Banking Shares....

[Ultraviolet]

All

thinking of buying a few banking shares - probably around £10k's worth - progressively over the next few months, with a medium to long-term view.

is this wise - and any thoughts on which banks look particularly good value at the moment?

UV

[Horse_Apple]

Ultraviolet said:

All

thinking of buying a few banking shares - probably around £10k's worth - progressively over the next few months, with a medium to long-term view.

is this wise - and any thoughts on which banks look particularly good value at the moment?

UV

I think that if the £10K is non essential to your current standard of living then that is the right amount.

I think that you are also correct to be looking at several stocks and building positions over a period of time.

That's the dull risk/reward stuff out the way.

As for the banks. I also agree with you. I believe that over the next few years, regardless of the economy, that positions opened this year will do very well.

Key problem at the moment is banks over exposed to property, either directly (B&B, NR) or via capital markets (Barclays, RBS).

The key problem over the next 18 months will be business and personal loan defaults, but while the media will rant and rave about this most banks will have factored in a reasonable level of bad debt provision. In theory

I like A&L, because while it is small and therefore more exposed, it has always been a bid target and once the big banks start buying up the smaller ones I think this will perform well.

Lloyds, hasn't the same kind of capital markets exposure and is looking very over sold.

HSBC and Standard Chartered are plays on the Far East coming out of this better than the US and Europe. I would look at the latter but suspect that it is already at a premium so would want to compare the two to see which was better value.

After that I would probably have some Barclays and RBS.

[NoelWatson]

Horse_Apple said:

Ultraviolet said:

All

thinking of buying a few banking shares - probably around £10k's worth - progressively over the next few months, with a medium to long-term view.

is this wise - and any thoughts on which banks look particularly good value at the moment?

UV

I think that if the £10K is non essential to your current standard of living then that is the right amount.

I think that you are also correct to be looking at several stocks and building positions over a period of time.

That's the dull risk/reward stuff out the way.

As for the banks. I also agree with you. I believe that over the next few years, regardless of the economy, that positions opened this year will do very well.

Key problem at the moment is banks over exposed to property, either directly (B&B, NR) or via capital markets (Barclays, RBS).

The key problem over the next 18 months will be business and personal loan defaults, but while the media will rant and rave about this most banks will have factored in a reasonable level of bad debt provision. In theory

I like A&L, because while it is small and therefore more exposed, it has always been a bid target and once the big banks start buying up the smaller ones I think this will perform well.

Lloyds, hasn't the same kind of capital markets exposure and is looking very over sold.

HSBC and Standard Chartered are plays on the Far East coming out of this better than the US and Europe. I would look at the latter but suspect that it is already at a premium so would want to compare the two to see which was better value.

After that I would probably have some Barclays and RBS.

I hold AL., LLOY and RBS. Currently underwater but am in it for 20 years so will have to wait and see.

[Horse_Apple]

NoelWatson said:

Horse_Apple said:

Ultraviolet said:

All

thinking of buying a few banking shares - probably around £10k's worth - progressively over the next few months, with a medium to long-term view.

is this wise - and any thoughts on which banks look particularly good value at the moment?

UV

I think that if the £10K is non essential to your current standard of living then that is the right amount.

I think that you are also correct to be looking at several stocks and building positions over a period of time.

That's the dull risk/reward stuff out the way.

As for the banks. I also agree with you. I believe that over the next few years, regardless of the economy, that positions opened this year will do very well.

Key problem at the moment is banks over exposed to property, either directly (B&B, NR) or via capital markets (Barclays, RBS).

The key problem over the next 18 months will be business and personal loan defaults, but while the media will rant and rave about this most banks will have factored in a reasonable level of bad debt provision. In theory

I like A&L, because while it is small and therefore more exposed, it has always been a bid target and once the big banks start buying up the smaller ones I think this will perform well.

Lloyds, hasn't the same kind of capital markets exposure and is looking very over sold.

HSBC and Standard Chartered are plays on the Far East coming out of this better than the US and Europe. I would look at the latter but suspect that it is already at a premium so would want to compare the two to see which was better value.

After that I would probably have some Barclays and RBS.

I hold AL., LLOY and RBS. Currently underwater but am in it for 20 years so will have to wait and see.

I'd agree with those.

I would say that there is no rush to buy or add to holdings as things can still get cheaper and even if they don't it'll be a while before stable share price growth comes back into this sector. Going to be wild for a while but a well spread long term portfolio isn't looking a bad idea.

[Trommel]

B&B takeover?

[Horse_Apple]

Trommel said:

B&B takeover?

Under normal conditions I would suspect so, but with our currently weak and scared Govt I would put money on banks sitting on their hands until GB calls them up and offers to pay them with our money to buy out B&B. Wouldn't you?

[Seany88]

Horse Apple what do you think about talk that the SP of LLOY is overvalued in relation to the giants of HBOS and RBS? I bought a lot of LLOY when it dropped a lot, but then it dropped more :s i'm willing to average down but don't want to do that, only for it to drop further!

[NoelWatson]

Seany88 said:

Horse Apple what do you think about talk that the SP of LLOY is overvalued in relation to the giants of HBOS and RBS? I bought a lot of LLOY when it dropped a lot, but then it dropped more :s i'm willing to average down but don't want to do that, only for it to drop further!

My view is that Lloyds have been paying a 7% dividend for donkeys, and if they continue to do this for the next 20 years I will be happy.Furthermore, the market perceives them to be less of a credit risk.

[Seany88]

NoelWatson said:

Seany88 said:

Horse Apple what do you think about talk that the SP of LLOY is overvalued in relation to the giants of HBOS and RBS? I bought a lot of LLOY when it dropped a lot, but then it dropped more :s i'm willing to average down but don't want to do that, only for it to drop further!

My view is that Lloyds have been paying a 7% dividend for donkeys, and if they continue to do this for the next 20 years I will be happy.Furthermore, the market perceives them to be less of a credit risk.

But how likely are they to maintain their dividend in the future? Or in fact any company? Sorry not been through a 'recession' before so am still learning the ropes and what's happened in the past.

[Horse_Apple]

Seany88 said:

Horse Apple what do you think about talk that the SP of LLOY is overvalued in relation to the giants of HBOS and RBS? I bought a lot of LLOY when it dropped a lot, but then it dropped more :s i'm willing to average down but don't want to do that, only for it to drop further!

I suspect that by comparison it may be over valued, but if it is it will be because of a percieved lower exposure to the sub prime market. HBos and RBS have large trading desks that had built up large exposure to the US housing markets whereas Lloyds is not really a player in this field.

As such, I suspect that money flowed from those deemed to be most exposed to those deemed less exposed.

Another factor has been the issie of exposure to the domestic housing market. B&B and NR were really too small to be banks and in order to compete with their listed counterparts went out into the market place and hoovered up every bit of crap property debt they could lay their hands on. Thus, they are the most screwed now. Too small to start with and enormous books of rubbish business.

Again, C&G, Lloyds mortgage arm by comparison has not been so aggressive. That is not to say they aren't sitting on some crap but generally speaking they weren't the ones out in the market flogging thousands of 125% debt deals.

Where Lloyds may well get clobbered more than others is with regard to personal and company lending as many of those people start to default.

I suspect that most banks would argue that due to the changes a few years ago that made it easier for people to go bankrupt, they have been building in large bad debt provisions. The reality is that no bank will every build in sufficient provisions and will in fact, in the City environment that has taken a hold in the last 5 years, have only put aside enough cash to keep investors happy rather than accountants as that is likely to be a lower number.

My overall view at present is bearish and so my thoughts are:

If you are already in then now is probably not the right time to average down. The market is trending down and there isn't any point in fighting it.

Having said that, things could start ticking up sooner than expected and you might feel you could be losing out. My view on that is that missing out on calling the absolute bottom is on no consequence. The time to average down is once the stock has already clearly reversed and the whole market or sector is once again trending up. I would even go so far as to wait until the papers are being positive just to make sure.

Bottom picking is best left to small kids with worms and chimps.

I do feel that there will be plenty of time to double down, dive in etc and there is plenty of upside, I just don't see the point in risking capital until it is a real no brainer and is clearly going back up.

Don't forget that we haven't yet seen any major high street failures, let alone the collapse of sofa and kitchen stores which are the usual first obvious signs that spending is down and debt is being defaulted in serious numbers. (Even SCS seems to have found a backer?)

What the shares seem to now be pricing in is the following:

Step 1: Furniture and kitchen stores closing down and clients losing their deposits etc. (SCS in trouble)

Step 2: Big high street chains going bang (M&S have warned, Starbucks reducing stores)

Step 3: Big corporate loan defaults at the banks and a swathe of personal defaults.

These steps could be very bad as this time around so many businesses have either been run by corporate financiers who have stripped the businesses to the bone and leveraged massively to get as high a share price as quickly as possible, or the company has been forced to do this themselves to keep the corporate financiers away from their business. All in, what it means is that there are many well known household names which used to be very robust and asset backed which could almost be viewed as empty bubbles nowadays and won't be able to stand up to a prolonged downturn.

The house builders are a pretty good example, as is any high street chain which sold off and leased back its properties in the last 10 years.

Do bear in mind that I am feeling particularly bearish today. But I have been for a while as I cashed in most of my toys and equity investments at the end of last year with a view of buying them all back for less at a later date.

[NoelWatson]

Seany88 said:

NoelWatson said:

Seany88 said:

Horse Apple what do you think about talk that the SP of LLOY is overvalued in relation to the giants of HBOS and RBS? I bought a lot of LLOY when it dropped a lot, but then it dropped more :s i'm willing to average down but don't want to do that, only for it to drop further!

My view is that Lloyds have been paying a 7% dividend for donkeys, and if they continue to do this for the next 20 years I will be happy.Furthermore, the market perceives them to be less of a credit risk.

But how likely are they to maintain their dividend in the future? Or in fact any company? Sorry not been through a 'recession' before so am still learning the ropes and what's happened in the past.

Just checking on Bloomberg and the yield is over 12%. There have been rumours of them wanting to cut the divi for years but they never have. This may change, but my understanding is that they are pretty conservative and don't have a massive subprime exposure.

[Horse_Apple]

NoelWatson said:

Seany88 said:

NoelWatson said:

Seany88 said:

Horse Apple what do you think about talk that the SP of LLOY is overvalued in relation to the giants of HBOS and RBS? I bought a lot of LLOY when it dropped a lot, but then it dropped more :s i'm willing to average down but don't want to do that, only for it to drop further!

My view is that Lloyds have been paying a 7% dividend for donkeys, and if they continue to do this for the next 20 years I will be happy.Furthermore, the market perceives them to be less of a credit risk.

But how likely are they to maintain their dividend in the future? Or in fact any company? Sorry not been through a 'recession' before so am still learning the ropes and what's happened in the past.

Just checking on Bloomberg and the yield is over 12%. There have been rumours of them wanting to cut the divi for years but they never have. This may change, but my understanding is that they are pretty conservative and don't have a massive subprime exposure.

I don't think there is any doubt that all the banks want to cut their divi but I would be shocked it it was Lloyds to start the trend.

As soon as one main player folds on that front all the others will follow.

[NoelWatson]

Horse_Apple said:

NoelWatson said:

Seany88 said:

NoelWatson said:

Seany88 said:

Horse Apple what do you think about talk that the SP of LLOY is overvalued in relation to the giants of HBOS and RBS? I bought a lot of LLOY when it dropped a lot, but then it dropped more :s i'm willing to average down but don't want to do that, only for it to drop further!

My view is that Lloyds have been paying a 7% dividend for donkeys, and if they continue to do this for the next 20 years I will be happy.Furthermore, the market perceives them to be less of a credit risk.

But how likely are they to maintain their dividend in the future? Or in fact any company? Sorry not been through a 'recession' before so am still learning the ropes and what's happened in the past.

Just checking on Bloomberg and the yield is over 12%. There have been rumours of them wanting to cut the divi for years but they never have. This may change, but my understanding is that they are pretty conservative and don't have a massive subprime exposure.

I don't think there is any doubt that all the banks want to cut their divi but I would be shocked it it was Lloyds to start the trend.

As soon as one main player folds on that front all the others will follow.

RBS are paying their next divi in shares - will be interesting to see if any others follow

[Seany88]

Excellent replies, thank you. Horse Apple sounds like you made very good decisions, bet your smiling. So without trying to pry, have you just sat on your cash for now waiting for the right opportunity to come?

I personally try to invest mainly in high-yielding co's and so may be being naive but think I should keep ploughing my money into these co's for the dividend (as long as its secure) in the view that the actual SP will eventually recover? (provided I hold onto them long enough and they are able to weather the storm). Any opinions?

[Horse_Apple]

Seany88 said:

Excellent replies, thank you. Horse Apple sounds like you made very good decisions, bet your smiling. So without trying to pry, have you just sat on your cash for now waiting for the right opportunity to come?

I personally try to invest mainly in high-yielding co's and so may be being naive but think I should keep ploughing my money into these co's for the dividend (as long as its secure) in the view that the actual SP will eventually recover? (provided I hold onto them long enough and they are able to weather the storm). Any opinions?

Hi,

Generally agree. With higher yielders it is always important to carry out a lot of fundamental research to get to the precise reason why they are yielding above the norm.

It's obvious with most of the banks but other stocks aren't as clear cut usually.

As for myself, I'm a trader who gets spooked easily and so normally invest over the medium term using cost price averaging on what I feel to be over sold scenarios. As such I am sitting on the sidelines waiting on the banking sector.

My main play for the last 12 months has been building commodity positions with the odd shorter term dive into oversold equity indices, but the latter came to end some time ago and I'm now out of oil and gold, so pretty much all cash. I look for trends and try to ride out a % of it.

All returns are dumped into either the mortgage account or the pension, rather than back into the market.

I'm naturally risk averse and tend towards a bearish nature most of the time, if that helps to understand my scribblings. In other words, a miserable coward.

[Seany88]

As for myself, I'm a trader who gets spooked easily and so normally invest over the medium term using cost price averaging on what I feel to be over sold scenarios. As such I am sitting on the sidelines waiting on the banking sector.

My main play for the last 12 months has been building commodity positions with the odd shorter term dive into oversold equity indices, but the latter came to end some time ago and I'm now out of oil and gold, so pretty much all cash. I look for trends and try to ride out a % of it.


Are you quite bullish on commodities? I've not done any research on them as I initially felt it was a bubble waiting to burst, but now commentators are suggesting that its the start of a long bull run? I guess i'm a bit shy after loading up on gold (to build my shelter with) and then it falling back maybe a week or so after! Gotta love it eh

[Horse_Apple]

Seany88 said:

As for myself, I'm a trader who gets spooked easily and so normally invest over the medium term using cost price averaging on what I feel to be over sold scenarios. As such I am sitting on the sidelines waiting on the banking sector.

My main play for the last 12 months has been building commodity positions with the odd shorter term dive into oversold equity indices, but the latter came to end some time ago and I'm now out of oil and gold, so pretty much all cash. I look for trends and try to ride out a % of it.


Are you quite bullish on commodities? I've not done any research on them as I initially felt it was a bubble waiting to burst, but now commentators are suggesting that its the start of a long bull run? I guess i'm a bit shy after loading up on gold (to build my shelter with) and then it falling back maybe a week or so after! Gotta love it eh

Not bullish on anything today

Commods have been driven by a huge increase in manufacturing demand plus speculation.

If the US stops buying then the East will stop manufacturing and commodities could come tumbling down.

The world is in limbo and I do feel that coming up soon will be that classic single event that triggers market capitulation.

[NoelWatson]

Seany88 said:

As for myself, I'm a trader who gets spooked easily and so normally invest over the medium term using cost price averaging on what I feel to be over sold scenarios. As such I am sitting on the sidelines waiting on the banking sector.

My main play for the last 12 months has been building commodity positions with the odd shorter term dive into oversold equity indices, but the latter came to end some time ago and I'm now out of oil and gold, so pretty much all cash. I look for trends and try to ride out a % of it.


Are you quite bullish on commodities? I've not done any research on them as I initially felt it was a bubble waiting to burst, but now commentators are suggesting that its the start of a long bull run? I guess i'm a bit shy after loading up on gold (to build my shelter with) and then it falling back maybe a week or so after! Gotta love it eh

If you do some research on historical returns (bearing in mind I'm a long term investor so this may not apply to all), over the last 20 years, we have had the following

FTSE 100 Total return 641 3288
Gold 445 930

not sure about commodities.

[Seany88]

NoelWatson said:

Seany88 said:

As for myself, I'm a trader who gets spooked easily and so normally invest over the medium term using cost price averaging on what I feel to be over sold scenarios. As such I am sitting on the sidelines waiting on the banking sector.

My main play for the last 12 months has been building commodity positions with the odd shorter term dive into oversold equity indices, but the latter came to end some time ago and I'm now out of oil and gold, so pretty much all cash. I look for trends and try to ride out a % of it.


Are you quite bullish on commodities? I've not done any research on them as I initially felt it was a bubble waiting to burst, but now commentators are suggesting that its the start of a long bull run? I guess i'm a bit shy after loading up on gold (to build my shelter with) and then it falling back maybe a week or so after! Gotta love it eh

If you do some research on historical returns (bearing in mind I'm a long term investor so this may not apply to all), over the last 20 years, we have had the following

FTSE 100 Total return 641 3288
Gold 445 930

not sure about commodities.

As a long-term investor though, do you just simply buy and hold indefinitely? As that was my original plan, though I then thought well if I see what I feel are peaks or overselling, that there's money to be made by taking advantage...or am I stating the obvious?

I ask because theoretically, if I understand that figure for total return I assume that's simply growth of the FTSE which could be achieved from a simple tracker?

[NoelWatson]

Seany88 said:

NoelWatson said:

Seany88 said:

As for myself, I'm a trader who gets spooked easily and so normally invest over the medium term using cost price averaging on what I feel to be over sold scenarios. As such I am sitting on the sidelines waiting on the banking sector.

My main play for the last 12 months has been building commodity positions with the odd shorter term dive into oversold equity indices, but the latter came to end some time ago and I'm now out of oil and gold, so pretty much all cash. I look for trends and try to ride out a % of it.


Are you quite bullish on commodities? I've not done any research on them as I initially felt it was a bubble waiting to burst, but now commentators are suggesting that its the start of a long bull run? I guess i'm a bit shy after loading up on gold (to build my shelter with) and then it falling back maybe a week or so after! Gotta love it eh

If you do some research on historical returns (bearing in mind I'm a long term investor so this may not apply to all), over the last 20 years, we have had the following

FTSE 100 Total return 641 3288
Gold 445 930

not sure about commodities.

As a long-term investor though, do you just simply buy and hold indefinitely? As that was my original plan, though I then thought well if I see what I feel are peaks or overselling, that there's money to be made by taking advantage...or am I stating the obvious?

I ask because theoretically, if I understand that figure for total return I assume that's simply growth of the FTSE which could be achieved from a simple tracker?

"As a long-term investor though, do you just simply buy and hold indefinitely? "

Yes

"though I then thought well if I see what I feel are peaks or overselling, that there's money to be made by taking advantage...or am I stating the obvious?"

I find predicting a random walk impossible. Maybe you will have more luck.

"I ask because theoretically, if I understand that figure for total return I assume that's simply growth of the FTSE which could be achieved from a simple tracker?"

You will need to take into account costs and tracking error. Both should be pretty low