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Investing Are you buying the too big to fail investment banks?
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WestIndianArchie Offline
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Post: #1
Are you buying the too big to fail investment banks?
Goldman Sachs, JP Morgan, etc?

WIA
02-24-2014 11:08 AM
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RockHard Offline
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RE: Are you buying the too big to fail investment banks?
Not at this point. I think that trade was awesome a couple years ago. I was looking at BAC a couple years ago around 5, didn't have the stones to buy, I'd have tripled my money as of today.
02-24-2014 02:32 PM
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RE: Are you buying the too big to fail investment banks?
(02-24-2014 11:08 AM)WestIndianArchie Wrote:  Goldman Sachs, JP Morgan, etc?

WIA

You should also look at European banks. I brought shares of Banco Santander in 2012, which I consider "too big to fail" and probably the strongest bank in Europe.

It is not an investment bank, but a huge retail/commercial bank domiciled in Spain, with 50% of its profits coming from Latin America, and 25% coming from Europe outside of Spain. I like the geographically diverse earnings stream.

Santander is paying a juicy 9% dividend, and its American Depositary Receipts are listed on the NYSE as SAN.

The European Central Bank will be releasing the bank stress test results in November...it will be interesting to see which banks are insolvent or need to recapitalize!
(This post was last modified: 02-26-2014 08:42 AM by Steve9.)
02-26-2014 07:47 AM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
This thread makes me want to put a bullet in my brain because I love WIAs posts.

Let me ask one question, do you know how an investment bank operates and do you know where the margins/growth is?

How do you guys feel comfortable buying a stock when you don't know how the business even works?

I don't want you guys going broke buying a company that has off balance sheet debt and you guys aren't even reading the filings.

Finally Steve9 your post is false, Banco Santander absolutely is an Investment Bank:
http://www.santandergbm.com/en_GB/Santan...nt-Banking

---

"Buy what you know" - Warren Buffet

So please tell me. How are you okay investing in a single stock when you can't tell me how a bank even operates. It sounds like you came up with this strategy as follows

"I don't like banks they are all liars and crooks... Hmm so maybe I just buy the stock because I know they will never go bankrupt"

^ that is not an investment thesis that is a guess.

Want to know how I am certain? Lehman Brothers and Bear Stearns. Look up the market cap of LEH before collapse and please define "too big to fail".

---

Again don't care if you buy individual stocks if you can afford to see it go to zero and don't care about taking risk. Do care about gambling money when someone does not at all understand a business model.

If someone had a PHD in chemical engineering working specifically for XYZ vaccines I would have less problems with that guy taking a risk here and there investing in medical companies.

Emphasis on not trying to be a dick and trying to prevent bad decision making.
(This post was last modified: 02-26-2014 09:34 AM by WestCoast.)
02-26-2014 09:02 AM
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WestIndianArchie Offline
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RE: Are you buying the too big to fail investment banks?
So WC, do you think when the SHTF, The Fed will let them fail? Lehman and Bear Stearns is/was.seen.as a mistake. This is despite the numbers.

I'm defining TBTF as too interconnected with other banks and too politically connected with decision makers.

WIA
(This post was last modified: 02-26-2014 10:46 AM by WestIndianArchie.)
02-26-2014 10:43 AM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
"I'm defining TBTF as too interconnected with other banks and too politically connected with decision makers."

Please explain how you would personally know of any of these matters.

I know what your definition is so how in the world do you personally know who is in "cahoots".

I know you hate Wall Street and that is fine but you have a severe misunderstanding of the pricing of the security/book value of each firm.

Your thesis makes no sense. Pull up a stock chart of any major bank. Since BOA was already mentioned look at the stock price in 2007... Clearly if you bought the bank knowing it was too big to fail you would have lost money.

How about this. "When shit hits the fan" in the future, take all your cash and buy a bank that got hammered. That's where the money is.

You're basically trying to "disaster invest" before the disaster. If you disaster invest before the disaster... That's called buying a put option not going long.
02-26-2014 10:55 AM
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WestIndianArchie Offline
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RE: Are you buying the too big to fail investment banks?
Whoa, WC, you seem really mad about this.
Wasn't trying to offend.
02-26-2014 01:11 PM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
^ not at all.

For whatever reason when I am in a good mood on the Internet in writing form it comes off as angry.

I am just laying out the facts.

The most important point was the question i laid out in my first post on here.

"Why are you confident investing in a business you don't understand?"

If you have not met the management team and do not know how the business works I legitimately don't understand how anyone can click buy. This is like being an expert in fashion design and investing in healthcare stocks.

It just doesn't make any sense right?
(This post was last modified: 02-26-2014 01:24 PM by WestCoast.)
02-26-2014 01:21 PM
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WestIndianArchie Offline
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RE: Are you buying the too big to fail investment banks?
I'm not actually. I put the bulk of my retirement money in investment grade comic books from the 90's. I'm sure my copies of Spawn and WILDCATS will return to their face value.

Someone asked this question on a different forum.

WIA
02-26-2014 03:01 PM
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Steve9 Offline
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RE: Are you buying the too big to fail investment banks?
(02-26-2014 09:02 AM)WestCoast Wrote:  Finally Steve9 your post is false, Banco Santander absolutely is an Investment Bank:
http://www.santandergbm.com/en_GB/Santan...nt-Banking

WC, that is being disingenuous. Retail banking makes up 74% of Santanders profits: http://www.santander.com/csgs/Satellite/...data-.html

Sure it has investment banking operations, but that is not its main focus.
(This post was last modified: 02-26-2014 04:37 PM by Steve9.)
02-26-2014 04:34 PM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
^ yes that is true. My comment is still correct saying it is not an investment bank is factually false. Hell in that case Goldman Sachs is not in the investment banking business, you see where I am going with this. I will leave you with the same question.

Do you know the biz model? Do you actually know what the margin structure on IBD revenue versus commercial banking revenue is? Do you have the penetration rates in each region. How are they growing in each region? Is the capital structure solvent?

I could go on and on.

I think I came off as "angry" in this thread because I am talking about investing in a very direct way. I have a hard time investing even five figures (pocket change) into a position when I know everything about it ie: I have personally met the management team and I know the product inside and out.

Simply pitching something when I can tell from the text alone the person doesn't know the stock is actually what bothers me.

It is not what you know that gets you burned. It is what you think you know that really isn't so.
(This post was last modified: 02-26-2014 04:45 PM by WestCoast.)
02-26-2014 04:44 PM
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Menace Offline
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RE: Are you buying the too big to fail investment banks?
I don't really invest in this way, but WC I think part of the "problem" is that this is your subject area of expertise. Obviously the vast majority of people are not going to have your understanding of this simply because you do this (or close to it), day in day out. I realize you don't mean to do this, but often your posts come off as like "I'm way smarter at this than you so don't be stupid and shut up." The tone of your posts is frequently (needlessly IMHO) abrasive and antagonistic even though you mean well. I'm not sure why that is.
02-26-2014 05:15 PM
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Steve9 Offline
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RE: Are you buying the too big to fail investment banks?
(02-26-2014 04:44 PM)WestCoast Wrote:  I think I came off as "angry" in this thread because I am talking about investing in a very direct way. I have a hard time investing even five figures (pocket change) into a position when I know everything about it ie: I have personally met the management team and I know the product inside and out.

Simply pitching something when I can tell from the text alone the person doesn't know the stock is actually what bothers me.

It is not what you know that gets you burned. It is what you think you know that really isn't so.

I appreciate you aggressively challenging everyone's investing ideas. It is true that the majority of forum members are better off investing in index funds/ETFs.

But some of us are not content with just being average and are aspiring to or have got better investment returns than the index. I think you also have done well in individual stocks, but understand that you cant really discuss them because of a conflict of interest with you job.

Im not pitching any stocks here, just like sharing what I have invested in, and like seeing what other guys are investing in.

Ive made a fair bit of money out of Santander, and well aware of the risks, but I am not suggesting that anyone else here should invest.
02-26-2014 05:32 PM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
@menace yes I agree.

Basically the only reason I bothered with posting here is because I saw it was posted by WIA and don't want to see him wasting his time making speculative bets on the stock market. That is the only reason I stepped in.

You'll notice I don't even post on the 2013 or 2014 stock market thread because I read it and just assume a certain percentage will make risky bets no matter what. I charge that to the game of life.

To me there is only one situation when you buy individual securities.

1. You have met the management team
2. You are financially independent and you are only investing money above that financially independent level
3. You have a 100% understanding of basic finance concepts and the what is driving the business model

If you can say yes to 1, 2 and 3 I will not say squat about what you do with your money.

If I like you as a person based on your posts and see you are in neither bucket then I will jump in to try and save you from making a terrible decision.
02-26-2014 05:53 PM
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rimjobs4life Offline
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RE: Are you buying the too big to fail investment banks?
I discourage you from buying individual stocks unless you know what you’re doing.

If you must invest in investment banks, consider XLF, the largest ETF for the Financials sector. Top 10 holdings in order are: WFC, JPM, BRK/B, BAC, C, AXP, USB, AIG, GS, and MET. These 10 holdings together account for 50.32% of XLF.

Price is currently $21.48, well off its high of $38.15 before the financial crisis. You’d have been better off in a total stock market index like FSTMX or VTSMX. If you bought $10k of these funds in February 2004 and reinvested dividends, you’d have $20,500, whereas you’d barely be at $9k today with XLF.

People think about how they could have doubled or tripled their money buying off a stock’s lows, when history shows the average clueless investor/trader is more likely to have had a 50% loss.

Stick with the Bogleheads investing philosophy of keeping all your money in a few low-cost index funds such as those offered by Vanguard and Fidelity. 90 percent of the time people try to take the stock market into their own hands, they lose money or fail to match the market’s returns while wasting time and emotional energy that could have been used elsewhere. After you develop your own consistently successful investing/trading strategy while also maintaining the discipline to not fuck it up, you can designate a small percentage of your portfolio for that. The stock market will always be there.

All throughout 2013, everyone was trying to pick a top, pointing to economic events both here and overseas, saying the market was rising on low volume and only because of the Fed, and that we were way extended, and guess what? We never even got a meaningful correction. 90 percent of stock market “experts” don’t know shit.

p.s. I don’t think WestCoast is angry at all. I’m probably coming off the same way just because I’m trying to keep people from getting burned or missing out on better investing opportunities in index funds.
02-26-2014 06:04 PM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
^ glad you saw the points.

This reminds me of December 2013, a friend of mine called me bragging he made 50% over the course of the year. He spent 10 hours a week monitoring all his stocks (a whole 3 stocks)

Then I said "so your time is worth $10K (6.5K after tax because he was doing short term gains) for 520 hours of work and you underperformed based on a sharpe ratio?"

He hung up the phone and has stopped trying to beat the market.

Take the market performance and subtract that from your portfolio performance and take the total dollars. Now divide that by your hours spent researching. That is how much you made and for 99% of people it ain't pretty.
(This post was last modified: 02-26-2014 06:18 PM by WestCoast.)
02-26-2014 06:14 PM
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TheBulldozer Offline
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RE: Are you buying the too big to fail investment banks?
(02-26-2014 05:53 PM)WestCoast Wrote:  To me there is only one situation when you buy individual securities.

1. You have met the management team
2. You are financially independent and you are only investing money above that financially independent level
3. You have a 100% understanding of basic finance concepts and the what is driving the business model

If you can say yes to 1, 2 and 3 I will not say squat about what you do with your money.

That's a pretty bold statement WC. Though not one I disagree with.

Are you stating this for any company, or more speculative picks?
02-26-2014 06:22 PM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
^ literally any company you are going to buy on an individual basis.

Let's think like rich people.

Even venture capitalists and angel investors who have $100M to invest (tons more).. If they are going to invest a measly $25k-$1M into your risky start up venture do you think they are going to invest without meeting you?

No. So why would anyone think they can outperform venture capitalists when they literally won't invest in anyone they have not met before?

When you invest in a company, you're handing over the keys to the drivers seat. I want to know who is driving that car.

---

To be honest investing can be a hobby as well, so if you're financially independent again IDGAF what you do with your money. You know "something" very well so you likely invest in that space.

Example: my buddy runs a $10M business that sells a very specific medical device. He invests in medical device companies. Can I talk him out of it? No becuase he actually knows the industry and is not betting more than he can lose.

I realize that is a contradiction becuase he doesn't always meet the management team but the three items is literally how anyone I know with real money (9 digits plus) think.
02-26-2014 06:33 PM
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Steve9 Offline
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RE: Are you buying the too big to fail investment banks?
(02-26-2014 05:53 PM)WestCoast Wrote:  To me there is only one situation when you buy individual securities.

1. You have met the management team
2. You are financially independent and you are only investing money above that financially independent level
3. You have a 100% understanding of basic finance concepts and the what is driving the business model

If you can say yes to 1, 2 and 3 I will not say squat about what you do with your money.

I disagree with No 1. Management teams are very important, but, for example, I do not need to meet with Starbucks management or Howard Schultz to know that this is a good company to invest in.
02-26-2014 06:55 PM
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WestCoast Offline
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RE: Are you buying the too big to fail investment banks?
^ that's fine I assume that you don't have to work for a living I'll give you a bye.

I would never do this though.

Being straight forward, I have a hard time believing you understand the business model of Santander, a commercial/investment bank, Starbucks a consumer goods company and tesla a high tech automotive company all at the same time.

That is just a hunch though, and if you're wealthy then again I don't care because you've already won the game of life anyway.
(This post was last modified: 02-26-2014 07:04 PM by WestCoast.)
02-26-2014 06:57 PM
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Steve9 Offline
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RE: Are you buying the too big to fail investment banks?
(02-26-2014 06:04 PM)rimjobs4life Wrote:  Stick with the Bogleheads investing philosophy of keeping all your money in a few low-cost index funds such as those offered by Vanguard and Fidelity.

Its interesting to note that Jack Bogle's son runs a successful actively managed fund, the Bogle Small Cap Growth Fund :

Quote: Vanguard Group founder Jack Bogle, the quintessential advocate for low-cost, passive investing, has a son, John Bogle, Jr., whose career as an active fund manager is as much a success in its own right as it is a contrast to Bogle Sr.’s viewpoint

http://blogs.barrons.com/focusonfunds/20...tive-side/
02-26-2014 07:14 PM
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RE: Are you buying the too big to fail investment banks?
Good stuff WC.

I'm a bit skeptical on point one as well. Meeting and making connections creates an emotional bond, which as we all know if the enemy of sound judgement. On the other hand, a real conversation will provide you with insight that others aren't privy to.
02-26-2014 09:18 PM
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RE: Are you buying the too big to fail investment banks?
(02-26-2014 07:14 PM)Steve9 Wrote:  Its interesting to note that Jack Bogle's son runs a successful actively managed fund, the Bogle Small Cap Growth Fund :

Quote: Vanguard Group founder Jack Bogle, the quintessential advocate for low-cost, passive investing, has a son, John Bogle, Jr., whose career as an active fund manager is as much a success in its own right as it is a contrast to Bogle Sr.’s viewpoint

http://blogs.barrons.com/focusonfunds/20...tive-side/

His career may be a success since BOGLX charges high annual fees, but his sucker investors shouldn't be so quick to celebrate since this small-cap growth fund, contrary to what was written in the Barron's article, underperformed the Russell 2000 benchmark.

The article did not account for dividends or taxes, so we get a completely different story when BOGLX, with its 0.10% annual yield, is compared with index mutual funds and ETFs tracking the small-cap growth index (VBK, VISGX), Russell 2000 (IWM) or S&P 600 (IJR).

Growth of $10,000 since February 2004, including reinvestment of dividends:
BOGLX (Bogle Small-cap Growth Fund): $21,990*

VBK (Vanguard Small-cap Growth ETF): $26,118
VISGX (Vanguard Small-cap Growth Index Fund): $25,827
IJR (iShares Core S&P Small-cap ETF): $25,470
IWM (iShares Russell 2000 ETF): $22,177

* This is the figure before taxes. BOGLX also lists an annual holdings turnover of 237.59%, which means higher taxes if it's not in a tax-free account. VBK and VISGX both had a portfolio turnover of 37%.
(This post was last modified: 02-26-2014 09:24 PM by rimjobs4life.)
02-26-2014 09:19 PM
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RE: Are you buying the too big to fail investment banks?
(02-24-2014 11:08 AM)WestIndianArchie Wrote:  Goldman Sachs, JP Morgan, etc?

WIA

No, but I was until two months ago.

IMHO the only TBTF security still worth considering is Wells Fargo Co. (WFC). Their balance sheets look much better than other bloated financials.

Quick Ratios:
P/E: 11.84
Yield: 2.61%
EPS: 3.89

I think you could see them quoted at $80+ within a year.

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02-26-2014 09:21 PM
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rimjobs4life Offline
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RE: Are you buying the too big to fail investment banks?
delete
(This post was last modified: 02-26-2014 09:24 PM by rimjobs4life.)
02-26-2014 09:23 PM
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