Monday, October 1, 2007

60% Off at Citi

Citigroup announced earnings will be 60% lower as it take a $3 Billion write down on mortgage related losses.

Everyone just take a second and absorb what that says.

$3B loss in mortgages. What does that tell you about the housing crash? Does that sound like there is a bottom out there? Does that sound like it will be a good time to buy anytime in the near future?

I believe the answers are Hell No, no way, not a chance in hell and are you ******* me? Unless you are buying at significant, and I mean significant discounts, do not buy.

What I am doing is waiting for the $3B in losses to be converted to $3B worth of homes going on the market at pennies on the dollar. The lenders are holding foreclosed homes. They are hoping against hope that magically the homes on which they lent all these billions will be sold at 2005 prices.

Well they can hope and wish all they want, it isn't happening. At some point they will capitulate and sell the things for whatever they can get. And in the meantime expect more headlines like these from WaMu and Wells Fargo. WaMu went subprime LOCO and will be as bad, if not worse.

The rate cuts will offset some of that so I'm still cautiously bullish on banks as a whole.

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