T2’s Tilson Says $1 Trillion Bank Losses Still to Come
May 21st, 2009 | By Contrarian Profits | Category: Notes From the Investment UndergroundAnother bad omen for stocks comes from storied hedge fund T2. According to Reuters, T2 partners Whitney Tilson and Glenn Tongue Tilson “have halted their move into the US mortgage bond market.”
Tilson says there will be “a headwind of continued losses for the better part of five years.” That’s because banks are facing more losses on residential and commercial real estate.
Tilson and Tongue expect additional losses at banks of more than $1 trillion. They also say US home-price drops could overshoot fair value of about 40%, to a decline of 50%.
T2 is selling selected bank stocks. Despite the “green shoots,” we advice readers invested in banks to consider doing the same.
Speaking to Reuters, Tilson said he really liked his bets that will profit when stocks drop, especially MBIA Inc (NYSE:MBI), which he says is so under reserved for losses that it will be seized and placed in runoff this year.
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