US Bank will be survive

By - Fandi Cendrawira

You asked some good questions there. To give you an awareness of how this crisis started is because of over-leverage. From fleas, dogs, people to companies in US are borrowing multiple times of their equities as collateral.

That is why overtime, companies are able to expand rapidly and generate massive profits and with people/society having too much money be able to push up share prices to epic ridiculous valuation. Thus everything is wayyy overvalued in 2007-2008. Even now at the current S&P level, company is just reasonably valued with sense with about 12-15x PER.

Would you buy something that will give you break even in over 10 years? I personally would not do so. Imagine yourself buying business or investment that give you back your total return in 12-15 years? Bah. Correct.


Stocks historically during the great depression is valued at 2-3x PER. Surprise? But of course the condition in 1928 is different from now. The world has advanced much in many terms(population, economically, standard of living, technology). People are much smarter now than last time and information from internet has dramatically shrank the world which give people edge in making timely decision or taking advantage. I do not make money by making a bet on the direction of the economy or hoping a screwed up company to overturn(This is extremely hard), but I love something that is really good, the best in it's industry, no problem with it's balance sheet, for discount sale in 20 years !!


Investment Bank in US is practically dead for now, I do not dare to touch an investment bank especially with derivatives because it is a giant ponzi scheme, nobody will be there especially in this economic climate is able to absorb the writedown/losses. I shudder at the thought of banks with derivatives product, it is what cause US financial system meltdown and AIG, Citigroup, Lehman brothers to go BUST. Retail, Commercial Banking will be the face of new US financial system. My money is on Wells Fargo. Some people like BK (Bank of New York Mellon) and USB (Us Bancorp), but I always like the cream of the good, pick the best horse and run to the finish with it.