Skip to content
Andrew Tobias
Andrew Tobias

Money and Other Subjects

  • Home
  • Books
  • Videos
  • Bio
  • Archives
  • Links
  • Me-Mail
Andrew Tobias
Andrew Tobias

Money and Other Subjects

If the Bank Fails, We Could Always Open a Restaurant

November 26, 2007March 10, 2017

PEAS PIES AND PEARS

Let me preface this by saying real guys don’t eat peas. And they don’t eat pies except for frozen apple pies that they eat semi-defrosted, like the ultimate Ben & Jerry’s apple pie ice cream minus any actual ice cream. Real guys will, at Thanksgiving, eat their mother’s hot apple pie ala mode, but they’d never go to the trouble of cooking it themselves. That would be Baking Like a Guy™, and what guy bakes?  Guys grill.

But I digress.  My point is that at Thanksgiving this year I saw a huge serving bowl of peas on the kitchen counter next to two pies – and a light bulb went off.  Why not open a restaurant – ultimately, with proper management, a nationwide chain – called Peas and Pies?

“Hey, Madge – look!  Peas and Pies!  What the . . . ?”

“Well, Honey, isn’t that odd.  It must be good.  Let’s try it!”  (The thinking here: why would anyone open such a presumptive loser, if it weren’t really, really good.)

My nephew Timmy, 14, eyeing the peas and pies, was listening to my pitch and completely not buying it.

“Too narrowly focused?” I asked him.

“Definitely.”

“All right then.  Pears.  Peas, Pies & Pears.”  (I thought briefly of “Peas, Pies ’n Pears” but it is absurdist, not folksy, we are going for here.)

Timmy rolled his eyes as he often does when I am pitching an idea.  Were he a bit older and a reader of this column, he might have added, “Well, it can’t be any worse than your WA-MOOPS idea.”

Touché.

WA-MOOPS

There is, to begin with, worse to come with the housing and mortgage mess, and it’s hard to see how that won’t spill over into other miseries.  So be careful.  (“Rising Rates to Worsen Subprime Mess” ran this Wall Street Journal headline Saturday.  “Now the real crest of the reset wave is coming.”)

Just how bad it will get, and which players will ultimately emerge stronger as their weaker competitors fall by the wayside, I am not remotely qualified to guess.  Will Washington Mutual muddle through?

Glenn Hudson:  “I found two charts (both as of 9/30/07) showing valuable information about the breakdown of the $20 Billion of subprime loans on Washington Mutual’s balance sheet.  One of the most interesting facts that can be derived is that the loans are backed by $27.8 Billion in estimated current value of real estate.  Obviously there are a lot of situations where the loan is greater than the current value of the residence but looking at the chart, it is also obvious that this probably only represents a small fraction of the $20 Billion in loans.  Also, it should be pointed out that where there is a shortfall in value of the residence, the owner of the mortgaged residence is also personally liable for any uncovered loan balance.  So unless a person decides to go bankrupt, there wouldn’t be a loss incurred by Washington Mutual on loans not fully covered by the residential valuation.  People need to remember – we have low unemployment, fairly low inflation, fairly low interest rates, and Washington Mutual has a whole department working on making sure these sub-prime loans don’t go into default and even if they do go into default, they have people working on keeping the loss to a minimum.  Also, if everyone can look beyond the current supposed crisis, there is always going to be a need for mortgage lenders and this market has knocked out a lot of their smaller competition.  I believe they will continue to pay at least their 56 cent per quarter dividend (based on Friday’s close of $18.21 equals a 12.3% dividend) plus there is a huge potential for capital appreciation over the next two years.  If you do the research, you need to load up on this stock.”

☞ Much as I’d like to think Glenn is right (and I have added some to my position, with the stock price barely half where it was when I first bought some), I think he is being much too cheery in his assessment.  I don’t think we can assume massive numbers of people won’t go bankrupt, or that a vicious cycle of foreclosures leading to falling home prices leading to more foreclosures, decreased consumer confidence, and all the rest, won’t take hold.  Yes, with the dollar falling, our exports should pick up, and unemployment might stay low.  But you can also imagine a recession where unemployment rose.  And you can imagine a situation where the falling dollar led investors to demand higher interest rates before they would be willing to finance the U.S. debt.

In short: fasten your seatbelts.  And, while WM may ultimately work out well (as Citibank would have, had you joined Prince Alwaleed in buying it at $10 a share at the depths of its last great crisis) – it may not.

Advice so useless, let me be the first to note, it is worth exactly what you pay for it.

Post navigation

← A New Spaculation
Of Borrowers, Lenders, and 6,000 Applicants for 300 Unskilled Jobs →

Quote of the Day

"A thousand dollars invested at just 8% for 400 years grows to $23 quadrillion. But the first 100 years are the hardest."

Sidney Homer

Subscribe

 Advice

The Only Investment Guide You'll Ever Need

"So full of tips and angles that only a booby or a billionaire could not benefit." -- The New York Times

Help

MYM Emergency?

Too Much Junk?

Tax Questions?

Ask Less

Recent Posts

  • "Those Who Cannot Remember The Past . . ."

    May 31, 2025
  • Heartwarming / Thought-Provoking / Silver Lining -- And Despair

    May 30, 2025
  • Destroy The FBI; Protect The High-Jump!

    May 28, 2025
  • George Orwell, Joe, And Carl

    May 28, 2025
  • Harvard - UPDATED

    May 27, 2025
  • Harvard -- UPDATED

    May 27, 2025
  • Happy Memorial Day

    May 26, 2025
  • Echos Of 1859

    May 25, 2025
  • Here's The Thing: It Doesn't Have To GO That Way

    May 25, 2025
  • Joe Biden In Perspective

    May 22, 2025
Andrew Tobias Books
  • Facebook
  • Twitter
©2025 Andrew Tobias - All Rights Reserved | Website: Whirled Pixels | Author Photo: Tony Adams