Buffett is the world’s greatest vulture. He buys when stuff is in trouble. His last major move was Oxy when she got over her tips when buying Anadarko and Warren came to her “rescue”. Now the BH vultures are starting to pick at the bones of CRE,
How can they do this?
November 4, 2023 at 9:01 AM CDT
Just got off the phone with my bank consultant client. He finished an audit of the bank and sent the results to his boss. The boss said “you’re wrong”, “No. I’m not”. “There’s too many zeros in the number, it has to be wrong”. My guy said that when the regulators see the numbers not only will they shut the bank down, somebody is going to jail. The write off is over 50%.
He keeps telling me when all this is over, there will be only JP Morgan Chase left standing.
Any clue how long this may take , the regulator review , and when this would hit the press ? Guesstimate?
No, your client is wrong.
None. Since his boss has to present to the bank’s board, no time soon. Unless it’s time for the bank regulators to visit
I see 4 large banks in US based on current assets
(12/23).
| RANK | BANK NAME | TOTAL ASSETS | PREVIOUS RANK |
|---|---|---|---|
| 1 | JPMorgan Chase | $3.39 trillion | 1 |
| 2 | Bank of America | $2.47 trillion | 2 |
| 3 | Wells Fargo | $1.70 trillion | 4 |
| 4 | Citigroup | $1.66 trillion | 3 |
| 5 | U.S. Bancorp | $657.2 billion | 5 |
| 6 | PNC Financial Services | $553.1 billion | 6 |
| 7 | Goldman Sachs | $538.1 billion | 8 |
| 8 | Truist Bank | $535 billion | 7 |
| 9 | Capital One Financial | $468.8 billion | 9 |
| 10 | TD Group US Holdings | $366.3 billion | 10 |
Of course, he was exaggerating about one bank standing. He doesn’t think Citi is well run although the new CEO is making some good moves. Whether that’s enough is hard to say.
Or another way to view it…
US Inflation Rate is at 3.09%, compared to 3.35% last month and 6.41% last year. This is lower than the long term average of 3.28%.
Lies, damned lies, and statistics 
Getting back to this…one of my first impressions when looking at the large bank
assets was … what for it…how small they are! That may sound a bit foolish, laugh if you like 
| Last Value | 23.26T |
|---|---|
| Latest Period | Jan 31 2024 |
| Last Updated | Feb 9 2024, 16:16 EST |
| Next Release | Feb 16 2024, 16:15 EST |
| Average Growth Rate | 6.90% |
| Value from Last Week | 23.32T |
|---|---|
| Change from Last Week | -0.29% |
| Value from 1 Year Ago | 22.99T |
| Change from 1 Year Ago | 1.18% |
| Frequency | Weekly |
| Unit | USD |
| Adjustment | Seasonally Adjusted |
So total assets of all banks is about 23 trillion, of which Chase has about 15%.
Top 5 collectively have 9.9 trillion , or about 43% of all assets.
Too big ?
➚ BUY: Brains. Elon Musk’s Neuralink said the patient who received its first brain implant last month is now able to control a computer mouse just by thinking.
➘ SELL: Brawn. Home Depot reported its fifth straight quarter of falling sales. Home construction in the U.S. — already too scant to meet rising demand — is down by 25% since early 2022. Higher borrowing costs have also cratered interest in home improvement projects.
The CFPB doesn’t have an explicit veto over this takeover, but antitrust regulators do. Already, four banks control two-thirds of the U.S. card market, about the same competitive dynamic as U.S. airlines. The Justice Department just blocked the merger of JetBlue and Spirit, a combination the companies claimed would help a scrappy maverick take on the industry’s giants. At least Spirit’s flights are cheaper: Discover doesn’t even charge meaningfully less than Visa or Mastercard.
Antitrust regulators might like the idea of putting Discover’s merchant network in stronger hands to help it compete with Visa and Mastercard. I was surprised that Capital One didn’t lead with the duopoly-busting potential of this deal. If it were me, the first slide of the presentation would have been the Visa and Mastercard logos.
“There’s a story to tell that it’s both pro- and anti-competitive,” Keith Noreika, the former comptroller of the currency under President Donald Trump, told me. Regulators may see it as “beefing up a failing network to keep it going and competitive with the more dominant ones.”
Instead, executives didn’t press their case in their prepared remarks this morning and seemed unprepared for the first question to be on the deal’s regulatory hurdles. Capital One CEO Richard Fairbank said the company would be filing for the necessary approvals “in the next couple months” and moved on.
Both of these companies have found themselves in serious legal trouble in Washington in recent years. Capital One just got out of the Federal Reserve’s penalty box, four years after a major data breach, and in 2021 paid a hefty fine to Treasury for “egregious” failures to flag suspicious transactions. Discover just got into the penalty box for sweeping compliance lapses that resulted in its CEO leaving in August.
The business logic of this deal is sound enough. Capital One is strong in subprime (61% of its loans are to borrowers with credit scores of under 660) and has been chasing 800-club wealthy borrowers who might otherwise flash an Amex or Chase Sapphire. Discover is stronger in the middle, helping to fill out the barbell. And if it can grow Discover’s network of merchants, Capital One saves money on every swipe that its customers would otherwise pay to Visa or Mastercard.
But the companies appear to be underestimating the chances of a chain reaction in Washington. This deal feels like a thought experiment that escaped the lab.
Tip of the day, don’t invest in REIT funds or those that focus on CRE. You can thank me later on Black Tuesday, Wednesday, Thursday, Friday, or next Monday.
In the words of Fred Sanford, I can feel the big
one coming.
All BS aside, I’m reading that only about 25% of office towers can be converted to residential
use and even that’s not cheap to do with putting in extra plumbing.
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