Bought 125 WaMu Shares
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I gambled today again on Washington Mutual (WM).
Two months ago, I bet on Freddie Mac (FRE) when the stock was traded below $7. For a company like Freddie, I thought that was an attractive price. That trade was proven to be as bad as it could be: The $100 I spent on the stock is only worth $9.5 now, even though I recovered part of the money later on from another trading of the stock at a much lower price.
Today, when Lehman Brothers (LEH), an investment bank that’s fighting its life, dominated financial news, WaMu also made some noises, in the bad way: the stock early traded as low as $1.75 a share, a 18-year low. The stock has been under pressure for quite some time after losses related to bad loans mounted. Like Lehman, investors question the survival of the thrift, which may need to raise as much as $10 billion fresh capital, according to some analysts (Reuters).
I didn’t get the stock at the lowest level, but the best I could. At $2.00 apiece, I bought 125 shares of WM through my TradeKing account (so I paid $4.95 commission). I’d love to save that commission and buy the stock through Zecco, but didn’t have enough cash in it. But that’s not the only reason. I found that I can’t use proceeds from stocks I just sold to make a purchase immediately with Zecco. The Buy Power didn’t increase right away. It only increase when the fund settles, usually the next day. Of course, in this case I can’t wait till tomorrow to make the purchase.
At the close of today’s trading, WM actually gained 51 cents to $2.83. The stock rises in after-hour trading after the company said
Despite the losses, Washington Mutual said it maintains $50 billion of liquidity from “reliable funding sources,” and expects to remain “well-capitalized,” with capital “significantly above” regulatory minimums.
Let’s see how this one plays out.
BTW, WaMu has recently introduced a couple of big promotions, including the 3.75% APY for WaMu online savings account and 5.00% APY 12-month CD. I am wondering what roles these promotions play in WaMu’s capital basis. And remember before Lehman’s stock lost some 90% of its value, it also repeated said it has plenty of capital, but only came out to ask more and more. That wasn’t long ago.
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yeah, i keep buying WAMU stock too.
Sun,
I keep resisting the temptation to buy beaten down financials. I still remember the pain in 2002 of buying beaten down tech stocks that kept going down and never recovered. I’ve decided to wait for a clear turnaround before touching financials. I know I’ll miss some of the rebound, but I should avoid most of the volatility.
Good luck on your bottom fishing trades. I like your approach of only risking a small amount.
I would have rather sold WM 2.50 put and that way if the stock closed above 2.50, you would have kept the premium. You could do this over and over till Wamu’s future hangs in air. Buying stock is good if you think that it’s going to shot up to 10 bucks in near future.
they should kill short and long buyers…ok, not so dramatic. i think there need to prevent so much speculation by eliminating the vehicles for speculation. also need to make hedge funds more accountable and transparent.
at any rate, that’s the system right now. you might be better off just buying a wamu cd at 5%, at least it’s fdic insured.
i’ve stopped buying more wamu at this point. i have lots of shares, but i went into financials with the understanding that if i lose the money, i lose it. i’ll hold long and wait it out.
Unfortunately, I think WaMu is going to fall the path of freddie and fannie, and countrywide, and end up going south, and get bought by someone else. Same with lehmans.
I do wish you luck on this investment though.
I remember there was one month in July/August when naked short was banned on financial stocks. As soon as the ban ended, FRE dropped like a rock. That may not be the whole reason, but it played a role.
Nobody knows for sure what will happen to WaMu. Early this year when JPMorgan wanted to buy WaMu, it offered a discount price. Now whether a buyout from JPMorgan is good for the stock or not is not clear. $2 is much cheaper than $8 back then. So hopefully, somebody will offer a premium than a discount.
If I loss, it’s only some $250. Not terrible.
i am very surprised at how resilient wamu is. you would figure that if they were in as bad shape or worse than lehman, merrill, freddie-fannie, bear, that they would be under already. as the weeks go by and the big players fall to the waste side, i am getting more and more confident that wamu will survive. i almost let my nerves get the better of me and started selling everything like everyone else. then i told myself, that i don’t have that much in wamu and the payoff at this point will be huge in the long run so just hang on. again, i am continually amazed wamu won’t die, so there has to be something to them; otherwise we would have seen its death by now. if they hold on the rest of this week at $2 and there is only speculative is wamu next, i think wamu will survive. then again, those sep 15th calls were supposed to do havock, and they did, but i’m surprised that they didn’t do more. especially looking at citi and jim cramer’s take that citi was next to get cut up by short sellers. there were lots of people panicking today, and that is what we get. unfortunately, the sec isn’t acting in order to stop blind shorts and shorts that drove down today’s market.
yeah wamu will shoot up in a week…buy as much as you can.
i bought 1000 stocks