This is a great time to be in banking - Warren Buffett - 3 Billion in earnings for Q1 2009

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Submitted by HiggyBaby on April 9, 2009 - 9:32pm

People like Warren Buffett and a number of the regular posters on this board have better financial minds than I'll ever have. But, this one was a bit of a surprise. Didn't think we'd see banks reporting positive news for some time...

From the article, I gather its due largely to refinancing available at historically low rates, and a surge in purchaes of fire-sale priced homes, again at historically low rates.

Way to go Warren way to go.

http://www.cnbc.com/id/30137024

If you were listening carefully to Warren Buffett on CNBC one month ago today, you heard him say, "This is a great time to be in banking."

It may not have made sense to you then, but it should today.

Wells Fargo shares soared 31.7 percent today (Thursday) after the bank announced before the opening bell that it expects to report a record $3 billion in earnings for its first quarter.

In a news release, Wells said, "Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results."

At the closing bell, the stock was up $4.72 to $19.61 a share.

As of the end of December, Buffett's Berkshire Hathaway owned almost seven percent of Wells Fargo's stock. That's over 290 million shares. (It may have bought, or sold, shares since then.) It's the single biggest shareholder.

During a three-hour live appearance on Squawk Box that same morning, Buffett talked about how banks could take advantage of the low cost of money to make very profitable loans:

"The spreads have never been wider. This is a great time to be in banking, you know, if you just get past the past and they are getting past the past. I mean, right now every time a loan is made to somebody to buy a house--and we're making, you know, making millions of loans--four and a half million houses will change hands this year out of a total stock of less than 80 million. So those people are making good mortgages. You want those assets on your books and you get a great spread in putting them on now. So it's a great time to be in banking, but you do have to get past this past."

Today, Berkshire's stake in Wells Fargo is worth $3.2 billion more than it was when Buffett spoke those words.

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If you took the gamble and
Submitted by flu on April 9, 2009 - 10:23pm.

If you took the gamble and bought citibank stock at $1 a few months ago when everyone thought it was going under, with today's closing prices, you would have been up 200% :) (for now, at least, until shittybank announces "earnings").

So WFC is keeping 4.5%
Submitted by BGinRB on April 10, 2009 - 10:45am.

So WFC is keeping 4.5% yielding loans on their books? Suuuure. And HELOC's as Ln, where n>=3.

Is it me, or doesn't it seem
Submitted by Navydoc on April 10, 2009 - 11:14am.

Is it me, or doesn't it seem particularly suspicious that Wells Fargo is reporting high earnings immediately after Mark-to-Market was suspended? I'm certainly not a financial wizard, but this sure smells like smoke and mirrors to me. Didn't WFC buy up all of Wachoia's crap mortgages?

I just realized that I think my car has appreciated 2 million dollars this year. Congratulate me, I'm a millionaire! I wonder if I can declare that as an asset on my mortgage application?

NavyDoc, that's exactly what
Submitted by jpinpb on April 10, 2009 - 11:23am.

NavyDoc, that's exactly what it is. Smoke and mirrors. They even discussed this. I remember hearing it on KPBS. The M2M was going to make it "appear" the banks were doing ok. That still doesn't mean they are. I just don't understand. People are told ahead of time of the deception and so they believe it anyway. GAAAA!

I think it's pretty evident
Submitted by flu on April 10, 2009 - 11:38am.

I think it's pretty evident what this administration is now trying to do.... Artificially prop up companies....

1) Relax accounting rules

2) Impose short sell restrictions (again), or any other restriction that goes against an appreciating stock price

2) Let companies inflate earnings

3) Stock market rallies

4) Workers of USSA's 101k gradually becomes a 201k and eventually back to a 401k

5) Dollar gets trashed by inflation, but who will notice that. Besides, if you have a lot of debt, even better :)

6) Everyone is happy, "we're rich, we're rich" good times are here again. Spend spend spend spend spend spend. Debt debt debt debt debt. Minimum credit card payment, Minimum credit card payment, Minimum credit card payment.

7) Companies then start to air out the laundry by taking excessive "1 time charges", but at that point who cares because we will be in another Bubble 3.0 by then.

At least that probably is the plan.

How many of these current events can you identify that fall in to 1-7 categories....hmmm.

The only thing that I thought was funny...Was the government should have just listened to me and rather than spending so much money to prop up banks, they should have bought all the credit rating agencies, and cheated on the credit worthiness of these companies a few months back.. It would have been a cheaper alternative. And if you're going to be dishonest, might as well do the thing that is the quickest, dirtiest thing (I know, this is tongue and cheek).

Ok, I'll get off the conspiracy theory thing...Disregard.

Buffet WFC value: Jan. 1 =
Submitted by Rockemsock on April 10, 2009 - 12:38pm.

Buffet WFC value:

Jan. 1 = 8.7 billion
Apr. 1 = 3.9 billion
Apr. 9 = 5.2 billion

Year to date...i'd say Mr. Buffet has lost about 3.5 billion worth of WFC. Are we supposed to be congratulating him or something?

Navydoc wrote:Is it me, or
Submitted by patb on April 10, 2009 - 12:50pm.

Navydoc wrote:
Is it me, or doesn't it seem particularly suspicious that Wells Fargo is reporting high earnings immediately after Mark-to-Market was suspended? I'm certainly not a financial wizard, but this sure smells like smoke and mirrors to me. Didn't WFC buy up all of Wachoia's crap mortgages?

DINGDINGDINGDING we have a winner.

M2M suspends and they have huge earnings.

If they were Mrking to market their credit card debt and their
CRE, they would be drowning in red ink.

Rockemsock wrote:Buffet WFC
Submitted by davelj on April 10, 2009 - 1:14pm.

Rockemsock wrote:
Buffet WFC value:

Jan. 1 = 8.7 billion
Apr. 1 = 3.9 billion
Apr. 9 = 5.2 billion

Year to date...i'd say Mr. Buffet has lost about 3.5 billion worth of WFC. Are we supposed to be congratulating him or something?

Buffett's history with financial stocks is horrific. He's right about margins expanding. And he's right that it's a great time to be in banking IF YOU DON'T HAVE A BOATLOAD OF LEGACY CRAP IN YOUR LOAN PORTFOLIO (which WFC does). Other than that, his comments are noise.

Btw, significant 'selling on
Submitted by BGinRB on April 10, 2009 - 1:23pm.

Btw, significant 'selling on strength' action with GS (the other major Warren's financial) and financials in general on Thursday.
GS' block trades came in very late in the day.