Rarely Seen: KBW Officer Being Interviewed ... "Buy the Vulture"

Fred Cannon is an Equity Strategist at KBW. KBW stands for Keefer, Bruyette & Woods, a firm that manages the BKX index. The KBW Bank Sector (BKX) index is intended to reflect the evolving financial sector.




Mr. Cannon, provides the TARP does not protect common investors or equity holders. That is a cautionary note, if you are thinking about purchasing common shares of a bank you believe is benefiting from the TARP (Troubled Asset Relief Program) ... waiting might be better, as you may be able to get a better price. Cannon identifies JPM, WFC and PNC as 'the vultures' who are able to buy troubled assets. This factors into a privately held idea at Keefer, Bruyette & Woods, of "buying the vultures and not the meat (they eat)." ...


2:20 in, Cannon talks about possibility some of the banks may have to cut their dividend. The inference here is that they are taking money from U.S. Tax Payer Base, and therefore, must perform due diligence to pay back uncle sam first, before paying common shareholders a dividend. ...


Cannon also points out a common mis-perception: Many news agencies report the U.S. government is infusing money by way of purchasing preferred shares in banks. The mis-perception is that this will translate into common shares which are more popularly traded on exchanges. The government is NOT purchasing those common shares. Therefore, there is a slight of hand effect, whereby, many common persons, think bank-shares, traded on popular exchanges are protected and back stopped by the Fed. Banks offer two types of shares, the preferred shares to their elite customers, and the common shares to the broader market (everyone else). So a word of caution is inherent, in that if you buy a bank, you might be better off to buy "preferred shares." Common shares if you want to trade in banks (rather than invest).


On a sidenote: Steve Leisman botches this interview, as it was originally meant to address the issue Hank Paulson raised recently, indicating the FED should regulate Hedge Funds. Leisman gets so far off topic that he shows he is giddy and not able to focus on the issue (possibly Leisman believes this is a hot potatoe for the FED, to be regulating Hedge Funds, and as such, seeks to distract attention from the subject raised by Henry Paulson. Leisman calls this "breaking news," and then begins to distract attention. Surprisingly substandard and unprofessional reporting. We are left to speculate why he did this.)


Sidenote 2: This is posted due to the rarity of seeing an officer at KBW being interviewed regardless of subject.

Category:

News & Politics

Tags:

• BKX
• BKX Index
• Fred Cannon
• Keefer Bruyette & Woods
• Banking Index
• Bank Sector Index
• CNBC
• rebecca jarvis
• Hedge Fund Oversight

[corymd3470]

Matt Nesto had a segment on the historical KBW Bank index which showed that the financials are not at all cheap.