Friday, September 26, 2008

WaMu explanation number 1

We now know they had a deposit run.  To quote the WSJ...

Federal regulators said WaMu has suffered an exodus of $16.7 billion in deposits since Sept. 15, leaving the Seattle thrift "with insufficient liquidity to meet its obligations."
I am sure there will be more.  However it is very hard to see how JPM does not make a shocking profit on this transaction.


Anonymous said...

HEyyy John this only proves how skeptical the market we live in is.. But why am I not surprised... JPM is reaping big and there stock price will soon reflect that... I tink I might transition myself into the Canadian oil and gas.. they have undervalued companies... but I can understand them.. put valuation on the mines based on drilling... I got caught in the LEH mess and now I'm left scratching my head.. wondering where I went wrong.. I simply cannot value these can any of us? We're like little children awaiting on the next big PR then we pounce and try to gain some momentum.. At least this is what I've been noticing.. you can get a stock on the TSX trading at below p/e of 1 and pray for the best and get better longterm results than trying to mess with these pieces of paper.. IMO of course.. on another note I made some money today by jumping on PR within minutes.. yeahh it was a CDN mining company.. but the thing is they had a buyout.. AND I got the news in seconds in my email.. then i was able to ride some momentum. :) guess that's my way of recouping my LEH losses. I was on and I get all my PR alters instantaneously :P shows just how inefficient the market can really get. Post soon John! more explanations

Anonymous said...

So.. what are the odds of us getting our deposits out tomorrow morning?

John Hempton said...

Well JPM has adopted them. JPM is solvent last time I looked.

So you will get your deposits.


Anonymous said...

OMG, u're right on the losses WM will take. JPM is going to write off US$31B on WM's loan portfolio.

I'm assuming that is JPM's worst-case estimates (sort of kitchen-sinking the acquistion) based on best-available current info.

Of course, losses going forward may top US$50-60B. Then again, it maybe less and you get a nice write-back.

Anonymous said...

u mentioned that US$20B losses over 2.5 years are not a problem.

In this cas JPM is going to write off US$31B (which you mentioned would be a problem).

So how would this acquistion worked out for JPM? Doesn't seem value-accretive to me.

Unknown said...

John, what do you think of Wachovia?

John Hempton said...

What I think of Wachovia is irrelevant. I always thought Wachovia was worse than WaMu.

Now WaMu has been taken over and Wachovia is still there I guess I have been proven wrong.

So don't take my word for it.


On whether it is accretive - that is the subject of a future post. But as far as I can tell JPM got an absolute steal.

I do not believe that WaMu was functionally insolvent - but it was illiquid.

I suspect that the gift to JPM was tens of billions of dollars.

But again my calculations are worthless - I got this wrong. And calculating it out according to my old assumptions just repeats the mistakes - and I don't ever want to repeat my mistakes. [Lord knows I have made enough mistakes...]

So I will leave that future post very caveated.


Anonymous said...

The bank run is not unlikely. Anecdotal: I told my friends WM would go under for months, and most of them did not move until about two weeks ago. My GF told me tonight of her friends moving funds this week. I was partially wrong of course, as it appears that accounts with 100k+ survived. Nothing that would help you. But people well below the limit don't want to inconvenience themselves IndyMac style with having to deal with the FDIC. Again, this won't happen here. Somewhat assuring for the future.

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