[davelj]

Actually, Karl, I didn’t read your whole post or the entire thread. (Who’s got that kind of time?) However, here is a direct quote from your post, which I think cuts to the heart of your position:

“But what it does indicate is that the banks are continuing to lend into a locked “hard money” environment – that is, they are failing to attract capital against which to lend, and are instead borrowing from The Fed to keep the debt initiation cycle going.”

I happen to agree with a lot of what you wrote in your post. What I think you’re doing here, however, is creating causation where none exists. That is, “Because the banks are borrowing from the Fed and only maintaining “X” in liquidity then there’s a problem.”

My point is that there’s nothing sinister about borrowing from the Fed when the rates are (relatively) attractive. Anyone would do this almost regardless of the economic climate.

This is a SEPARATE issue, however, from paying a big price for equity capital which Citigroup – as you point out – and others are doing. The TAF is about liquidity; equity capital via Abu Dhabi (or whomever else) is about solvency. Two largely separate issues in the banking world… UNTIL there’s a run on the bank, as in the case of Countrywide.

Anyhow, I think we agree that the banking complex is in deep trouble. Where we disagree is that you think the Fed borrowing is indicative of something sinister going on while I do not. It’s merely expedient.

However, if you want to continue to believe this, it’s ok with me. No skin off my back. I mean, hell, if you’re bearish on banks – as I am – I think you’ll end up being right, even if it’s partially for the wrong reason. In investing, luck often trumps (faulty) reasoning. Fortunately.

Although I am curious, since you seem very sure of yourself on this topic, what’s your background in banking? Former CEO, CFO, loan officer, Director, private equity investor, examiner? Personally I’m generally wary of providing strong opinions outside of my very few areas of expertise, one of which is banking. But that’s just me.

[davelj]

Actually, Karl, I didn’t read your whole post or the entire thread. (Who’s got that kind of time?) However, here is a direct quote from your post, which I think cuts to the heart of your position:

“But what it does indicate is that the banks are continuing to lend into a locked “hard money” environment – that is, they are failing to attract capital against which to lend, and are instead borrowing from The Fed to keep the debt initiation cycle going.”

I happen to agree with a lot of what you wrote in your post. What I think you’re doing here, however, is creating causation where none exists. That is, “Because the banks are borrowing from the Fed and only maintaining “X” in liquidity then there’s a problem.”

My point is that there’s nothing sinister about borrowing from the Fed when the rates are (relatively) attractive. Anyone would do this almost regardless of the economic climate.

This is a SEPARATE issue, however, from paying a big price for equity capital which Citigroup – as you point out – and others are doing. The TAF is about liquidity; equity capital via Abu Dhabi (or whomever else) is about solvency. Two largely separate issues in the banking world… UNTIL there’s a run on the bank, as in the case of Countrywide.

Anyhow, I think we agree that the banking complex is in deep trouble. Where we disagree is that you think the Fed borrowing is indicative of something sinister going on while I do not. It’s merely expedient.

However, if you want to continue to believe this, it’s ok with me. No skin off my back. I mean, hell, if you’re bearish on banks – as I am – I think you’ll end up being right, even if it’s partially for the wrong reason. In investing, luck often trumps (faulty) reasoning. Fortunately.

Although I am curious, since you seem very sure of yourself on this topic, what’s your background in banking? Former CEO, CFO, loan officer, Director, private equity investor, examiner? Personally I’m generally wary of providing strong opinions outside of my very few areas of expertise, one of which is banking. But that’s just me.

[davelj]

Actually, Karl, I didn’t read your whole post or the entire thread. (Who’s got that kind of time?) However, here is a direct quote from your post, which I think cuts to the heart of your position:

“But what it does indicate is that the banks are continuing to lend into a locked “hard money” environment – that is, they are failing to attract capital against which to lend, and are instead borrowing from The Fed to keep the debt initiation cycle going.”

I happen to agree with a lot of what you wrote in your post. What I think you’re doing here, however, is creating causation where none exists. That is, “Because the banks are borrowing from the Fed and only maintaining “X” in liquidity then there’s a problem.”

My point is that there’s nothing sinister about borrowing from the Fed when the rates are (relatively) attractive. Anyone would do this almost regardless of the economic climate.

This is a SEPARATE issue, however, from paying a big price for equity capital which Citigroup – as you point out – and others are doing. The TAF is about liquidity; equity capital via Abu Dhabi (or whomever else) is about solvency. Two largely separate issues in the banking world… UNTIL there’s a run on the bank, as in the case of Countrywide.

Anyhow, I think we agree that the banking complex is in deep trouble. Where we disagree is that you think the Fed borrowing is indicative of something sinister going on while I do not. It’s merely expedient.

However, if you want to continue to believe this, it’s ok with me. No skin off my back. I mean, hell, if you’re bearish on banks – as I am – I think you’ll end up being right, even if it’s partially for the wrong reason. In investing, luck often trumps (faulty) reasoning. Fortunately.

Although I am curious, since you seem very sure of yourself on this topic, what’s your background in banking? Former CEO, CFO, loan officer, Director, private equity investor, examiner? Personally I’m generally wary of providing strong opinions outside of my very few areas of expertise, one of which is banking. But that’s just me.

[davelj]

Actually, Karl, I didn’t read your whole post or the entire thread. (Who’s got that kind of time?) However, here is a direct quote from your post, which I think cuts to the heart of your position:

“But what it does indicate is that the banks are continuing to lend into a locked “hard money” environment – that is, they are failing to attract capital against which to lend, and are instead borrowing from The Fed to keep the debt initiation cycle going.”

I happen to agree with a lot of what you wrote in your post. What I think you’re doing here, however, is creating causation where none exists. That is, “Because the banks are borrowing from the Fed and only maintaining “X” in liquidity then there’s a problem.”

My point is that there’s nothing sinister about borrowing from the Fed when the rates are (relatively) attractive. Anyone would do this almost regardless of the economic climate.

This is a SEPARATE issue, however, from paying a big price for equity capital which Citigroup – as you point out – and others are doing. The TAF is about liquidity; equity capital via Abu Dhabi (or whomever else) is about solvency. Two largely separate issues in the banking world… UNTIL there’s a run on the bank, as in the case of Countrywide.

Anyhow, I think we agree that the banking complex is in deep trouble. Where we disagree is that you think the Fed borrowing is indicative of something sinister going on while I do not. It’s merely expedient.

However, if you want to continue to believe this, it’s ok with me. No skin off my back. I mean, hell, if you’re bearish on banks – as I am – I think you’ll end up being right, even if it’s partially for the wrong reason. In investing, luck often trumps (faulty) reasoning. Fortunately.

Although I am curious, since you seem very sure of yourself on this topic, what’s your background in banking? Former CEO, CFO, loan officer, Director, private equity investor, examiner? Personally I’m generally wary of providing strong opinions outside of my very few areas of expertise, one of which is banking. But that’s just me.

[davelj]

This reminds me of the old business joke: “Yeah, we’re losing money at the unit level, but we’re going to make it up in volume!”

File under: “Truth is Stranger than Fiction”

[davelj]

This reminds me of the old business joke: “Yeah, we’re losing money at the unit level, but we’re going to make it up in volume!”

File under: “Truth is Stranger than Fiction”

[davelj]

This reminds me of the old business joke: “Yeah, we’re losing money at the unit level, but we’re going to make it up in volume!”

File under: “Truth is Stranger than Fiction”

[davelj]

This reminds me of the old business joke: “Yeah, we’re losing money at the unit level, but we’re going to make it up in volume!”

File under: “Truth is Stranger than Fiction”

[davelj]

This reminds me of the old business joke: “Yeah, we’re losing money at the unit level, but we’re going to make it up in volume!”

File under: “Truth is Stranger than Fiction”

[davelj]

A short follow-up to my last post. Something to keep in mind…

It’s almost impossible to bottom-tick a market. I’m sure I didn’t do it, even the way my contract was structured. I may still lose a little money “on paper” for a while after all is said and done. But I don’t really care. I really like the place I bought and I’d like to buy a second place as well, so if the price declines are greater than I anticipated, no big deal.

I think many people here get a bit obsessed with “buying at the bottom.” I think (perhaps) a better way to look at a home purchase is to wait until you find a property that you really like that makes sense financially… and then buy it. That may sound ridiculously simplistic – and it is – but a lot of people get caught up in trying to buy at the absolute lowest price and end up ultimately unhappy. (This applies to a lot more than houses.) Again, when rents and ownership payments on a condo are comparable, at worst you’re probably buying within 10%-15% of the bottom. Maybe I’m crazy but that doesn’t seem so bad to me. It’s a place to live, after all, not an investment.

[davelj]

A short follow-up to my last post. Something to keep in mind…

It’s almost impossible to bottom-tick a market. I’m sure I didn’t do it, even the way my contract was structured. I may still lose a little money “on paper” for a while after all is said and done. But I don’t really care. I really like the place I bought and I’d like to buy a second place as well, so if the price declines are greater than I anticipated, no big deal.

I think many people here get a bit obsessed with “buying at the bottom.” I think (perhaps) a better way to look at a home purchase is to wait until you find a property that you really like that makes sense financially… and then buy it. That may sound ridiculously simplistic – and it is – but a lot of people get caught up in trying to buy at the absolute lowest price and end up ultimately unhappy. (This applies to a lot more than houses.) Again, when rents and ownership payments on a condo are comparable, at worst you’re probably buying within 10%-15% of the bottom. Maybe I’m crazy but that doesn’t seem so bad to me. It’s a place to live, after all, not an investment.

[davelj]

A short follow-up to my last post. Something to keep in mind…

It’s almost impossible to bottom-tick a market. I’m sure I didn’t do it, even the way my contract was structured. I may still lose a little money “on paper” for a while after all is said and done. But I don’t really care. I really like the place I bought and I’d like to buy a second place as well, so if the price declines are greater than I anticipated, no big deal.

I think many people here get a bit obsessed with “buying at the bottom.” I think (perhaps) a better way to look at a home purchase is to wait until you find a property that you really like that makes sense financially… and then buy it. That may sound ridiculously simplistic – and it is – but a lot of people get caught up in trying to buy at the absolute lowest price and end up ultimately unhappy. (This applies to a lot more than houses.) Again, when rents and ownership payments on a condo are comparable, at worst you’re probably buying within 10%-15% of the bottom. Maybe I’m crazy but that doesn’t seem so bad to me. It’s a place to live, after all, not an investment.

[davelj]

A short follow-up to my last post. Something to keep in mind…

It’s almost impossible to bottom-tick a market. I’m sure I didn’t do it, even the way my contract was structured. I may still lose a little money “on paper” for a while after all is said and done. But I don’t really care. I really like the place I bought and I’d like to buy a second place as well, so if the price declines are greater than I anticipated, no big deal.

I think many people here get a bit obsessed with “buying at the bottom.” I think (perhaps) a better way to look at a home purchase is to wait until you find a property that you really like that makes sense financially… and then buy it. That may sound ridiculously simplistic – and it is – but a lot of people get caught up in trying to buy at the absolute lowest price and end up ultimately unhappy. (This applies to a lot more than houses.) Again, when rents and ownership payments on a condo are comparable, at worst you’re probably buying within 10%-15% of the bottom. Maybe I’m crazy but that doesn’t seem so bad to me. It’s a place to live, after all, not an investment.

[davelj]

A short follow-up to my last post. Something to keep in mind…

It’s almost impossible to bottom-tick a market. I’m sure I didn’t do it, even the way my contract was structured. I may still lose a little money “on paper” for a while after all is said and done. But I don’t really care. I really like the place I bought and I’d like to buy a second place as well, so if the price declines are greater than I anticipated, no big deal.

I think many people here get a bit obsessed with “buying at the bottom.” I think (perhaps) a better way to look at a home purchase is to wait until you find a property that you really like that makes sense financially… and then buy it. That may sound ridiculously simplistic – and it is – but a lot of people get caught up in trying to buy at the absolute lowest price and end up ultimately unhappy. (This applies to a lot more than houses.) Again, when rents and ownership payments on a condo are comparable, at worst you’re probably buying within 10%-15% of the bottom. Maybe I’m crazy but that doesn’t seem so bad to me. It’s a place to live, after all, not an investment.

[davelj]

Not at all surprised. That’s why I structured my contract the way I did.

I think prices will drop in most buildings to the point at which it’s a toss-up between buying and renting. Historically, that has been a very good time to buy in San Diego. I don’t see why it should be any different this time around. Depending on the building that would mean a 35%-60% drop from the peak. When you see those kinds of prices, demand will pick up. But that’s still a couple years off I think.

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