Buying Bank Stocks Now?

[30ashopper]

Investing is easy with the benefit of hindsight. ;-) Are we in a new bull mkt or is this still a rally in a bear mkt ? I am taking profits, which I almost forgot what they were , and selling SPY's to hedge part of my portfolio. Also selling May calls against certain long positions since premiums are still high. I think the rally may peak out at the 925- 935 range in the SPX. The only stock I am currently buying is Abbott Labs ( ABT ), which is a 5 star rated stock by S&P and is also a "dividend aristocrat", having raised the dividend for 25 straight years. BTW, the banks have been on fire especially yesterday after WFC's earnings forecast.....could be a trap though !!!

I agree, the current admin has basically given the banks the right to cook the books. I have to wonder if the bottom still falls out at some point as these institution's balance sheets haven't changed and more bad debt is headed their way in the form of bad CRE, consumer debt, and of course home loans.

As far as tops in the S&P, I'm not going to try and call it, things are just too crazy. I am happy some longs are doing better, especially MSFT and MS, but I will be keeping those stops very up to date. I'm still convinced another major leg down is in the near future. I sold all my short term positions around 810.

 

[Lynnie]

Could you two keep me posted, please????

 

[Mango]

I'm not understanding how Citibank rallied 25% today when analysts expect that they will show a loss for the quarter when the results of the stress tests come in this week?

From Bloomberg:
Citigroup, Goldman Sachs Group Inc. and JPMorgan Chase & Co., all based in New York, are scheduled to announce results this week. Bank of America Corp. in Charlotte, North Carolina, and Morgan Stanley will report next week. Wells Fargo pre- announced earnings last week, saying first-quarter net income was $3 billion, or 55 cents a share, more than double the average estimate of analysts surveyed by Bloomberg. Earnings were bolstered by an increase in the bank’s mortgage business, mainly from homeowners refinancing loans at lower rates.


Stress-Test Results
“We do expect first-quarter earnings will be better than previous quarters, but what investors are really looking most forward to are the results of the stress tests,” said Tom Kersting, an analyst at Edward Jones & Co. in Des Peres, Missouri. “Just looking at the first-quarter results may mislead some people as far as the results of the stress test.”

and analysts say that Wells Fargo probably doesn't have enough reserves for write downs. What's all the euphoria about?

 

[30ashopper]

I have absolutely no idea. It doesn't make any sense to me either Mango, I think it's just irrational exuberance.

 

[goofer]

A lot of the Citi move has to do with the conversion of preferred shares into common shares. If you recall the preferred stopped paying dividends and the holders of the various preffereds were enticed into converting to common at advantageous terms. As a result there has been a rush to lock in the spread by shorting common. Now Citicorp cannot be borrowed resulting in a big short squeeze.

 

[Mango]

I figured out today that it had something to do with shares, Goofer, but you explained it better than I comprehended it. I didn't realize that there was an enticement. I just thought they stopped paying dividends, period. Still a little confused, though.

I'm still edgy. This mark to fantasy is creating an over exuberance and at some point there is only so much selling of assets and moratoriums before reality settles in. They can only cook the books so much. That being said, I think Citi will rally more and reach $5 by Monday, IMO. After that, it's anyone's game. It's been interesting watching this FED induced rally and the stress test folly show to come should be interesting.

 

[goofer]

okay

Here we are after the bank stress tests, after first quarter earnings, after employment numbers and after a 40% move in the stock mkt since March 6. Now I ask where do you think the mkt goes from here and Why ?

 

[30ashopper]

okay

Here we are after the bank stress tests, after first quarter earnings, after employment numbers and after a 40% move in the stock mkt since March 6. Now I ask where do you think the mkt goes from here and Why ?

I'm currently on the side lines waiting to see what happens. Foreclosures are still on the rise, consumers are still without credit and in debt, and the banks are still over leveraged. I think it's easy to get excited by thinking everything is going to back to the way it was, but IMHO it's not. The depression will play out over a long term period, one or two months do not make a trend.

 

[Lynnie]

I'm currently on the side lines waiting to see what happens. Foreclosures are still on the rise, consumers are still without credit and in debt, and the banks are still over leveraged. I think it's easy to get excited by thinking everything is going to back to the way it was, but IMHO it's not. The depression will play out over a long term period, one or two months do not make a trend.

I don't think things will go back to the way they were, but my 'personal confidence' in the economy is improving. While I am still shifting gears (recovering) from 2007 & 2008, I have recently begun the task of preparing for the imminent inflation lurking around the corner. My prediction is 18 mos. from now, we will be on a roller coaster for certain.

I try to pop out of my bubble once a week to see a bit of reality and this week alone I had three very close friends tell me about more layoffs, no work out there and clients who aren't paying. The ol' trickle down effect is (in my opinion) hitting near the bottom. I don't think we'll move into a depression, but I do believe this will be one of the longest recessions in our history.

I have friends who are being forced into short-sells - people we never thought would be in that position. Meanwhile, I am also trying to get out of the country and take advantage of the strengthening dollar. Long strange trip this has been for me and in an odd way, I am thankful for having gone through it. I feel stronger somehow! I should be back in the black within 90 days! What a relief! ;-) I have a yummy Super Tuscan that will be opened in celebration - y'all are all invited to toast with me, but I'm drinking the whole bottle myself!

 

[30ashopper]

Being more optimistic than I am is certainly paying off over the short term. I bought BAC at 6, sold it at 8, and now it's at 14. (Of course it could have gone back to 3, and may still get there. )