4 ms·

Well, I was wrong: https://www.fdic.gov/news/press-releases/2023/pr23016.html https://www.fdic.gov/news/press-releases/2023/pr23016.html

user_named 4y ago
Yes but you were very confident in everything you said that was wrong, so I guess that's all that matters
- KerryJones 4y ago
  I think I only said one wrong thing -- that they would last through this. The rest is factual (still is), I'm not positive that having bought a chunk wouldn't have a positive result (see other comment)
cityofdelusion 4y ago
You dodged a bullet. Definitely find out what assumptions you made that were wrong, that could be a very costly mistake in the future. Betting against market headwinds that are blowing strong is always very risky, even when you are correct since sheer momentum can kill an investment.
- KerryJones 4y ago
  I was looking at buying in with 1/60th or less of my portfolio (I'm a focused investor, most of my investments are 1/10th of my portfolio) so it would have been a small bet, I was acknowledging this as risky. I'm still not confident I was 100% wrong -- in my scenario I labeled above included the fact they could go under (I didn't think they would go under), but now that their assets being are being sold, it will depend on how deep of a discount FDIC sells for. If it's in 40%, there's a good chance that investors will still get money back (I believe). If it's 80%, they won't get it all back.
  - bjacokes 4y ago
    You're mistaking assets and equity. A 40% discount in asset value absolutely would wipe out shareholders. To be a bit blunt, given your thesis here I would advise against trading in individual stocks, at least in the banking sector.
    - KerryJones 4y ago
      In general I agree that banking sector is definitely not strongly in my circle of competence, but on my only long-term bank I'm in I've made 100+% ROI within a couple of years. That could certainly be luck. To give advise on what I should do investing seems a bit premature with no more information -- even on banking stocks. I did make a mistake in previous comment and used the word assets instead of Total Equity. The same principle applies -- FDIC will sell their assets, likely at a discount. Depending on the discount of those assets will determine how much total equity they have. Currently, their assets over liabilities is large, so there would have to be significant underselling of assets. My original thesis made it clear I was talking about 40% discount on their equity, I didn't make it clear in the subsequent thread. I.e. if bought at the last price ($40) their assets priced them in some range between $150-220/share (if they were sold off). So they would have to have a significant discount to their assets in the last 2 months since they reported to lose that much. In my book and using Graham's term, I was valuing this as a cigar-butt company.
      - bjacokes 4y ago
        You keep referring to this 40% number and calling it a "significant discount", when in actuality it's only a 7-8% decrease in asset value that would be needed to wipe out shareholders ($211B assets vs $195B liabilities on their latest balance sheet). In your original comment you mention the bank selling assets at a 8.5% discount as a point _in favor_ of your thesis. You seem to not only be missing the contradiction there, but also making a vaguely optimistic case for investors getting money back in an asset firesale. I don't mean to dunk here, I just get nervous seeing someone propose a super-high-variance trade that goes empirically wrong an hour later, and then quote Benjamin Graham. As the responder above said, given the size of the dodged bullet you should really be updating your priors on investing strategy, but you seem to barely even regard your thesis as mistaken.

user_named 4y ago

Yes but you were very confident in everything you said that was wrong, so I guess that's all that matters

KerryJones 4y ago
I think I only said one wrong thing -- that they would last through this. The rest is factual (still is), I'm not positive that having bought a chunk wouldn't have a positive result (see other comment)

cityofdelusion 4y ago

You dodged a bullet. Definitely find out what assumptions you made that were wrong, that could be a very costly mistake in the future. Betting against market headwinds that are blowing strong is always very risky, even when you are correct since sheer momentum can kill an investment.

KerryJones 4y ago
I was looking at buying in with 1/60th or less of my portfolio (I'm a focused investor, most of my investments are 1/10th of my portfolio) so it would have been a small bet, I was acknowledging this as risky. I'm still not confident I was 100% wrong -- in my scenario I labeled above included the fact they could go under (I didn't think they would go under), but now that their assets being are being sold, it will depend on how deep of a discount FDIC sells for. If it's in 40%, there's a good chance that investors will still get money back (I believe). If it's 80%, they won't get it all back.
- bjacokes 4y ago
  You're mistaking assets and equity. A 40% discount in asset value absolutely would wipe out shareholders. To be a bit blunt, given your thesis here I would advise against trading in individual stocks, at least in the banking sector.
  - KerryJones 4y ago
    In general I agree that banking sector is definitely not strongly in my circle of competence, but on my only long-term bank I'm in I've made 100+% ROI within a couple of years. That could certainly be luck. To give advise on what I should do investing seems a bit premature with no more information -- even on banking stocks. I did make a mistake in previous comment and used the word assets instead of Total Equity. The same principle applies -- FDIC will sell their assets, likely at a discount. Depending on the discount of those assets will determine how much total equity they have. Currently, their assets over liabilities is large, so there would have to be significant underselling of assets. My original thesis made it clear I was talking about 40% discount on their equity, I didn't make it clear in the subsequent thread. I.e. if bought at the last price ($40) their assets priced them in some range between $150-220/share (if they were sold off). So they would have to have a significant discount to their assets in the last 2 months since they reported to lose that much. In my book and using Graham's term, I was valuing this as a cigar-butt company.
    - bjacokes 4y ago
      You keep referring to this 40% number and calling it a "significant discount", when in actuality it's only a 7-8% decrease in asset value that would be needed to wipe out shareholders ($211B assets vs $195B liabilities on their latest balance sheet). In your original comment you mention the bank selling assets at a 8.5% discount as a point _in favor_ of your thesis. You seem to not only be missing the contradiction there, but also making a vaguely optimistic case for investors getting money back in an asset firesale. I don't mean to dunk here, I just get nervous seeing someone propose a super-high-variance trade that goes empirically wrong an hour later, and then quote Benjamin Graham. As the responder above said, given the size of the dodged bullet you should really be updating your priors on investing strategy, but you seem to barely even regard your thesis as mistaken.