Archive for the 'Uncategorized' Category

Latest FDIC Data Released!

Posted on February 27, 2010, 8:59 am. Closed

When I was in grade school, I often awaited for the release of a computer or video game. In high school and college I eagerly awaited the release of a new album or an upcoming concert. Now I eagerly await such things as annual reports and the release of FDIC data.

There are several banks out there that I want to check up on, but I suppose I should first do an update on Atlantic Southern (ASFN), one of the struggling banks in my former hometown of Macon, Georgia. One of the first big local banks to fail in that area was Security Bank, so I have used the last several quarters of Security Bank’s existence as a rough benchmark for Atlantic Southern’s likelihood of success of avoiding failure.

Here are my thoughts on the current data for ASFN:

  • I don’t take it as a good sign that returns on assets and equity are still negative
  • Net interest margin has declined again
  • The loss allowance to noncurrent loans ratio is still in decline. This means that ASFN has potentially not set aside enough money to cover losses from their bad loans.
  • The non-accrual rate for ASFN’s largest loan portfolio – construction and development which makes up 37.44% of its total portfolio – has increased again by a very significant amount, from 14.42 to 19.85 quarter over quarter.
  • Tier one capital ratio has declined again.
  • The Texas ratio has increased again from last quarter, rising from 105.71 to 141.41, which means the bank’s credit troubles are increasing. History has shown that banks with a ratio above 100 tend to fail at a higher rate than banks with a ratio less than 100.

Right now I’m pretty undecided about the future of Atlantic Southern. They could struggle through this difficult time and survive intact or they could very well fail, albeit in a slow motion kind of way.

What’s the Point of Shorting a Sub-Four Dollar Stock?

Posted on August 20, 2009, 12:15 am. Closed

While sitting in the hospital again with my dad after my second procedure, I told him about the basic analysis I did comparing one of Macon’s publicly-traded banks to another local bank, the recently failed Security Bank (now State Bank and Trust). I told my dad things look really bad and that I felt chances were good that Atlantic Southern (ASFN) would fail within a year or two.

My dad asked me if one should short the stock. I replied that it was trading just below $4 and sure, I would short it but I would hedge by going long on the stock of a much stronger bank. My dad didn’t seem to think shorting a $4 stock was worth the effort as there was not much downside left. (click chart)

2009-08-19-asfn

Well, it’s true. Not much downside is left, but the stock can certainly go to zero. If one is confident of their analysis, shorting the stock of a bank that has numerous non-performing loans and is not adequately capitalized and hedging by going long on stock of a strong bank should still be  a good strategy.

As a side note, I think its a travesty the way this bank has let its shareholders down. ASFN has been publicly traded for roughly 3.5 years and its stock has only been heading down the toilet for the majority of that time.

The Education Bubble

Posted on April 26, 2009, 3:46 pm. Closed

The last bubble to pop? The education bubble, says Al Fin (got the link via Simoleon Sense).

Cost of tuition has risen…

Forty-seven universities have built billion-dollar endowments, while doubling their average tuition from 1995 to 2005. The average US public college tuition rose 35% between 2001 and 2006, while private college tuition rose 11%.

While quality of education has declined…

SAT scores peaked in 1964. Twenty-two percent of college freshmen need high school-level math. From 1995 to 2005, reading proficiency among Americans with graduate degrees declined from 51% to 41%. A 2006 study found that 20% of students pursuing 4-year degrees had only basic quantitative skills, and half could not perform complex literacy tasks. In the early 1960s, the average college student completed 60 hours of schoolwork per week. In 2003, only 33% of freshman reported 6 or more hours per week. Those doing less than one hour per week doubled over 16 years to 16%. Meanwhile, 47% receive A average grades, compared to 18% in 1968.

With this knowledge, I am beginning to feel more and more that my college degree means a lot less than I thought it did.

As suggested by the doctor quoted in the article, colleges and universities should fire the counselors, send the deans back into the classrooms, dismantle the football teams and turn the stadiums into playgrounds for kids, ban fraternities and sororities, and board up the student-activities office. Once you have more administration focused on actually teaching kids and once you free up the kids’ time, I think a school should probably double or triple the current amount of work required to just to PASS the class.

What would be the result? I think you’d probably see a lot of students leave and also a decline in applications. But the end result would be smarter kids and the school would have a growing reputation for academic excellence.

Western Investment’s New Statement On GCS

Posted on October 3, 2008, 9:36 pm. Closed

Western Investment filed a 14A regarding their proxy battle with the management of DWS Global Commodities Stock Fund (GCS). Western reiterates that its interests are alligned with shareholders because they hold 14.5% of outstanding shares. However most alarmingly, the discount to NAV has reached an astonishing 18%! That means selling shareholders can only get 82 cents on the dollar for the assets their shares represent. If you’re a current shareholder of GCS, I would urge you to vote for Western Investment’s nominees. If you’re not a shareholder, I think this is a great special opportunity where you can simply play the discount to narrow.