I will leave the fate of my blogging future in the hands of upright walking pigs (bank stocks). Over the last three weeks, I’ve endured melt up after melt up, which would be perfectly fine, providing I was long. Being short the lowest order of banks once made me proud to be an American. After all, what country can provide such upright walking pigs, in such a wide variety?
It is a demonstration of true diversity.
Literally, I have 20 bank stocks on my screen worth shorting, right now. You may think the charts look cute, with their little “breakouts” above “necklines” and such. However, consider the fact that I will punch your eyebrows, mustache and hairpiece off your skull for suggesting such things, and you may start to see it my way.
The credit crisis didn’t go anywhere. Global growth is slowing, spreads are widening and we have not even seen the ramifications of bad commercial paper yet.
Be patient.
With my money, I am banking some “gorilla coin” in VeraSun Energy Corporation [[VSE]] and Hansen Natural Corporation [[HANS]] today. VSE reported stellar numbers last night.
Remember, ethanol production is still booming. The problem has been corn. With corn coming down in price, people like Jim Cramer can shut up and let the Godly folks at VSE continue to produce, with impunity.
At these levels, I like BKS, short Bank of America Corporation [[BAC]] , short Morgan Stanley [[MS]] and short Goldman Sachs Group, Inc. [[GS]].
Time Machine Update: I can tell you, with the utmost amount of accuracy and frankness, Willie Randolph will be fired by the All-Star break and (CHL: 60.30 -5.10%) will trade in the 50’s. These two “future facts” are not debatable nor can they be stopped.
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Cramer is telling people to buy tech…
“sell tech in May, sell it in August”. What the fuck is that supposed to mean?
Did Cramer ever make money as a hedge fund manager?
He’s certainly put the kabosh of tech.
J:
Cramer was a great fund manager. “The Fly” was also a great baseball player, as a teenager.
Now I suck.
I have heard numerous short the financial commentators in the media recently that I am beginning to think it is a very crowded trade.
1/3 of US Homeowners are upside-down on their mortgages. FUCK THE BANKS! They are going down hard over the rest of this week.
Great analogy Sir Fly.
Per your above rant, don’t discount global instability/war. Things are as dicey as they’ve been since the cold war.
Kid:
Oh really?
Is that why the banks are up 60% over the last 3 weeks?
It’s not crowded anymore.
1/3 of homeowners are not down, DB. You’re just dreaming.
j:
you are right it is probably more like half.
yeah, 1/3 doesn’t seem right.
Fly,
Whats wrong with hair pieces??? Long FXP at 76 7/8 Baby
SMN has some compitition for shittiest ETF, SRS and RTH.
Oh ya, been short CAD since 99.00
1/3 of New Homeowners….
“Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.”
Excellent analogy, Fly. And as for the Mets, try being a Cleveland Indians fan.
The trade may work for 10 points.
I believe there is considerable upside from here. Percentages such as the 60% you cite are exaggerated because of such low denominators.
FNM is the tell.
Kid
Not true.
BAC was 19, now 33.
Go through a list of banks. They’re all up 50%.
All of them.
Fly did you listen to the VSE cc? I’m curious of their guidence when these new plants are all ripping. I have a feeling all dips should be bought.
Short BAC. Its not often we agree on things, Fly.
If they are en route to 100-300% gains from their lows then getting on now for the ride can be very rewarding.
Bac to 45
WB to 30
C to 27
Tell me Kid, why should the banks be rewarded with 100-300% gains?
Are we in the midst of some recovery?
Or, better yet, were the banks able to unload all of their bad paper and repo’s?
This isn’t 1991. I wish people would start acting like it’s 2008.
BTW:
I am long WB, as my ‘what if I’m wrong’ pick.
However, I just cannot see a scenario where the banks can shoot much higher.
The only way the banks can start booming again, is if they were able to extend cheap credit, with poor standards, to people again.
I’m talking 500 fico scores, zero down, ARMS.
Then, they could get rid of the inventory, underwirte some more CDO’s and Wall Street could eat steak again.
The only problem: the banks don’t have any money.
How sad.
Yea, UB unloaded on Mitsubishi.
Off to the gym.
Should be a bear attack in addition to a bull sell off pretty soon in the financials.
Technical Analysis wins again, don’t go against the tape.
Bear Market rally about to be over soon.
I always said, UB is a good bank.
Before I go, my short list includes:
CATY, MER, MS, GS, LEH, EWBC, TCB, FED, PCBC, PACW, MI, CMA, COF and PZN
Honestly Kid, even if the banks have mystically vanished all of this trash paper circulating the market, which I don’t think they have……..it’s not exactly the best environment moving forward to be in the banking business. Appetite for low quality paper is scant, lending standards are tight, borrowers are leveraged and widely underqualified, and real estate is continuing to deflate.
Wachovia to $30? Have you seen the egregious dilution thats taken place with that company? Did you happen to notice they bought Golden “pick a payment” West Financial in the summer of 2006 for $26 BILLION cash.
These are things to consider while celebrating the demise of “upright walking pigs”.
Its a technical move and will confound many. There are many dynamics in place for a recovery in my opinion.
I am in commercial lending and speak with roughly 500 owners/execs of small businesses a month across a variety of industries. This is unlike in 2001-2003 when there was not sufficient business to justify capital investments. Many of the companies I speak with have plans for expansion and indicate that business is steady to up. I believe that a replacement cycle has begun for capital equipment which will result in two plus years of above trend growth.
It’s odd that the NY Yankees are closer to last place in the East than first place. 200 million Steinbrenner dollars ain’t what it used to be. That is all.
kidstock, why are credit spreads still wide?
When the banks don’t want to lend to themselves, do you really think they are going to lend to small businesses?
Check Barry Ritholz blog re:
ACME Investor Relations
LMAO!
Thought the Fly had lost what’s left of his microscopic brain w/ HANS & VSE. I’m glad to see that he is still king of the carcass.
I am in commercial lending …
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Say n’more.
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Not sure about credit spreads, but what I do know is that none of my banks have folded in the last two years or are on the ropes. Credit standars for certain industries have become more stringent but good credits are still getting bought. This recession buried consumers not businesses. Things are not as dire as they appear.
Mr Practical
11:05:20 AM
No positions in stocks mentioned.
Minyan Mailbag: But the Yen?
Mr. P,
You posted today you think a secular shift has occurred favoring a strong dollar. Earlier this year, in a ‘conversation, with Toddo, I thought you had the bulk of your assets in Japanese bonds, as you expected a strong Yen. Do you believe that the Yen and the Dollar can/will strengthen together?
I ask because I have long believed the Yen would be an excellent vehicle to play the unwind of the ‘carry trade’ and some debt destruction. I also have recently been picking some up the last few days.
Minyan S
MS,
The strength in the dollar I think is for all bad reasons, caused by deflationary pressures: the part of the money supply due to derivatives and asset backed paper (a lot of off-balance sheet stuff) is shrinking. This destroys dollars and makes them dear. Oil going down is also relatively strengthening the dollar as oil is still priced in dollars. Oil is going down due to lower demand.
This is all temporary. How long it lasts I don’t know… could be a year, could be days. It depends on government intervention.
The next and only tools left to government is direct intervention like fiscal policy and nationalization of certain parts of the financial system. That is hyper-inflative: that will crush the dollar relatively. We don’t know where, when, or how that will begin. As I said it could be years or days.
The important thing is to be patient, to understand the huge dynamics at play here. To understand that this is a secular change.
The yen is a long term situation: I want to have my assets denominated in the currency where the money supply has a high amount of savings. This will offset massive hyper-inflation that I believe the U.S. government will eventually attempt. Whether or not the dollar rallies 10 or 20% relatively is not significant to this overall situation.
At the bottom of it all, savings are going to be very valuable. Make sure you have some.
Mr. P
Jeffrey Cooper
10:55:00 AM
No positions in stocks mentioned.
Tale of the Tape
If the market is going squeeze the substantial number of long puts and short calls into Friday’s expiration, then the behavior if the daily swing chart turns down on trade today below yesterday’s low at S&P 1291.40 by even a tick should tell the tale of the tape.
1291 of course coincides with the idea of a backtest of the breakout through prior trip tops at that level.
Bennet Sedacca
10:48:16 AM
position in XLF, xlf options
Confirmation Station
I have no idea what the SEC will do with short selling rules, but they can’t stop the fundamentals… which are horrible.
Note the action in BKX as it came up under nice resistance at 70-75. It got reversed, and hard.
This is typical bear market behavior.
And by the way, you want confirmation? Every stock in the XLF is red today. Very red.
Propaganda shmopaganda.
Does everyone get their education from the media now?
The headline of “33% of all US Homeowners are underwater” is pure unadulterated egregiousness.
How about, “33% of all homeowners who punted into a home with zero down between 2006 and early 2008 are underwater”
The gospel according to Mr. Mortgage and friends is 96.5% apostocy and 3.5% useful.
kidstock: I do remember reading the results of some Business Development Companies that are doing good trade at the moment, that would support your comment.
However: Considering the BDC’s use their own capital through raising in the markets, how will this help the banks ? They will be by-passed unless they are collecting fees from the share issues.
Kidstock, how can you be in commercial lending and not know about credit spreads? That seems awfully fishy.
Plus, you admit the consumer has been buried. Tell me who then will support the businesses?
mr. mortgage, bleck!
BTW, did you dump your WB yet? **shudders**
Steven Smith
Biotech Buy-out in the Works?
8/12/2008 11:30 AM EDT
Auxilium Pharmaceuticals (AUXL) , a specialty biopharmaceutical company, focuses on developing and marketing products to urologists, endocrinologists, has seen its shares jump some 17% from its July 15th low to a new 52-week high of $40.40 this morning. The stock bolstered by better than expected earnings release on July 31 and then this weekend’s Barrons wrote a very positive article.
The options are very thinly traded but this morning there was a notable transaction in which someone bought the September $40 calls and sold January $50 calls 5,000 times. This diagonal calendar spread was done for a net debit of just 30 cents and will benefit from a continued rally in the stock price but a big payoff would occur if AUXL becomes the target of a take over bid. Especially if it involves cash.
Assuming that bid will not be much above $50, which would a about a 25% premium the stock would climb towards the offer price but the value of the January $50 calls would decline as implied volatility and time premiums would collapse on the notion that stock will not gain much more than the takeover bid.
That means the September $40 puts will be worth their intrinsic value while the Jan $50 calls have little premium. Translation, the spread will widen or increase in value.
Fly,
What is up with the mens USA gymnastic team? They win the bronze and celebrate like they discovered the cure for cancer. We need a new government policy for this lazy country – “Win or work in a Nike shoe factory”.
BTW, that commentator is a gignormous fag.
I don’t have all the answers Gregory but I belive business spending will lead us out of this recession. The CDO’s and Residential woes are fully discounted.
For the record I remember reading on here that Mr. Mortgage’s largest holding was HRB short.
52 week high much?
Waiting for your Oceanfront Dreamhome to come down to your affordability level?http://nmhm.washingtondc.museum/exhibits/humanbody/imgs/skeleton.jpg
HOV needs to fill that gap @ $5.66, if you’re into that kind of thing.
Wood: I am guessing that the BDC’s will get more business from the larger companies instead of just the SME’s that normally deal with them. Some of the BDC’s that were niche focused on the energy sector are changing to become more generalized. Some of them are well capitalized.
If I had some names for you now, I would give them. Would have to dig them up. Most of them have been beaten down of late, and I am not a very good bottom fisher. So I stay away for now.
Off memory: take a look at TICC, GAIN, ARCC, TYY. Of course these are not recommendations.
Update: I meant GLAD, but GAIN is fairly similar
Wood
My cost of funds fluctuates quarterly. Some lenders base their rates off of swaps, doesn’t really impact me much.
Consumers are on the mend. It will take time but they will benefit from lower food and gas costs and will have more disposable income. They are saving more.
What is long-term vs. short-term thinking for you guys?
I think we’re in the middle of a holding pattern right now, particularly on oil. With the Olympic shutdown in China and Americans reducing their driving, it’s pushing everything lower. But given a price point of $3.40-3.50, watch the demand get driven back up and push gas back to the $4.00 threshhold.
Retailers look good now, but I don’t think they will in a few months.
Why does anyone think the bank stocks won’t turn WELL BEFORE credit spreads peak like they do every cycle?
Why does anyone think the bank stocks won’t turn WELL BEFORE foreclosures peak?
Why does anyone think the capital infusions, dividend reductions, and net interest margin the banks are earning hasn’t improved their balance sheet?
Why does anyone think that given the pressures the banks have been under, the new business they’ve booked the past several months and going forward isn’t of extremely high quality, improving the outlook for out year credit losses and earnings?
Thanks Kidstock. I understand where you are coming from…I just think it is too early yet.
KS’s Official Spokesman…of course they’ll turn before all that happens. And guess what, they have turned, due in large part to SEC changing the short selling rule and more intervention from the Fed. None of this, however, has improved the credit markets. The only thing it has improved is the stock prices of the banks, which allows them to raise capital. And they will continue to raise capital, and simultaneously write down.
They changed the short selling rule because the banks make money lending you their stock. LOL
GS-n breaking the local swing point on increasing volume….not good for the financials to have the stalwart bending over here..
Fly … any thoughts on the sell off in AIZ? … this thing seems to be down even on heavy up days in the mkt? Thinking of covering near low 50s. Must admit the property arm is doing well though.
http://www.rallymonkey.com/video/kenindex.swf
Can you feel it?…wheres Merlin?
The trend in AIZ is broken. I’ll buy more in the low 50’s.
seems like there is support near the 53-55 range. Also the Fortis sale and the other non-property arms are doing pretty crappy. Seems like this maybe turning into a one trick pony? Also the 50, 100 looking to cross 200 mda soon.
Kidstock, how can you be in commercial lending and not know about credit spreads? That seems awfully fishy.
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Not surprising to me at all.
_
Update: I meant GLAD, but GAIN is fairly similar.
GAIN has far more upside.
One of my larger holdings right now.
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