Showing posts with label fifth third. Show all posts
Showing posts with label fifth third. Show all posts
Saturday, September 21, 2013
Friday, June 11, 2010
Guest Post: Extend And Pretend - A Guide To The Road Ahead | zero hedge
(c) 2010 F. Bruce Abel
A conversation with Neil Bortz at a youth baseball game Thursday night causes me to start a new topic: "extend and pretend."
The Fifth Thirds of the world are told by FHA and the like "extend and pretend." When your good customers' loans come due, close them out and do not relend. Use your government money as follows: with your questionable loans, pretend they are good for it and extend the loan. That way nobody has to recognize the loss!
Guest Post: Extend And Pretend - A Guide To The Road Ahead zero hedge: "There is no mistaking the fact that the US has a sovereign crisis as measured by many indicators such as: Debt to GDP, deficit percentage, balance of trade, state, city and local government financial imbalances, underfunded pension plans and excess unfunded entitlement programs. However, relative to Europe, the US is still lagging and therefore is not currently getting the media attention that it will soon receive."
A conversation with Neil Bortz at a youth baseball game Thursday night causes me to start a new topic: "extend and pretend."
The Fifth Thirds of the world are told by FHA and the like "extend and pretend." When your good customers' loans come due, close them out and do not relend. Use your government money as follows: with your questionable loans, pretend they are good for it and extend the loan. That way nobody has to recognize the loss!
Guest Post: Extend And Pretend - A Guide To The Road Ahead zero hedge: "There is no mistaking the fact that the US has a sovereign crisis as measured by many indicators such as: Debt to GDP, deficit percentage, balance of trade, state, city and local government financial imbalances, underfunded pension plans and excess unfunded entitlement programs. However, relative to Europe, the US is still lagging and therefore is not currently getting the media attention that it will soon receive."
Saturday, August 8, 2009
Canadian Public Pension Fund Makes 19% on Bond Portion of its Portfolio Yr End March 31, 2009
(c)2009 F. Bruce Abel
A good result that shows the value of diversification by having a fixed income balance. Fifth Third barely broke even on its bond portfolio for the same time period in the trust that I follow, largely, I believe, because it invested in Various Bond Funds which had toxic assets such as Fannie and Freddie preferreds, and perhaps had bad derivatives as well.
http://www.theglobeandmail.com/report-on-business/federal-pension-plan-books-227-loss/article1229050/
You will note that the comments and the gist of the article is that the Canadian pension fund managers did not deserve their large pay because the overall portfolio showed a loss of 22.7%. But I dispute that conclusion, as the bond portion did quite well.
A good result that shows the value of diversification by having a fixed income balance. Fifth Third barely broke even on its bond portfolio for the same time period in the trust that I follow, largely, I believe, because it invested in Various Bond Funds which had toxic assets such as Fannie and Freddie preferreds, and perhaps had bad derivatives as well.
http://www.theglobeandmail.com/report-on-business/federal-pension-plan-books-227-loss/article1229050/
You will note that the comments and the gist of the article is that the Canadian pension fund managers did not deserve their large pay because the overall portfolio showed a loss of 22.7%. But I dispute that conclusion, as the bond portion did quite well.
Saturday, July 18, 2009
How to Interpret Cramer
As I have said before (and my blog quotes a study that verifies this) you make money on Cramer by carefully reading between the lines and following what he is really recommending as a sale, not a buy. He is reluctant to go negative, so you have to know the area he is talking about.
For example regional banks, covered in the cite shown below.
I have a friend who bought $10,000 FITB at $2 something and now has quite a profit. Reading the following by Jim Cramer, you will note that he does not mention FITB. This is a key point and my friend should GET OUT NOW.
(Should I tell him? What are the implications for Cincinnati, where Fifth Third is so influential?)
http://www.thestreet.com/_yahoo/story/10546019/1/jim-cramers-best-blogs.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
For example regional banks, covered in the cite shown below.
I have a friend who bought $10,000 FITB at $2 something and now has quite a profit. Reading the following by Jim Cramer, you will note that he does not mention FITB. This is a key point and my friend should GET OUT NOW.
(Should I tell him? What are the implications for Cincinnati, where Fifth Third is so influential?)
http://www.thestreet.com/_yahoo/story/10546019/1/jim-cramers-best-blogs.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Saturday, April 25, 2009
The Word "Bank"
(c) 2009 F. Bruce Abel
It occurs to me that for the bailout to work we must wipe out a word from our vocabulary: "Bank," as in "Oh, you work for a bank, do you? I don't trust you, even though I work for a bank myself. In fact I don't even trust myself here at this bank, because I am addicted to trading credit default swaps."
We must now create another word, another category.
What is that word? I don't know. What about "Trank." This implies trust. But, now that I think about it, the phrase "Bank Trust Department" must be removed also.
It occurs to me that for the bailout to work we must wipe out a word from our vocabulary: "Bank," as in "Oh, you work for a bank, do you? I don't trust you, even though I work for a bank myself. In fact I don't even trust myself here at this bank, because I am addicted to trading credit default swaps."
We must now create another word, another category.
What is that word? I don't know. What about "Trank." This implies trust. But, now that I think about it, the phrase "Bank Trust Department" must be removed also.
Sunday, March 15, 2009
David Swensen -- Listen-Up
David Swensen, Yale's in-house Warren Buffet, answers questions posed by Marc Gunther.
I will be posting a lot on this article by Marc Gunther. So far it is not on the web. So I will "Nuance" it from time to time and post the verbatims. Correction, here it is!
http://www.yalealumnimagazine.com/issues/2009_03/swensen.html
Note that Swensen does not say "bond funds."
The article was written by Marc Gunther '73, a contributing writer to Fortune magazine, who blogs at marcgunther.com
Monday, February 9, 2009
Saturday, December 27, 2008
Monday, December 8, 2008
Biting My Tongue
The hardest thing is to bite my "tongue." To the trust officer, I mean. But reviewing the September 30 statements there was no place to hide. Yes, pure treasuries was the place to be, not the semi-toxic bond funds which had some Fannie and Freddie preferreds and the like.
Under one of the last trust officers, who took suggestions, we had an agreement that the bond sector would be in treasuries, but that may have been many years ago. This because I always had a fear of the derivatives, which I traded for two years and saw the immense possibility for destroying the system. But you can't go around saying the sky is falling while the market is stable without being totally snubbed.
Under one of the last trust officers, who took suggestions, we had an agreement that the bond sector would be in treasuries, but that may have been many years ago. This because I always had a fear of the derivatives, which I traded for two years and saw the immense possibility for destroying the system. But you can't go around saying the sky is falling while the market is stable without being totally snubbed.
Monday, November 3, 2008
Toxic Dodge & Cox
Morningstar.comWhat Went Wrong at Dodge & CoxMonday November 3, 7:00 am ET By Dan Culloton
Shortly after Dodge & Cox closed its Stock (NASDAQ:DODGX - News) and Balanced (NASDAQ:DODBX - News) funds to new investors in 2004, I asked then CEO Harry Hagey if the firm would ever consider reopening them. "Probably when everybody hates us," he replied. I knew friendly markets and adoring investors could quickly turn cruel and fickle, but still found it hard to conceive of the conditions that would turn the venerated firm's fortune on its head. "That would be a pretty hostile environment," I thought. I had no idea.
Can You Feel the HateI wouldn't say everybody hates Dodge & Cox now. Judging from my e-mail, though, the firm has ticked off a lot of people. All five of the boutique's funds have gotten slaughtered in 2008, especially its domestic and international equity funds which, this year, loaded up on many of the poster children of the crash of 2008.
I've been getting a steady stream of messages asking, "Have they lost it? Fannie Mae? AIG? Wachovia? What were they thinking? I thought these managers were supposed to be experienced and smart! Couldn't they see this coming? How could you still recommend this fund?"
A lot of investors haven't waited for an answer. Shareholders have streamed out of the fund as fast as they were piling into it a few years ago. For the year through Oct. 27, the firm saw $6.7 billion go out the door of its mutual funds, according to Morningstar estimates. The stock and balance funds have been hit the hardest with more than $2 billion and $3.3 billion in outflows, respectively, so far. Redemptions at Dodge & Cox International (NASDAQ:DODFX - News), however, have accelerated in recent months as that fund has foundered.
What Were They Thinking?I think investors selling these funds are mistaken. But they have a right to be disappointed and even angry. Dodge & Cox has made some colossal blunders. As far back as 2003 the firm cautioned investors that future equity returns were unlikely to be as strong as they had been, but the magnitude of what has transpired makes those warnings seem weak.
And just what happened? How did a firm with such an enviable long-term track record and reputation for sober, in-depth fundamental analysis end up with so many time bombs? Based on recent and past conversations my colleagues and I have had with the firm's managers, as well as the funds' portfolios and shareholder reports, I don't think they lost their minds or chucked their process. Indeed, they seemed cognizant of the financial sector's risks. As recently as 2006 the Stock fund had less money in financials than its benchmark and peers because the managers thought the stocks' valuations unrealistically assumed profits would stay high and credit losses low. Even after boosting its financials stake after the credit crisis broke late in 2007, buying AIG (NYSE:AIG - News), adding to Wachovia (NYSE:WB - News), and in the first half of 2008 picking up Fannie Mae (NYSE:FNM - News), the managers were hardly cheerleaders.
In the firm's June 30 semiannual shareholder reports, they acknowledged the companies faced big challenges, but noted they also had raised significant capital. The managers even tried to model what the stocks would be worth in worse case scenarios, such as if AIG had to absorb significant losses from its derivative, credit default swap and mortgage insurance portfolios. The problem was reality turned out much worse than their worse case scenarios--a costly error made by many others, including Legg Mason Value's (NASDAQ:LMVTX - News) Bill Miller and Selected American's (NASDAQ:SLADX - News) Chris Davis and Ken Feinberg.
Wachovia is a good example of went wrong. The managers liked the bank's strong retail franchise, solid base of deposits and tight lending standards. They acknowledged the housing crisis and slowing economy could make things difficult for the company, perhaps even forcing it to raise more capital and cut its dividend. But the company's share price reflected an even more dire future than that, the managers said.
They weren't pessimistic enough, it turns out. Fannie Mae, Freddie Mac (NYSE:FRE - News), Lehman Brothers, Merrill Lynch (NYSE:MER - News), AIG, Washington Mutual, Wachovia each met ignominious ends via failure, government seizure, or forced mergers as panic gripped Wall Street. Dodge & Cox knew AIG would need a lot of cash, but not $85 billion (a sum that reportedly stunned even former CEO Hank Greenberg). It knew the housing crisis would get worse before it got better and companies like Fannie Mae and Wachovia would struggle, but it did not assign a high enough probability to the chaotic unraveling we witnessed and the government's aggressive, uncompromising response to it.
Future PresentThis is not Dodge & Cox's finest moment. But no amount of Monday morning quarterbacking will undo the firm's miscalculations. The questions for investors now are these: Does this dismal patch of performance reveal some tragic flaw? And can Dodge & Cox learn from this and move beyond the crisis?
The firm gets an F for failing to accurately handicap extremely rare, but potentially catastrophic events, or, in the words of author Nassim Nicholas Taleb, "black swans." Especially as a housing-ignited credit meltdown wasn't completely unforeseeable. Authors like Taleb, economists like Robert Schiller, and investors like FPA's Bob Rodriquez and GMO's Jeremy Grantham had warned of a real estate and credit bubble for years. Furthermore, making big bets on AIG, Wachovia, and Royal Bank of Scotland, another bank that needed a lifeline, as Dodge & Cox Global (NASDAQ:DODWX - News) did after Bear Stearns collapsed and conditions got increasingly weird, looks almost reckless in hindsight.
Yet, I don't expect Dodge & Cox to excel at predicting panics, bank runs, and emergency government interventions. I expect them to look for stocks and bonds trading at prices that underestimate the companies' long-term earnings potential, and to invest where they have a lot of conviction. True value contrarians go where others fear to tread, so Dodge & Cox's foray into financials was consistent with their time-tested style. And despite what some investors came to believe this decade, that style has its risks. The strong performance of value strategies in the 2000-02 bear market and in subsequent years lulled some into believing funds like Dodge & Cox would protect them in every bear market. That even the best-performing value funds have fallen hard this year and veteran bargain hunters such as Weitz Value's (NASDAQ:WVALX - News) Wally Weitz and Third Avenue Value's (NASDAQ:TAVFX - News) Marty Whitman have struggled should disabuse people of that notion. It should also remind them that even seasoned, accomplished managers can stumble--hard.
They've Fallen and They Can Get UpI think the firm can and already has learned from this experience. In the short term it has assigned a team of fixed-income specialists to examine the balance sheets of the firm's equity and bond holdings to make sure the issuing companies have enough cash to survive a prolonged credit market lock down. The long-term lessons are still being learned because this drama is still playing out. But if any firm has the temperament and perspicacity to turn this distressing experience into something useful, I think it is Dodge & Cox. The average manager there has more tenure than the vast majority people running funds today. The senior investment team members have lived through rough periods before and are some of the most thoughtful and long-term focused people I've encountered in nearly a decade of writing about funds. I don't expect radical modifications to the firm's investing process. In fact, I'd be more worried if they did decide to go back to the drawing board. I do, however, expect the historic events of the past year to augment the firm's store of institutional knowledge that stretches back eight decades and informs everything they do.
I'd also be more concerned if Dodge & Cox hadn't lagged its peers and benchmark only to bounce back before. In 1998 the Stock fund trailed 88% of its competitors and the S&P 500 and Russell 1000 Value indexes by wider margins than it does today. Though the equity and Balanced funds did make money that year (which is far easier to take than 40% losses), many still asked if the firm had lost its touch then, too. But the fund followed up with seven straight calendar campaigns in the large-value category's top fourth and beat the S&P 500 in seven of the next nine years.
There's no guarantee Dodge & Cox funds will snap back like they did in the past. Sure, you could switch to another manager who hasn't yet hit the skids or to an index fund. But Dodge & Cox retains many simple, enduring long-term advantages besides experience and a long memory. Its process is consistent and has been tested and found worthy in previous crises. Its expense ratios are among the lowest offered by active managers; and the firm's culture remains trustworthy due to its focus on investing and its investors rather than marketing. These are all traits that we at Morningstar and others have found to correlate with long-term success.
Plus, the firm doesn't just need financial stocks to come back to regain ground (though it would help). For years the Stock fund also has been building positions in more growth-oriented stocks in the health-care and technology sectors whose share prices, prior to tanking with everything else this year, hadn't kept up with their improving profitability. More recently the fund also has been adding to hard-hit consumer-services stocks. Such holdings give the firm's equity funds a good shot at participating in a recovery no matter what style or sector leads the market out of this trough.
So, while Dodge & Cox has not been the firm of the moment, it is still a good fund family for the future.
Dan Culloton does not own shares in any of the securities mentioned above.
Morningstar Premium Members get access to over 3,900 Stock and Fund Analyst Reports, Analyst Picks, and award-winning portfolio tools. Learn
Shortly after Dodge & Cox closed its Stock (NASDAQ:DODGX - News) and Balanced (NASDAQ:DODBX - News) funds to new investors in 2004, I asked then CEO Harry Hagey if the firm would ever consider reopening them. "Probably when everybody hates us," he replied. I knew friendly markets and adoring investors could quickly turn cruel and fickle, but still found it hard to conceive of the conditions that would turn the venerated firm's fortune on its head. "That would be a pretty hostile environment," I thought. I had no idea.
Can You Feel the HateI wouldn't say everybody hates Dodge & Cox now. Judging from my e-mail, though, the firm has ticked off a lot of people. All five of the boutique's funds have gotten slaughtered in 2008, especially its domestic and international equity funds which, this year, loaded up on many of the poster children of the crash of 2008.
I've been getting a steady stream of messages asking, "Have they lost it? Fannie Mae? AIG? Wachovia? What were they thinking? I thought these managers were supposed to be experienced and smart! Couldn't they see this coming? How could you still recommend this fund?"
A lot of investors haven't waited for an answer. Shareholders have streamed out of the fund as fast as they were piling into it a few years ago. For the year through Oct. 27, the firm saw $6.7 billion go out the door of its mutual funds, according to Morningstar estimates. The stock and balance funds have been hit the hardest with more than $2 billion and $3.3 billion in outflows, respectively, so far. Redemptions at Dodge & Cox International (NASDAQ:DODFX - News), however, have accelerated in recent months as that fund has foundered.
What Were They Thinking?I think investors selling these funds are mistaken. But they have a right to be disappointed and even angry. Dodge & Cox has made some colossal blunders. As far back as 2003 the firm cautioned investors that future equity returns were unlikely to be as strong as they had been, but the magnitude of what has transpired makes those warnings seem weak.
And just what happened? How did a firm with such an enviable long-term track record and reputation for sober, in-depth fundamental analysis end up with so many time bombs? Based on recent and past conversations my colleagues and I have had with the firm's managers, as well as the funds' portfolios and shareholder reports, I don't think they lost their minds or chucked their process. Indeed, they seemed cognizant of the financial sector's risks. As recently as 2006 the Stock fund had less money in financials than its benchmark and peers because the managers thought the stocks' valuations unrealistically assumed profits would stay high and credit losses low. Even after boosting its financials stake after the credit crisis broke late in 2007, buying AIG (NYSE:AIG - News), adding to Wachovia (NYSE:WB - News), and in the first half of 2008 picking up Fannie Mae (NYSE:FNM - News), the managers were hardly cheerleaders.
In the firm's June 30 semiannual shareholder reports, they acknowledged the companies faced big challenges, but noted they also had raised significant capital. The managers even tried to model what the stocks would be worth in worse case scenarios, such as if AIG had to absorb significant losses from its derivative, credit default swap and mortgage insurance portfolios. The problem was reality turned out much worse than their worse case scenarios--a costly error made by many others, including Legg Mason Value's (NASDAQ:LMVTX - News) Bill Miller and Selected American's (NASDAQ:SLADX - News) Chris Davis and Ken Feinberg.
Wachovia is a good example of went wrong. The managers liked the bank's strong retail franchise, solid base of deposits and tight lending standards. They acknowledged the housing crisis and slowing economy could make things difficult for the company, perhaps even forcing it to raise more capital and cut its dividend. But the company's share price reflected an even more dire future than that, the managers said.
They weren't pessimistic enough, it turns out. Fannie Mae, Freddie Mac (NYSE:FRE - News), Lehman Brothers, Merrill Lynch (NYSE:MER - News), AIG, Washington Mutual, Wachovia each met ignominious ends via failure, government seizure, or forced mergers as panic gripped Wall Street. Dodge & Cox knew AIG would need a lot of cash, but not $85 billion (a sum that reportedly stunned even former CEO Hank Greenberg). It knew the housing crisis would get worse before it got better and companies like Fannie Mae and Wachovia would struggle, but it did not assign a high enough probability to the chaotic unraveling we witnessed and the government's aggressive, uncompromising response to it.
Future PresentThis is not Dodge & Cox's finest moment. But no amount of Monday morning quarterbacking will undo the firm's miscalculations. The questions for investors now are these: Does this dismal patch of performance reveal some tragic flaw? And can Dodge & Cox learn from this and move beyond the crisis?
The firm gets an F for failing to accurately handicap extremely rare, but potentially catastrophic events, or, in the words of author Nassim Nicholas Taleb, "black swans." Especially as a housing-ignited credit meltdown wasn't completely unforeseeable. Authors like Taleb, economists like Robert Schiller, and investors like FPA's Bob Rodriquez and GMO's Jeremy Grantham had warned of a real estate and credit bubble for years. Furthermore, making big bets on AIG, Wachovia, and Royal Bank of Scotland, another bank that needed a lifeline, as Dodge & Cox Global (NASDAQ:DODWX - News) did after Bear Stearns collapsed and conditions got increasingly weird, looks almost reckless in hindsight.
Yet, I don't expect Dodge & Cox to excel at predicting panics, bank runs, and emergency government interventions. I expect them to look for stocks and bonds trading at prices that underestimate the companies' long-term earnings potential, and to invest where they have a lot of conviction. True value contrarians go where others fear to tread, so Dodge & Cox's foray into financials was consistent with their time-tested style. And despite what some investors came to believe this decade, that style has its risks. The strong performance of value strategies in the 2000-02 bear market and in subsequent years lulled some into believing funds like Dodge & Cox would protect them in every bear market. That even the best-performing value funds have fallen hard this year and veteran bargain hunters such as Weitz Value's (NASDAQ:WVALX - News) Wally Weitz and Third Avenue Value's (NASDAQ:TAVFX - News) Marty Whitman have struggled should disabuse people of that notion. It should also remind them that even seasoned, accomplished managers can stumble--hard.
They've Fallen and They Can Get UpI think the firm can and already has learned from this experience. In the short term it has assigned a team of fixed-income specialists to examine the balance sheets of the firm's equity and bond holdings to make sure the issuing companies have enough cash to survive a prolonged credit market lock down. The long-term lessons are still being learned because this drama is still playing out. But if any firm has the temperament and perspicacity to turn this distressing experience into something useful, I think it is Dodge & Cox. The average manager there has more tenure than the vast majority people running funds today. The senior investment team members have lived through rough periods before and are some of the most thoughtful and long-term focused people I've encountered in nearly a decade of writing about funds. I don't expect radical modifications to the firm's investing process. In fact, I'd be more worried if they did decide to go back to the drawing board. I do, however, expect the historic events of the past year to augment the firm's store of institutional knowledge that stretches back eight decades and informs everything they do.
I'd also be more concerned if Dodge & Cox hadn't lagged its peers and benchmark only to bounce back before. In 1998 the Stock fund trailed 88% of its competitors and the S&P 500 and Russell 1000 Value indexes by wider margins than it does today. Though the equity and Balanced funds did make money that year (which is far easier to take than 40% losses), many still asked if the firm had lost its touch then, too. But the fund followed up with seven straight calendar campaigns in the large-value category's top fourth and beat the S&P 500 in seven of the next nine years.
There's no guarantee Dodge & Cox funds will snap back like they did in the past. Sure, you could switch to another manager who hasn't yet hit the skids or to an index fund. But Dodge & Cox retains many simple, enduring long-term advantages besides experience and a long memory. Its process is consistent and has been tested and found worthy in previous crises. Its expense ratios are among the lowest offered by active managers; and the firm's culture remains trustworthy due to its focus on investing and its investors rather than marketing. These are all traits that we at Morningstar and others have found to correlate with long-term success.
Plus, the firm doesn't just need financial stocks to come back to regain ground (though it would help). For years the Stock fund also has been building positions in more growth-oriented stocks in the health-care and technology sectors whose share prices, prior to tanking with everything else this year, hadn't kept up with their improving profitability. More recently the fund also has been adding to hard-hit consumer-services stocks. Such holdings give the firm's equity funds a good shot at participating in a recovery no matter what style or sector leads the market out of this trough.
So, while Dodge & Cox has not been the firm of the moment, it is still a good fund family for the future.
Dan Culloton does not own shares in any of the securities mentioned above.
Morningstar Premium Members get access to over 3,900 Stock and Fund Analyst Reports, Analyst Picks, and award-winning portfolio tools. Learn
Wednesday, October 15, 2008
Saturday, March 8, 2008
Crash of 1987 and Value of Diversification
[insert of March 14, 2008]
The first page is from a trust as of yesterday, managed by FifthThird.
The second page is perhaps the most important single piece of paper I have saved. I will be referring to it a lot as we go through the next two years.
.
There was a death in the family June 26, 1987, causing a valuation occasion of assets coming to be owned outright from a certain trust, shown above as the "Axxx" Trust. Then came the 1987 crash, which I was following on a minute-by-minute basis, not as a professional.
2667 shares of Procter was in this portfolio. At my urging -- yes, I felt the crash was coming -- shortly before the crash 500 shares of Procter was sold and Treasury Notes worth $50,000 were purchased with the proceeds. When the crash occurred all common stocks went down and the Treasury Notes went up 6%.
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