Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Future Bank Earnings

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The chart below is very interesting and supports the recent commentary by Chris Whalen that banks are sitting on far bigger losses than they are reporting.

The volume of foreclosure sales has stayed relatively flat yet the serious delinquent category has grown much faster.  Foreclosure inventory has not kept up with the growth in delinquency either.


I've heard reports of people not paying a mortgage for months, in some cases over a year.  That would be a delinquent credit, yet the banks in those instances are ignoring this non-performing credit.  Unless notice is given, the credit is performing and not delinquent.   Why do that? Why would a bank let someone not make a mortgage payment for months? Why does the foreclosure process take up to 19 months for the top banks?

It's all part of extend and pretend.  When a credit is delinquent, the bank is still accruing interest on that note even though the probability of collecting that accrued interest is very low. Additionally the asset is marked at full value.  When a bank finally seizes a property it becomes an REO (Real Estate Owned) and that is when the hit to the balance sheet for the value of the asset and the income statement for the accrued interest happens.

What we have seen the past few reporting seasons is banks reducing their reserves for credit losses when in fact there is a mismatch between their realized losses and future losses.   They claim improving credit quality and perhaps that is true but they still are under reserved.  Should housing take another leg down, strategic defaults will occur and this problem will grow.  For now banks are balancing their dwindling profit with balance sheet write downs.  This, is why the US economy is being held hostage by the TBTF banks.  The last thing they want to do is extend credit to anyone without a perfect credit score and very low LTV .

Submitted by Ultra Trading.  If you would like to read more, please visit - Ultra Trading

Our Old Friend TA

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Long-time Slopers may recall the relatively obscure stock Travelcenters of America (symbol TA), which was frequently mentioned last summer. Starting on February 1, this stock made an explosive move higher over a period of several days, more than tripling in price.

A couple of days ago, I entered a small short position in TA based on the chart below. I really didn't see this stock rising any more than it already did, and with so much empty space beneath, I thought it was a reasonable risk/reward ratio. This position has turned out pretty well so far.