RSSBarclays Bank Tries to Avoid UK Government's Bailout Plan
By Roger Nusbaum | October 31, 2008 | 12:30 PM | 0 Comments
Barclays Bank is going to great lengths to avoid as much of the UK government's dole as possible, according to this from the FT.
I used to own Barclays across the board for its strength in consumer banking and its huge foot print in the ETF business. When I first bought BCS in 2004 BGI, the group that runs the ETF business out of San Francisco only accounted for about 15% of revenues. The idea was that the bank could be fair to middlin', the growth in ETFs would be robust and it paid a generous dividend.
I sold it in December 2007 in the high $41's after a big drop as it became clear that the banking situation in the UK and really all of Europe could be worse than in the US. To be clear I don't know in absolute terms that it is worse, it had the potential to be worse so I exited quietly.
Today the stock is trading around $11 and while I really really doubt it will disappear, I believe the price action is warning that it could be a while before it gets healthy.
As this market event continues to sort itself out and you hear people talk about buying financials you need to grain of salt what you hear. Companies still capable of dropping more shoes should be avoided by most people. There is no need to get your fingers cut by that falling knife. Contrast that with some regional bank some where or one of the Canadian banks or any other segment of the financial sector that is down 50% or some other big number. The companies could still go down further but the realistic chance of serious fundamental problems developing from here are less. Homework still needs to be done on things like credit card exposure and other issues that have not yet made headlines but there are plenty of values popping up without chasing the names that are making the headlines.
You don't have to have all the answers as to what is going on everywhere in the world but a little common sense can go a long way to avoiding regret.
Amusingly enough I got a call from CNBC while I was working on this post to come on to talk about this subject during the second hour of Closing Bell today.
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