Something is rotten in the state of Rochdale. One of the most bullish banking analysts ever, Dick Bove, just crucified not only JP Morgan’s earnings report, but also said Jamie Dimon "missed it completely on housing", and lastly, has turned extremely bearish on the overall economy, saying there is a 40-60% chance for a double dip, which at last check is probably more bearish than David Rosenberg. Bove throws up all over JPM "good" results, stating it is all a function of loan loss reductions, which the bank is in no way entitled to take at this point, when there is so much negative macro data piling up. As NPLs are likely to continue deteriorating in the future, should the economy weaken further, JPM would have to not only replenish existing accounting gimmicks such as boosting Net Income via balance sheet trickery, but to put even more cash to preserve a viable capitalization ratio. As Bove is the quintessential contrarian indicator, we are preparing for a month long sabbatical to a Buddhist monastery in Tibet to thoroughly reevaluate our perspectives on the universe.
Bove asks: "if the economy is going to expand, how is it going to expand when the money supply is shrinking. If you can’t come away with a strong feeling that this economy can plough right through a decline in money supply and continue to grow, then you better not be reducing reserves by $1.5Bn in a particular quarter." On the economy: "There is a "40-60% shot we are going to double dip. If they can’t get money supply to turn around and go up there is a very high probability we double dip." The reason: "The Fed has lost total control of money supply and it’s in the hand of the banks. The banks make money supply going up by lending money. If you want to force the banks to increase their capital ratios, they can’t increase their loans. If they don’t increase their loans, you don’t get an increase in the money supply. If you don’t get an increase in the money supply, it is very difficult to see how the economy can be robust going forward." And some shockingly harsh words on Jamie Dimon: "I would say Jamie Dimon missed it completely…
Dick Bove says the passing of financial regulation is a huge positive for the banks. He lays out his bull case for the banking sector and why this bill is not critically bad for bank earnings. This could result in a near-term rally in the banks, but is ultimately bad for consumers as banks will simply sidestep the rules and pass along costs to consumers. Bove concludes that a recession is likely now and that the passing of this bill was nothing more than a sideshow and more political pandering. Unbelievable….We should just kick every incumbent out right now. Obama claims this was a big victory for his administration, but the truth is that he cratered to the bank lobbyists once again. Bove says this bill will not stop another crisis from occurring. What an embarrassment….
What a difference a day makes. First Cramer was firmly planted in the Steve Liesman camp, who in turn for the past week has been moonlighting as the semi-official Goldman PR manager, in "leaking" every piece of useless "absolving" information (a job only secondary in worthlessness to that of worst financial stock analyst ever Dick Bove who has been buying Goldman all the day down from $185), however now after actually doing some thinking, the troubled theStreet.com owner who himself is no stranger to SEC investigations, has diametrically changed his tune. In this morning’s edition of "Morning Joe" on MSNBC, Cramer said: "What makes this worse than most situations is that it’s entirely possible this young guy, who’s now holding the whole firm hostage, Fabrice Tourre – it’s entirely possible that he sold it fraudulently. If he did, then Goldman has no defense. So, what I would emphasize at this particular moment is that this guy is way too powerful. The hearings are going to go badly. Goldman knew they were going to have a Wells Notice, knew they were going to get prosecuted. They didn’t reveal it. It was totally material. Again they did that wrong.” But we thought that according to "GAMECHANGING" information which you yourself Jim broke, Goldman was ok: after all they lost "money on the deal", a conclusion so moronic it immediately led to derisive ridicule from fringe blog Zero Hedge. That said, we are pleased to bury the hatchet – after all even former Goldmanite and seasned CNBSer Jim now agrees that the vampire squid is in deep shit.
Cramer argued that Goldman would have better served by approaching the government hat in hand rather than taking an aggressive tack against the charges. As things are, however, he predicted serious consequences for the firm and its management.
“The main thing you have to understand is that Goldman has basically said, ‘Government, you’re just dead wrong,’ instead of saying, government, ‘We’re sorry, what do you need to do?’” Cramer explained. “In order to end this, if it’s a settlement, they will have to pay the largest fine in history and
One stock, a company which is effectively bankrupt absent the government’s support and the FASB’s suspension of Rule 157, now accounts for 20% of total market volume. At last check, Citigroup had traded 1.6 billion shares, one fifth of total market volume. Why does anyone still fool themselves that the market is indicative of the total universe of stocks. We are confident that if we add Goldman, BofA and the other financials, especially their penny stock variants, we would get something like 40% of all volume. This is the sector which as we have repeatedly reported has seen short recalls by assorted custodian entities and repo desks.And as we type, Dick Bove is on CNBC providing the instacommentary he had previously banned himself from doing before, and confirming what we have been saying all along – that Goldman Sachs is a Buy only because it is a monopoly.
The positive earnings announcement by Wells Fargo on Wednesday was marred by a sell recommendation from Dick Bove and a lot of chatter about credit writedowns and mortgage servicing rights (MSRs). I wanted to add a few words about the report, MSRs, and bank stocks more generally.
First of all, this has been a very good quarter for bank earnings. Many of the big names globally have surprised to the upside. this includes Goldman Sachs, Morgan Stanley, JPMorgan Chase, Wells Fargo, US Bancorp, SEB in Sweden, Credit Suisse in Switzerland and on down the line. As one would expect, most banks are profiting from record low interest rates.
The question for the big banks is whether the huge writedowns they are still taking and the run-up in their stock prices since march limits any upside in valuation. For smaller banks, we should expect weaker results as they are more leveraged to the sectors of the economy like commercial real estate and construction loans which are still suffering. Goldman and Morgan Stanley should do relatively better as they are really broker-dealers and both investment banking and sales & trading are doing well right now. On the whole, I have said I think upside is limited for the sector, but downside is vast. Hence I am bearish on bank stocks.
Let’s look at Wells Fargo (WFC) as an example of what is happening.
Wells reports record profits
Wells reported net income of $32 billion, a robust operating pre-tax profit of $10.8 billion, and record net income of $3.2 billion. Sounds wonderful. What’s not to like? That was bank analysts Dick Bove’s initial impression as well. Live on-air at CNBC, he said Wells Fargo “is proving itself to be a standout.”
But, once Bove got a peek under the hood and started to crunch the numbers at Wells, he was significantly less impressed – so much so that he issued a sell rating literally nine hours later. And he took a lot of flak for this about-face.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
The Industrial ETF XLI may have created a "Bearish Wick" on a monthly basis at its Fibonacci 161% Extension level at (1) last month. Over the past year, XLI has reflected relative strength compared to the broad market. Over the past 30 & 90 days, XLI has shown a bit of relative weakness.
The table below lists the Top Ten holdings of XLI that might be worth watching in the very near future.
Support line (2) in the next chart is drawn off "Monthly Closing" prices dating back to the 2009 low. At this time, five year support remains in place. If XLI remains weak, compared to the S&P 500, how it handles this ...
On July 23 the BBC deleted a video report from correspondent Olga Ivishina regarding the crash of MH17. This has caused quite a stir in the blogosphere because the deleted video contained eyewitness reports of military aircraft flying on the same day, shadowing Mh17.
Once again, stocks have shown some inkling of weakness. But every other time for almost three years running, the bears have failed to pile on and get a real correction in gear. Will this time be different? Bulls are almost daring them to try it, putting forth their best Dirty Harry impression: “Go ahead, make my day.” Despite weak or neutral charts and moderately bullish (at best) sector rankings, the trend is definitely on the side of the bulls, not to mention the bears’ neurotic skittishness about emerging into the sunlight.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, incl...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
Volume in Starbucks options is running approximately three times the average daily level for the stock as of 1:15 p.m. ET ahead of the company’s third-quarter earnings report after the close. Shares in the name are up roughly 1.0% just before midday to stand at $79.95. Traders of SBUX options today are more active in calls than puts, with the call/put ratio hovering near 2.0 as of the time of this writing. Much of the volume is in 25Jul’14 expiry options contracts, most notably in the $80 and $83 strike calls which have traded roughly 3,350 and 2,550 times respectively and in excess of existing open interest levels in both strikes. A portion of the volume in the $80 and $83 calls appears to be part of a spread trade.
We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither MaddJack Enterprises, LLC
d/b/a PhilStockWorld (PSW) nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.