friday at $6.25, up 6.3%.
Successes:
- East West Bancorp (NASDAQ: EWBC) -- $12.46 down 67% from its 52 week high of $30.42; closed Friday at $15.21, up 22.07%.
- MBIA Inc (NYSE: MBI) -- $4.92 down 93% from its 52 week high of $68.98; closed Friday at $13.74, up 179%.
I will continue to report on this story as events unfold. This week we have witnessed the long overdue capitulation by President Bush that things are bad and getting worse. Obviously he was the last to know, even with all the briefings by the Federal Reserve and Treasury and screams from Wall Street and Main Street. The Congress has finally capitulated as Details of $700 Billion Plan Emerge.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of MBI, NCT & did own WM.
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Reader Comments (Page 1 of 1)
2-05-2009 @ 8:05PM
Andee Sellman, One Sherpa said...
Hi Sheldon,
Very sorry to hear of your losses but I applaud you for being so open and honest and coming straight out with it. So often when it comes to money, people want to tell you all about their successes and hide all their losses.
I can't help but think that one of the issues facing us is that we've all been lulled into measuring and applauding the wrong thing.
Why do we measure performance by the amount of capital accumulated rather than the cash flow which it generates for paying to investors. And why do we mix up capital growth with revenue and called it all RETURN.
If more people focused on their cash return and less on their so called 'nest egg' the financial wizards who are supposed to get cash flow returns would become more accountable. Right now they can hide behind engineered capital gains and try and tell the public they're producing value. Most of what they do could be achieved by a smart graduate who learned a bit about accrual accounting and could use micrsoft excel.
Getting cash returns is not so easy because it requires you to understand how business works, how a company has constructed its business model and where in amongst all of that, the cash returns become available for investors.
9-28-2008 @ 6:30PM
Limoman said...
100 Yr Crash? OH BALONEY!
Worse as 1987? OH BALONEY!
1987 's meltdown was far worse , actually 5x worse!
And we are only down about -17% YTD and using anyother time is just hyping it!
If your going to go back to Oct. of 07' and use that? Then have to use that same time frme for everything ( gains) else.
Most are just hyping it and being drama quessn over it to gain attention..
And ever notice how they tout Investing ideas "6 mos" after the fact! Who recommended owning Pro-Funds Unltra Bear Funds or Short ETF's?
They're + 35 to 50% YTD!
and are they going to Stop them from shorting As well?
And how about all the hype about " Buy Large caps and Tech's again? That is getting Old and should be put to bed.. Only Mid and Small caps ..Forget Large Caps forever..
9-28-2008 @ 6:29PM
Limoman said...
Just Ck out Pro Funds Ultra SHORT funds and You can Still Short ETF's.
I made from +35-55% so far on them this yr!
and now, a word from our sponsor..
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9-29-2008 @ 1:36AM
shareholder said...
This is a sad day for all of us shareholders and employees of WaMu... we were robbed blind by the feds and no one said or did anything. Chase, like other firms were circling like vultures, waiting for the feds to move in. They all knew what was going on... this was the plan from beginning on the week of the take over...
The run on the bank was caused by the media and not one agency thought of regulating them or to set the record straight... they let the run on the bank happen right in front of their eyes.
Former CEO Kerry Killinger was so selfish and dumb enough not to sell at $8 per share before turning to TPG and investors for money. He was too concerned about his own legacy and income that he forgot what his job functions were and who he wrote his paychecks. Oh and he was paid over $22 million in separation package.
And now Alan Fishman will get paid over $18 million dollars for three weeks of work? humm… since he failed to do his job as a CEO to secure the company... should he be compensated $18 millions?
Oh and Stephen Rotella (President and COO) is getting his $12 million plus package for doing what? Running WaMu into the grounds? This is on top of his millions in bonuses.
Are they serious? We need to stand up... Open up your eyes people... this just doesn’t happen over night.
Everyone in the executive team of WaMu should be held accountable along with the feds who led this take over without any recourse or consideration for the employees' retirements, public pensions and share holders.
9-29-2008 @ 2:35AM
stevekendall said...
President Bush's overreaction to 9/11 may have helped doom the United States financially.
First off, no one is down playing how horrible and shocking 9/11 was to the country. It truly was a time of grief and a huge wake up call to how porous our borders were and still are, but did the terrorist win in the long run.
If you're a terrorist organization in the the late 90's trying to figure out the best way to attack....
continued at
www.mortgagebreakdown.com
9-29-2008 @ 1:43PM
brandonwargo said...
read this pretty insightful article on greenfaucet earlier today. this was somewhat out of the ordinary though...
thought you might enjoy...
http://www.greenfaucet.com/hanlons-pub/innermost-thoughts/04562