Well I got through another long week this week. It was busy but it wasn't too bad. Unfortunately next week appears to be a lot more involved. My boss is on vacation until after the 4th which means I'm going to be doing a few more reports this week. It won't be as bad as a last week when a number of people were in training for the new system but I expect it won't be too much fun either. We also have a new employee that I helped train last week and will be working with again next week. Oh well, it could be worse, I could be unemployed.
We bought a car this week. Not a new one but a used Jeep Liberty. Never had a Jeep before but with the daughter needing a car to drive at school and us needing her to earn some money as well, it seemed like the best idea. At least we got a good deal on the car and on the loan. 3.75% for a used car loan. Now that is low. I have been reading that the major banks have been unable to increase their loan portfolios because of all of those homes that are not being paid for and people not wanting to take out new loans and the fact that they now are actually setting standards (besides a warm body with a pulse) before they loan people money. Which means a lot of banks are competing for the same loan business and they only way they can compete is to lower interest rates on the loans. So even though we used the county employee credit union, the lower rates filter down to everyone. Supply and demand at work for me for a change baby.
Time for a little investment info. Not that my investments are doing all that great at the moment. Well let me rephrase that, some of my investments are not doing all that great. Some are doing pretty well still and some are only ok. But first I want to say, avoid the big bank stocks. The worst of them being Bank of America (BAC) and Citigroup (C). That's not to say I think either of them are going to fail sometime soon, or even later in the future, but they both have so many problem home loans to work through that it is going to be quite a while before they start to provide the kind of returns they used to. They both have gotten through the worst times pretty much intact and in the case of BAC, they added Merrill Lynch to their stable which can only help them at sometime. However this isn't the same Merrill Lynch you or your parents grew up with. They were holding a lot of bad paper when they merged with BAC otherwise they wouldn't have merged. Add in the merger with Countrywide Financial and all of their toxic loans that BAC did a couple of years before and you have a mess of ugliness that BAC has to wade through. Citigroup was in even worse shape during the financial crisis. They were this close to not making it. They still have a lot of issues. Both banks along with Wells Fargo (WFC) and JP Morgan Chase (JPM) who both came out better than BAC and C are reducing their reserves against bad loans which does help the bottom line but they are all suffering from the slow economic recovery here in the US as well as their lack of exposure to growing markets. In fact the worst of the bunch, Citigroup, has the best foreign exposure and is getting some help there. They did sell some of their foreign stakes to raise cash over the past few years but they just bought a part of a Russian bank to regain some of that. None of the other banks have nearly as much foreign exposure.
The biggest problems for the big banks are their lack of loan growth. Oh in BAC's case, their incredibly stupid handling of a number of foreclosures has meant that a number of homes they thought they could take over and sell are still in doubt and in some cases, they are going to have to give them up. In the words of the immortal Jay G. gun nut extraordinaire, "play stupid games, win stupid prizes". Or in BAC's case, hire stupid/crooked lawyers, lose stupid court cases. Both JPM and WFC got through the crisis much better with less bad loans though WFC ate a bunch when they bought out Wachovia (who had bought out Golden West financial of California at the top of the market, the west coast version of Countrywide) but they all face the same problem, lack of new loans. Since they make money (usually) but taking in deposits and paying a low rate of interest for them and then loaning the money out at a higher rate of interest, they need loans to make money. Especially since the volume of mortgages is much lower today than it was a few years ago. So what I'm trying to say is, I would avoid most very large US banks as investments today. Their earnings are not really improving and they don't pay the kind of dividend I would want while I wait for earnings to improve. The only large one I feel confident in recommending is US Bank (USB) as they have a decent dividend that will probably increase and they are actually increasing their loans. They took very little TARP money (compared to say C or BAC, 6 billion is still a lot to me and you) and that was only because the government made them. They paid it back as soon as they were allowed. I imagine they probably had it set aside to pay back they whole time. Now they are maybe 1/10th the size of JPM and BAC but they are still very large. And unlike many of their brethren, a solid and safe bank.
Another very interesting bank that could be a good one to invest in is PNC Financial. Excellent earnings that are growing nicely and a small increase in total loans for the year. Also a decent dividend that I believe will increase. They are about the same size as USB and have just signed an interesting deal to buy the US branches of Royal Bank of Canada. They become much bigger by branch count and get into a number of areas they had little or no presence. I also think they are worth a look.
Finally one that I do have a chunk of that has been good to me is NY Community Bank (NYB) who primarily focuses in multifamily residential lending in the NY area, especially around the city. Their earnings have dropped some over the past year and their loans have fallen a little bit but they got me through the financial crisis intact and they pay a very nice dividend. I got into them a little under $11/share and rode them up to $19 where I sold out of half my shares. They have a very nice dividend of .25 per share per quarter (9%) where I bought them and they were never in any danger and never took any TARP money. Even though the stock is back down to $15 now, they made some nice purchases of bankrupt banks last year and should show a nice pop in the future. I am debating buying more shares here while I keep reinvesting my dividends. Either way, I'm playing with the house's money in this stock now.
One area I have done well in and am buying more of at the right time are mining stocks, especially gold miners. I've had shares of Yamana Gold (AUY) for about 3 years. I bought some, sold half when it got high, bought more when it went back down and now am holding for the long haul. It pays a good dividend for a gold miner, not great compared to many others, but it has increased the dividend substantially over the past year. I think they have a very good future especially with the price of gold at $1500 an ounce. I also bought into a few of junior miners that have some really good prospects. As long as one of them is a home run, and I think 2 of them will be based on results, I will be fine. They are my way of speculating and also ensuring if inflation really increases in the future, and I think it's bound to, I will have some upside to match it. The ones I am in are Brigus Gold (BRD) who seem to be on a huge strike right now, Rubicon Minerals (RBY) who also has a large strike they are developing and Aurico Gold (AUQ) who may have the best near term prospects of all. I expect BRD and RBY will take a couple or 3 years to pay off but I think AUQ will be a quicker return. I have time to wait and I doubt gold will fall below $1000 an ounce in the near future, or even further out. Unless some major changes happen in our government and with the Fed, I don't see how it can go down much. So like the silver bears say, buy the *&%#ing dips. Which is what I have done.
Sorry about that, I know I enjoy talking investing and markets but most people, my dear wife included, get glazed eyes whenever I start talking. I am fascinated by some of the stuff that's gone on in the business sector but most people could care less. Then again, I have been called a little strange before so that wouldn't surprise me. So what else is happening out here. Well for one, it looks like the PQ and I will play some live poker today. She wants to play in the 8pm tourney again. So looks like thats a go. I have played some online stuff in small buy in tourneys and had a little success, In fact I took down a Stud Hi/lo tourney this week. It was only $1.10 buy in with about 70 runners. I got $33.00 for my first place finish. Lost on the river a few times when I knew I was ahead but also hit quad 3s to take down one hand and a straight flush to beat up a guy's full house. Stud hi/lo is hardly my best game and I doubt it prepares me too much for playing NLHE tourneys but it did get my mind in the groove thinking about how to win hands, when to bluff, who might be bluffing me, etc. I also took 3rd last night in a small buy in Hold em/Omaha8 tourney. I like that mix of games. There were 40 players and it paid top 5. I ran well early then took a couple of bad beats when the blinds went up. I got short but kept plugging away and took down an all in pot against the table chip leader and a short stack who got all in preflop when I flopped a set with 66 and he liked his top pair medium kicker way too much.
I got to the final table as a medium stack and then improved immediately in an Omaha hand when I flopped a straight with Q8 of diamonds on a J-10-9 flop . No chance of a low hand and though I worried about someone sitting with KQ a little, I thought the flush redraw with an inside straight flush draw made this a hand to go to war with. So I bet a bit over half the pot and get two callers, a big stack and a shorty. Turn is a 6 of hearts and I make an almost pot sized bet which puts the shorty all in if he calls. I want to see if someone is sitting on KQ or a flush draw. I figured a KQ would have come over the top already and I like my chances against a flush draw as if they have and Ace or King of diamonds in it, I got 2 of their outs cutting down their chances and anything less and I have them. I also have the chance of a straight flush and even if they do have KQ, I have outs still. The big stack thinks for a while and dumps it making me think he had a King high flush draw. I think with the Ace he stays. The small stack immediately calls and I think "damn he has the KQ" Turns out he didn't, he had top two pair. What? You're staking your tourney on top 2 pair, no flush or straight draws, and are willing to call all in with that flop? I was shocked. He didn't hit his 4 outer and I was 3rd in chips with 8 to go.
After that nothing much happened and I had to dump the 2 steal attempts I made when the flops and bettors did not cooperate. We get down to 6 and I am 5th but not too far from the other 4 who are pretty close. In the big blind I get AJ suited. The small blind pushes all in and everyone folds to me. I thought and figured I was at least 50/50 and maybe a big favorite as he could be pushing Ace rag. So I call and he flips over K6 off. What? You wait this long and then push K6? But it works for him as he flops a king and I get crapped on. He doubles and I'm now the shorty instead of being almost even with the other 4. The very next hand Mr K6 pushes all in again UTG. I want to call with 4-2 but dump it and the big stack in the big blind calls him with AQ. This time he flips over KJ and goes out when an A hits the flop. Buh bye, thanks for giving away my chips.
Once in the money, things got strange. I am still shortest by a good bit but 2 hands later the big stack gets it in with the guy in 4th and takes him out. Why he felt he had to push when I was as short as I was is beyond me but maybe he felt the big stack was on a steal (he wasn't) and felt his A-10 was good. I'm sure he hated to see AK in the big stacks hand. I got a walk in the big blind and then pushed all on the next hand for a complete steal. I had a little breathing room but not much when the guy in 3rd tangles with the guy in 2nd and gets whacked. Next hand I get 3-3 and push all in. Get called by guy with A9 and he flops an ace. Good bye to me but 3rd was nice all the same and after losing that hand to K6, I was struggling to stay in. So we'll see how the tourney goes tonight. I wouldn't say I'm ready but I'm not completely out of sorts either. I'll let y'all know how it goes tomorrow. Till then, stay lucky you nuts.