Beware the sharks
In the past few months we've heard about problems at the biggest names in international banking writing off losses because of the presumed credit crisis as a result of failures in the sub-prime market in the
HSBC is writing off $2.3B, UBS $3.3B, Goldman Sachs $2.8B, Citigroup $64B. Yesterday Barclays joined the fun with a $2.7B write-off.
Now we have news that our good friend Bank Hapoalim might also have to write off some debt. They've been claiming that they have no exposure, but now it appears that they will be writing off around $100M. Citigroup might not bother reporting such an amount, but for our little market it is a lot.
As a result, Poalim's stock price has sunk and it is now valued at less than Bank Leumi. Be on the lookout for increased competition between the banks and soon there we should be seeing a lot of attractive new programs for homeowners. I sense a new wave of Israeli refis coming on.
[Interestingly, I wrote an article about this subject for an Israeli "English language financial journal" and the clueless editor thought that it had nothing to do with the Israeli market. What an idiot. The guy understands nothing about finance but thinks that he can edit a financial newspaper. I don't know if they're out of business yet or not, but I sure hope so.]
I smell sharks in the water. There are banks jumping on the write-off bandwagon to artificially deflate their stock prices. The managers get options and then cash in on them next year when they report huge increases in profits. It's all on paper, they didn't really lose money now, and they won't really earn it back next year. They just write off huge amounts and then come back next year and say that it wasn't as bad as they thought.
[If you are interested in a detailed, academic explanation of why this "crisis" is mainly hot air, read here.]
Yes, a few of the worst loans in the States will fail. In
Please note that I am not suggesting that you run out and buy Poalim stock. I am not a qualified stock investor. I am an economist who looks at economic information. Stock advisors throw darts at a dartboard and try to guess what the sharks will do.
