Financial Insiders: Abandon Ship, Abandon Ship!

[HenryTo]

Just wanted to point out to all the following article regarding the huge insider selling in the financial sector from the Bank Credit Analyst:

http://www.bankcreditanalyst.com/public/story.asp?pre=PRE-20050725.GIF

This fits in with our relative strength chart on the Bank Index vs. the S&P 500, as well as the fact that we could see a credit crunch scenario later in the year.

Best regards to all,

Henry

[nodoodahs]

Agreed majority are banks. Also agreed the biggest problem will be the mortgage porfolios.

The insurers are only about a half-dozen or so in the group of 82. Just wanted any newbies to be aware that it's not quite a homogenous group ... even the banks will vary in their reaction, based on how much they have in mortgages, and the mortgage lender specialists will probably fare the worst.

Some insurers have large mortage holdings. Others have not-so-large mortgage holdings. Unfortunately I believe insurers get less regulatory hassle when holding MBS or GSE bonds, the auditors think they're "safer," and that lack of hassle has promoted a wider reliance on MBS in the industry than would happen in a free market.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[pete richardson]

Henry --

Banks make up the bulk of these indices.

Banks are able to re-price business and personal
loans quickly as they change the prime when the FFR%
is changed.

The toughie is the mortgage portfolio. Banks have taken
on and held a large volume of mortgages. Fine when
rates were falling, but tougher now. Even ARMs are
often adjusted only once a year.

Insurers have large mortgage and private placement holdings.
But here, many will run a matched book and not fund out
of the pot. Credit quality will be the issue with these guys.

PR

[nodoodahs]

Good stuff, Henry!

Reminder that S&P500 Financials are a mixed bag of 82 companies - there are banks, mortgage lenders, and P&C insurers in the group, not all are alike. Some are in the midst of share repurchases, like SAFC. I would venture most of the insider sales are from the lenders and not the half-dozen or so insurers in the group ...

S&P does not have (at least not that I've found) a calculation of the weight that each company carries and how much each company moves the index on a day-to-day basis. They do have this, however:

http://www2.standardandpoors.com/spf/xls/index/500_20050722_C.xls
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.