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I Wouldn't Touch These Banks With a Cheap CDS!



February 03, 2010 – Comments (3) | RELATED TICKERS: BAC , JPM , GS

My thoughts on some risks facing facing bank stock investors.

On another note, for those who are interested in following/ commenting on my analysis on a different platform, I can now be found on Twitter.

Alex Dumortier, CFA

3 Comments – Post Your Own

#1) On February 03, 2010 at 6:37 PM, fmahnke (67.10) wrote:

Great article, short sellers will win the next move here.  However,

don't throw out the baby with the bath water.  Bought some CZNC today as business couldn't be better for the well run regionals 

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#2) On February 03, 2010 at 9:29 PM, rd80 (95.72) wrote:

Alex - Just curious why you didn't include the poster child for troubled banks - Citi - in the table?

At least one of the major measures proposed by the White House - bank fees - may be intended to reduce systematic risk, but it would reduce cash flow available to pay debts. The new fees on each of the banks in your table will exceed a billion dollars a year if the plan passes as proposed.  Don't know if that may have played a part in bidding up the price of CDS insurance.

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#3) On February 04, 2010 at 12:33 AM, TMFAleph1 (91.88) wrote:


Thanks for your interest.

It was not my intention to omit Citi from the table -- I was curious myself -- but it was not included on the Markit CDS webpage that I culled the data from.

I don't think investors are thinking that specifically in pushing up CDS spreads; I think they were simply taken by surprise by the two announced regulatory measure. That raised the ambient level of uncertainty regarding financials and the cost of insuring them along with it.


Alex D

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