Several independent economists have said they expect a big U.S. bank to fail. It may be easy to ignore them because they are not affiliated with any of the large institutions that monitor financial companies. But now the former chief economist of the IMF says one of America's big banks will probably not make it.

According to Reuters, "The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said." Rogoff is currently an economist at Harvard.

The analysis pointing to the bank failure is based on the facts that the credit markets and housing situation will get much worse. Current earnings from banks and brokerage houses indicate that the prediction may well be true.

Continue reading Expert expects a big bank failure -- could it be WB or WM?

Expert expects a big bank failure -- could it be WB or WM? originally appeared on BloggingStocks on Tue, 19 Aug 2008 08:39:00 EST. Please see our terms for use of feeds.

Back in the early 1990s, the U.S. was mired in a recession and the money center banks were in dire straits. But, of course, it was a great opportunity for investors.

So, are we seeing a repeat? Perhaps so, although, you still need to tread carefully. This is according to a front-page piece in Barron's [a paid publication].

And yes, this week has been particularly encouraging, as seen with a widespread rally in the financials. It certainly helped that there was strength from Wells Fargo (NYSE: WFC) and JPMorgan (NYSE: JPM). At the same time, the results from Citigroup (NYSE: C) weren't as bad as expected.

By any measure -- such as price-to-book values and P/Es -- the financials look extremely cheap. Besides, these companies are taking quick medicine in terms of write offs. In other words, once financials report next year, the comparisons should look strong.

Something else: the Securities and Exchange Commission has implemented new rules on short selling (regarding 19 financial companies). Ultimately, this may relieve some of the volatility.

So what are some interesting possible investments? Barron's mentions a variety of companies, such as JPMorgan Chase, Lehman Brothers (NYSE: LEH), Bank of New York Mellon (NYSE: BK), Wells Fargo, and PNC Financial (NYSE: PNC). Though it might be smart to avoid companies like Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE) and Washington Mutual (NYSE: WM).

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Barron's: Are banks a "once-in-a-generation opportunity"? originally appeared on BloggingStocks on Sat, 19 Jul 2008 13:40:00 EST. Please see our terms for use of feeds.

Washington Mutual (NYSE: WM) reported its calendar first quarter results yesterday after the close. The bank reported $0.86 for the quarter, down $0.12 from a year ago. The shares are reacting favorably , up over 5% for three reasons:

First reason is the level of sub-prime mortgage loan write-offs came in at $113 million for the quarter, which caused the earnings per share to be at $0.86, in-line with consensus. The $113 million write-off was less than many investors feared.

The second reason is that Washington Mutual raised its annual dividend from $2.16 to $2.20 per share. Although not a huge increase, the symbolism of the raise surprised many investors and analysts. It was also the 47th consecutive quarter of WM raising its dividend.

Continue reading WaMu hitting subprime head on

WaMu hitting subprime head on originally appeared on BloggingStocks on Wed, 18 Apr 2007 13:39:00 EST. Please see our terms for use of feeds.

These four companies are on my watch list and I love them all. There are plenty of reasons to love my Dubya's; WD-40 (WDFC), Washington Mutual (WM), Wells Fargo Bank (WFC), and Wrigley (WWY) and I would be delighted to own them all...that is if Warren does not beat me to them.

They all pay higher than average dividends, have little or no debt, long illustrious histories, proven successful management, profitability, clear understandable businesses, and much more. I currently own Washington Mutual in my Roth IRA. Warren Buffett owns Wells Fargo and it has been reported he may be buying more. WD-40 and Wrigley are exactly the type of companies that Buffett would buy out in their entirety at the right price.

It is important to have a watch list because companies like these are not often on sale. Like Mr. Buffett I always want to buy at bargain prices. It is possible to make money buying them when they are not on sale but why not have the margin of safety (an important Benjamin Graham concept); there is no rush. Some of the companies/stocks I purchased in the last year were not available at bargain prices for many years prior. PATIENCE, PATIENCE--I watched Federal Express, UPS and Starbucks sadly wanting in but not having the right opportunity.

Continue reading Four smart Dubya's you can love!

Four smart Dubya's you can love! originally appeared on BloggingStocks on Tue, 13 Jun 2006 19:17:00 EST. Please see our terms for use of feeds.