The STOCK BLOCK

Renamed the Clemens Investment Blog to The STOCK BLOCK. Please note also the URL change to http://stockblock.info/.

Gannon On Investing

Another blog for the watchlist: Gannon On Investing

The Big Picture

Have a look at this blog The Big Picture. On occasion, the comments might be interesting as well.

E*Trade Volatility

E*Trade bounced back +41%.

Bloomberg: E*Trade Bankruptcy Is `Highly Unlikely,' BMO Says (Update4)

Van K. Tharp

Van K. Tharp is a psychologist specialized in coaching traders.

A very good book is:
Trade Your Way to Financial Freedom

From No Requirements to Be Happy: Part II:

A critical difference between good traders and the average trader is that good traders thrive on simplicity and not knowing. They come from being and simply go with the flow of the markets. If the markets tell them it's time to go up, then they buy. They might be wrong 60% of the time, but that is part of the game. They'll get out when the markets are no longer going up. They do this by simply observing what is happening, and are much more joyful because they are going with the flow. They allow themselves to let their profits run, because it's okay to be in the market when it is going up. They also allow themselves to get out, because it's okay to get out when the markets start to do something else.

What I've just described is pure trading. Its essence is simple. It doesn't require a lot of time. Instead, it gives you lots of time to play. It also involves seeing all possibilities and being in the flow of what is happening right now. You cannot do this if you are preoccupied with being right, doing hard work, or having money or profits. You can only do this when your mind is pure and you can be at one with what is going on around you.

E*Trade -58 %

Another one bytes the dust... today 2007-11-12 E*Trade is down 58 % after announcing writedowns on asset backed securities. They have an investmen of around USD 3 billion in ABS. You wonder what an online broker has on its balance sheet.

Update on Bloomberg: E*Trade Shares Fall; Analyst Says Bankruptcy Possible (Update4)

Here is the wording from E*Trade itself.

Banking Blood Bath

Very interesting albeit scary article about what is on the balance sheets of the big investment banks.

Nouriel Roubini's Blog: The bloodbath in credit and financial markets will continue and sharply worsen (2007-11-05)

It also points to this FT article (from 2007-11-04) predicting more write downs at Merrill Lynch, Citigroup, and UBS: What’s the subprime damage to banks?

The first article also looks into how many structured product assets are valued on an internal model valuation method, also named 'Level 3' (level 1 means you just take market prices, level 2 means you base your valuation on other prices of similar asset classes - level 3 basically means you make up your own prices).

Look at the info Citigroup just filed with the SEC today: they have $135 BILLION in LEVEL 3 ASSETS.

I have a neat idea.

Why don't we take every single major financial institution out there and then divide their total Level 3 assets by their equity capital base and make comparisons?

This will give us a better idea as to which of them may really remain solvent at the end of the day. Shall we?

Let's have a look at Citigroup. Their equity base is $128 billion. Therefore, their Level 3 assets to equity ratio: 105%

How about Goldman Sachs? Level 3 assets are $72 billion, equity base is $39 billion. Their Level 3 assets to equity ratio is 185%.

Morgan Stanley: $88 billion in Level 3, equity base is $35 billion. Ratio: 251% (WOW!)


Bear Stearns: $20 billion in Level 3, equity base is $13 billion. Ratio: 154%

Lehman Brothers: $35 billion in Level 3, $22 billion in equity. Ratio: 159%

Merrill Lynch: $16 billion in Level 3, $42 billion in equity. Ratio: 38%

Here is the Level 3 assets to equity ratio summary:

Citigroup 105%

Goldman Sachs 185%

Morgan Stanley 251%

Bear Stearns 154%

Lehman Brothers 159%

Merrill Lynch 38%

This becomes very interesting now, doesn't it?

Looks to me like Goldman Sachs and Morgan Stanley are by far in the WORST situation among the investment banks.

And yet the media is focusing all of their attention on Merrill Lynch---which actually has by far THE LEAST EXPOSURE of all of them.

BTW, UBS reported in third quarter 2007 CHF 23.4 billion in 'level 3' assets. This in addition to another CHF 21.6 billion in MBS and CDO assets. UBS has equity (without Goodwill) of CHF 33 billion.

IFRS

Here is an online version of IFRS as far as it has been adopted by the EU.

The individual standards are ordered historically by their adoption, so you might have to scroll down a bit...


Amazon (Germany) has a book version with both English and German text next to each other.


In case you wonder what IFRS is, here is the Wikipedia article.

Victor Niederhoffer

Blowing Up by Malcom Gladwell.

The Blow-Up Artist by John Cassidy.

Buffett Interview

Charlie Rose - Warren Buffett

From 2007-05-7, watch it while they still haven't pulled it.

The IKB Desaster

Background article by The Economist: Sold down the river Rhine

As an excercise here are some excerpts from the IKB 2006/7 annual report (when everything looked shiny and sunny).

Page 42 f.:

The capital released through our securisation activities over recent years has been used to expand our national and international lending business. Additionally, the capital has also been used to invest in international loan portfolios. Two thirds of our investments are focused on US investment-grade portfolios (including, for example, credit card claims, mortgage loan claims and corporate loans), with the remaining third being invested in similarly structured European portfolios.

However, we also utilise our wealth of expertise in this area to advise external companies - against a fee - on their own investments in international loan portfolios. This applies in particular to the Rhineland Funding Capital Corporation in the US. Based on our advise, this company is investing in portfolios comparable to those in which IKB is itself investing. In this way we ensure that the same quality standards that apply to the bank are also applied to third parties.

Page 50:

A gratifying increase in net commission income was also recorded, up by 19.2% to EUR 108 million. Half of this income resulted from structuring fees and commission earned in the Corporate Clients, Real Estate Clients and Structured Finance segments, with the other half being contributed by the Securitisation segment from advisory fees relating to the Rhineland Funding conduit.

Page 53:

As in previous years, the main focus of our activities were the placement of credit risks and investments in international loan portfolios. Overall, credit risks in the amount of EUR 4.7 billion were placed during the reporting period. Our investment in international loan portfolios totalled EUR 1.2 billion (EUR 2.1 billion), resulting in a slight increase in the portfolio to EUR 7.0 billion (EUR 6.8 billion).

The Rhineland Funding Capital Corporation, a conduit for which we have assumed an advisory function, increased its investment portfolio to EUR 12.7 billion (EUR 9.7 billion).

Page 77:

We expect an investment volume of EUR 20 billion (currently EUR 12.7 billion) for tge Rhineland Funding conduit, and a volume of EUR 10 billion for Rhinebridge.

In short, this means that the IKB Group will continue to grow over the coming years.

Page 182 f.:

Other commitments include credit commitments totalling EUR 11.9 billion (prio year: EUR 11.2 billion) in favor of special purpose companies, which can only be utilised by these companies in case of a short-term liquidity squeeze.

The figures presented reflect the amounts which would have to be paid out in case the customer fully draws on the relevant credit facility. The largest portion of these obligations by far will probably expire without ever being utilised. The figures are not representative for the actual future credit exposure or for liquidity requirements resulting from these obligations.

Now compare this to the EUR 32 billion which Deutsche Bank has invested in similar conduits, which is roughly the size of its equity. In comparison IKB had equity of EUR 1.4 billion at 2007-03-31.


The Rhine (right side) where it meets the Mosel river (left) by Koblenz at the so called Deutsche Eck.

Deutsche Bank And The Sub-Prime Crisis

Here are the slides of the presentation Joseph Ackermann gave on 2007-09-04 regarding Deutsche Bank's exposure to the Sub-Prime crisis in order to calm down the market.

It is in German.

STOCKscreener. i n f o

STOCKscreener.  i  n  f  o   is a new web site which provides a quick and easy way to search for interesting stocks to invest in and to access further information on the web about these financial instruments and their underlying companies.

At the moment you can see which stock moved the most, upwards or downwards, yesterday or for whatever timeframe you are interested in.

The stock performance list can be restricted to individual currencies or exchanges.

Hope it will be useful to somebody.