The Government Shutdown and the New Way to Buy Bank Stocks | Where the Money Is - 10/1/13 | Summary and Q&A

TL;DR

Analysis of recent news headlines and stock market trends, including government shutdown, bank settlements, and merger activity.

Key Insights

• 🍉 The government shutdown poses potential economic risks, but long-term investors should not base investment decisions solely on short-term economic fluctuations.
• 🏦 Wells Fargo's settlement with Freddie Mac is relatively minor compared to previous settlements by other large banks.
• 💪 Merger and acquisition activity remains strong, with Bank of America potentially benefiting from its acquisition of Merrill Lynch.
• 🍉 Book value alone is not a sufficient metric for evaluating bank stocks, as it does not consider long-term earnings potential.
• ⚾ Huntington Bank and AIG are mentioned as potential stocks to own based on their management and valuations.

Transcript

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Questions & Answers

Q: What are the potential economic consequences of the government shutdown?

The shutdown could cost the US economy $300 million per day in lost economic output, as consumers and businesses delay purchases and expansion plans.

Q: Why does Wells Fargo settle with Freddie Mac for $869 million?

Wells Fargo sold mortgages to Freddie Mac before 2009, and the settlement is related to the quality of these mortgages.

Q: How is merger and acquisition activity in the market?

Merger and acquisition activity remains steady, with Goldman Sachs leading the way, followed by JP Morgan and Bank of America.

Q: Why did Walker and Dunlop experience a stock price plunge?

Walker and Dunlop, a commercial real estate lender, lowered its guidance due to reaching the limit of loans it can sell to Fannie Mae and Freddie Mac.

Q: What is the significance of Occupy Wall Street partnering with Visa?

Occupy Wall Street's partnership with Visa highlights the limited options for upstarts in the financial industry, as Visa and Mastercard dominate the market for widely accepted debit cards.

Summary & Key Takeaways

• The government shutdown begins as Congress fails to reach a resolution, potentially costing the US economy $300 million a day.

• Wells Fargo settles with Freddie Mac for $869 million regarding pre-2009 mortgage sales.

• Merger and acquisition activity remains steady, with Goldman Sachs leading the way.

• Walker and Dunlop experiences a plunge in stock price due to loan outlook, while Bank of America faces trial over Countrywide's "hustle" program.

• Occupy Wall Street partners with Visa to release a debit card.

• Analysis on the effectiveness of using book value as a measure for investing in banks.