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I am working at banking industry, I sort don't agree with your idea For sure domestic market especially retail and commercial business would be hudgely impacted by recession and lack of buying power in cosumer market.
However, most banks are not dependent on retail and commercial business only, especially investment bank. Around two months ago, everyone is bearish about banking industry, then what happened, Fed steps up to provide "loans"(let's say tax payer's money) to save Banking industry.
Can you foresee what Fed would do later? You don't, the only thing you know is that Fed would do whatever he can to support Wall Street. Investment banks especially wall street top leaders don't earn money by their equity investment. It is not 90s when banks don't have option but go with economic ups and downs, with structured products and deriative and globalization, Ibanks have a lot of options to make money by betting down turn and invest globally. Current subprime crisis would finish and I could sense Fed's move towards it. Frankly CDO and CMO are not bad investment products. They are risky but they could provide a large return. Many banks have been buying CDO and CMO for very cheap now to bet market would go up. What would eventually bring those price up? yes, it is cosumer confidence, and that's what Fed has been doing, to signal the market I won't let it down.
If you look at 1998 Financial market crash and modern Fed's policy, you could see Fed has been involved into the market to adjust recession circle more and more often. Remember 98 LTCM's crisis and at that time, no one wants LTCM's position and It is Fed who stepped up to provide all investment banks loans to buy those products if not worthy nothing but very little. Look what happened later on. Morgan Stanley, Merrill Lynch, Goldman Sachs have earned enormous returns from that. Why? because LTCM is still a genius team and they at 98s just happened to meet a bad time to have enough cash(same case with BSC right now). Sure, Financials have been keeping going down and a lot of banks are sold at discount. Did you notice Citibank has already priced under their fair value of business? Do you think they would bankcrupt or do you believe Fed would allow citibank, the biggest player in US goes to bankcrupt? no, definitely no way, so the long term trend for Citi is definitely a going up.
If you are in investment banking community, you probably heard the news from people from different banks saying that write downs and subprime loss has already priced into Financials. I talked with employees from several major players everyday. It is a common belief that subprime crisis is almost over. Long subprime, short commodity have been a common play for many of us It is not that bad, All major investment banks have higher than estimated result for Q1 2008.
I believe in a long run, maybe towards 2009, US would go to recession eventually, but it would be a good year for Financial in 2008. Fed won't stop helping. Just for disclosure. I currently didn't hold any positions in financial market except my ESOP. I am waiting for mid-April to load some.
[ 本帖最后由 重耳 于 2008-3-29 10:18 编辑 ] | 
狗仔卡
发表于 2008-3-29 06:42 AM
