Monday morning presents what Cramer calls a “classic banking dichotomy” between Citigroup [C 28.40 0.76 (+2.75%) ] and First Horizon [FHN 6.56 0.04 (+0.61%) ], which both report before the bell.
Citi has problems all over the globe with slowing emerging markets, bad loans and a need to be able to compete in a slowing investment banking world. First Horizon, on the other hand, is a pretty well-run regional bank that doesn’t have the mortgage problems and international worries that Citi does.
Cramer said the action in these two companies will tell us whether we can finally get a separation between the “not-so-bad” regionals and the “deeply troubled” money center banks.
High-octane Wall Street investment banking is in deep trouble.
That's the message from JPMorgan Chase's [JPM 31.89 0.29 (+0.92%) ] earnings report Thursday. While JPMorgan did better than expected overall, it's performance was boosted by a write-down in the value of its own bonds. So the investment banking division officially earned $1.6 billion, but that includes a $1.9 billion gain from writing down the value of their own bonds to market value.
Take away those write-downs, and the investment banking division actually lost money.
Some of the ugly details (all numbers net of the bond write-down gains):
Investment banking fees were down 31 percent to $1 billion. Debt underwriting fees were down 37 percent to $496 million. Equity underwriting fees were down 47 percent to $178 million. Advisory fees were down 5 percent to $365 million. Fixed Income Markets revenue was down 14 percent to $2.8 billion. Equity Markets revenue was down 15 percent to $1.1 billion.
This very likely means that the more pure play investment banking companies, including Morgan Stanley [MS 15.22 0.08 (+0.53%) ] and Goldman Sachs [GS 96.73 0.58 (+0.6%) ], are in deep, deep trouble. What's more, with their prop trading operations badly damaged, it's unlikely that either company has managed to pull off the kind of Big Short call that helped Goldman weather the financial crisis better than its peers.
mark - we're busy moving again...or at least trying to find a place so that we can move again. we're not quite there but have found a few nice places.
i hear what you're saying about the Ibanks...just wondering if all of that is priced in already. i mean 50%+ drop offs in some of these is a big drop off.
GL with the move TOF. What a pain in the arse. As for C, we'll C on Monday. I'd be happy to clip a 3-4K out of it.
Night guys, early road trip tomorrow for you know what....OK, I'm actually going to go upstairs with a book and a huge glass of wine, but you get the point.
I haven't bought any of the big banks, but own 3 small regional banks - they are cheap and are able to just run their business without the headline risk or government getting in their way.
VIST, LION, SNBC
Plus, it is so much easier to get a feel for how their business is going then these huge ones where with operations and difference businesses all over the place.
Q. Do you see other manufacturers making the same decision (to move back to the U.S.)?
A. While I don’t personally know any, I think we’re on the leading edge of a trend because the factors that are affecting us affect everyone.
Q. Why isn’t it happening faster?
A. Change will take time. Five years ago, there was an absolute advantage to manufacturing in China. Today, some things are better produced here, and some are better produced there. It’s 50-50. But I think the U.S. advantage will become clearer with time.
Also quite positive on C Mark: "Citigroup, at below $28, trade for less than 60% of tangible book value and for under six times projected 2012 profit estimate" - hope it doesn't get the "Barron's bounce" on Monday.
Still own 3 lifeco's:
NWLI still at under 40% of an understated book value, no debt and P/E under 8.
KCLI at P/B of 50%, 3.3% yield, no debt, P/E of 13 with improving earnings.
AIZ at P/B 0f 0.70, forward P/E under 7, yield of 2%, very shareholder friendly management, part of S&P 500.
Hedgies’ Stock Exposure At 45%; Short-Selling A Contrarian Signal? Posted by Murray Coleman
Hedge funds hold just 45% of their assets in stocks, after subtracting their short positions from shares they own, Sarah Morgan reports at SmartMoney.com. That’s well below their typical exposure and approaches levels not seen since March 2009.
At the same time, researcher Data Explorers says that outstanding short interest — how many shares have been sold short — is at its highest level since mid-2009.
The bearish data came just as the Dow (DIA) turned positive for the year.
The most interesting part of the article is to do with how much cheaper non-dividend paying stocks are compared to dividend payors. Every person I talk to about stocks and most I see on TV are going after dividends. At some point, this has to flip:
ARE STOCK DIVIDENDS BLINDING investors to valuations? That's what research by AllianceBernstein contends.
Vadim Zlotnikov, chief market strategist at the research shop, ranked the large cap universe of 650 stocks by their dividends. He compared the stocks in the top quintile with those at the bottom using both price to book and price to forward earnings. The result: The premium of high-dividend payers over low-dividend payers is the highest it has been over the past 40 years.
"The high-dividend trade is the most crowded trade in the world," Zlotnikov argues. Conversely, deep-value, cyclical stocks are the most undervalued.
As always trends continue until they don't, and that's usually longer than expected. Zlotnikov suggests rebalancing portfolios between the two groups once every three to six months. And, he notes that within the dividend-paying universe, those in the utilities, staples and telecom sector are far more expensive than those dividend payers in energy, health care and defense.
Sure feels like we should have a good day tomorrow.
Lot's of negativity, people looking for a pullback, good news via a huge takeover, nothing bad (so far) from Europe, S&P futures up slightly, gold down a bit and oil and copper up.
C's old trading floor...
ReplyDeletehttp://yfrog.com/ocf5sadj
And now Cramer please on C...
ReplyDeleteMonday morning presents what Cramer calls a “classic banking dichotomy” between Citigroup [C 28.40 0.76 (+2.75%) ] and First Horizon [FHN 6.56 0.04 (+0.61%) ], which both report before the bell.
Citi has problems all over the globe with slowing emerging markets, bad loans and a need to be able to compete in a slowing investment banking world. First Horizon, on the other hand, is a pretty well-run regional bank that doesn’t have the mortgage problems and international worries that Citi does.
Cramer said the action in these two companies will tell us whether we can finally get a separation between the “not-so-bad” regionals and the “deeply troubled” money center banks.
Redbox alert!! 4 deep at the local Lucky's!!
ReplyDeleteAnd herd on the radio on the way home...
"And Fred Couples had a terrific day on the senior circuit with 12 birdies on the back nine!"
Now THAT is quite a feat!!
High-octane Wall Street investment banking is in deep trouble.
ReplyDeleteThat's the message from JPMorgan Chase's [JPM 31.89 0.29 (+0.92%) ] earnings report Thursday. While JPMorgan did better than expected overall, it's performance was boosted by a write-down in the value of its own bonds. So the investment banking division officially earned $1.6 billion, but that includes a $1.9 billion gain from writing down the value of their own bonds to market value.
Take away those write-downs, and the investment banking division actually lost money.
Some of the ugly details (all numbers net of the bond write-down gains):
Investment banking fees were down 31 percent to $1 billion.
Debt underwriting fees were down 37 percent to $496 million.
Equity underwriting fees were down 47 percent to $178 million.
Advisory fees were down 5 percent to $365 million.
Fixed Income Markets revenue was down 14 percent to $2.8 billion.
Equity Markets revenue was down 15 percent to $1.1 billion.
This very likely means that the more pure play investment banking companies, including Morgan Stanley [MS 15.22 0.08 (+0.53%) ] and Goldman Sachs [GS 96.73 0.58 (+0.6%) ], are in deep, deep trouble. What's more, with their prop trading operations badly damaged, it's unlikely that either company has managed to pull off the kind of Big Short call that helped Goldman weather the financial crisis better than its peers.
Shoot, I guess the rest of you guys have a life...
ReplyDeletemark - we're busy moving again...or at least trying to find a place so that we can move again. we're not quite there but have found a few nice places.
ReplyDeletei hear what you're saying about the Ibanks...just wondering if all of that is priced in already. i mean 50%+ drop offs in some of these is a big drop off.
GL with the move TOF. What a pain in the arse. As for C, we'll C on Monday. I'd be happy to clip a 3-4K out of it.
ReplyDeleteNight guys, early road trip tomorrow for you know what....OK, I'm actually going to go upstairs with a book and a huge glass of wine, but you get the point.
I haven't bought any of the big banks, but own 3 small regional banks - they are cheap and are able to just run their business without the headline risk or government getting in their way.
ReplyDeleteVIST, LION, SNBC
Plus, it is so much easier to get a feel for how their business is going then these huge ones where with operations and difference businesses all over the place.
Another story on manufacturing moving back to the US from China:
ReplyDeletehttp://www.nytimes.com/2011/10/13/business/smallbusiness/bringing-manufacturing-back-to-the-united-states.html?_r=1
A couple of key quotes:
Q. Do you see other manufacturers making the same decision (to move back to the U.S.)?
A. While I don’t personally know any, I think we’re on the leading edge of a trend because the factors that are affecting us affect everyone.
Q. Why isn’t it happening faster?
A. Change will take time. Five years ago, there was an absolute advantage to manufacturing in China. Today, some things are better produced here, and some are better produced there. It’s 50-50. But I think the U.S. advantage will become clearer with time.
Barron's positive on the financials including banks and lifeco's (my favourite still) this weekend.
ReplyDeletehttp://online.barrons.com/article/SB50001424052748704468304576627261773829164.html?mod=BOL_twm_ls#articleTabs_panel_article%3D1
Also quite positive on C Mark: "Citigroup, at below $28, trade for less than 60% of tangible book value and for under six times projected 2012 profit estimate" - hope it doesn't get the "Barron's bounce" on Monday.
Still own 3 lifeco's:
NWLI still at under 40% of an understated book value, no debt and P/E under 8.
KCLI at P/B of 50%, 3.3% yield, no debt, P/E of 13 with improving earnings.
AIZ at P/B 0f 0.70, forward P/E under 7, yield of 2%, very shareholder friendly management, part of S&P 500.
Well, it looks like I avoided one potential pit fall...Headline risk from the EU this weekend.
ReplyDeleteThe way these European politicians seem to work, you're probably safe for a few months still!
ReplyDeleteHuge takeover of El Paso Energy for $38 billion - can't think of any larger ones this year.
Barron's has some good info this wee:
ReplyDeletehttp://blogs.barrons.com/focusonfunds/?mod=BOL_article_full_blog_etf
Hedgies’ Stock Exposure At 45%; Short-Selling A Contrarian Signal?
Posted by Murray Coleman
Hedge funds hold just 45% of their assets in stocks, after subtracting their short positions from shares they own, Sarah Morgan reports at SmartMoney.com. That’s well below their typical exposure and approaches levels not seen since March 2009.
At the same time, researcher Data Explorers says that outstanding short interest — how many shares have been sold short — is at its highest level since mid-2009.
The bearish data came just as the Dow (DIA) turned positive for the year.
And:
ReplyDeleteAnother Talk With Mr. Market
By MICHAEL SANTOLI | MORE ARTICLES BY AUTHOR
We put the manic-depressive stock market back on the couch. And why high-dividend stocks look expensive.
http://online.barrons.com/article/SB50001424052748703492704576623000435706680.html?mod=BOL_twm_col
The most interesting part of the article is to do with how much cheaper non-dividend paying stocks are compared to dividend payors. Every person I talk to about stocks and most I see on TV are going after dividends. At some point, this has to flip:
ARE STOCK DIVIDENDS BLINDING investors to valuations? That's what research by AllianceBernstein contends.
Vadim Zlotnikov, chief market strategist at the research shop, ranked the large cap universe of 650 stocks by their dividends. He compared the stocks in the top quintile with those at the bottom using both price to book and price to forward earnings. The result: The premium of high-dividend payers over low-dividend payers is the highest it has been over the past 40 years.
"The high-dividend trade is the most crowded trade in the world," Zlotnikov argues. Conversely, deep-value, cyclical stocks are the most undervalued.
As always trends continue until they don't, and that's usually longer than expected. Zlotnikov suggests rebalancing portfolios between the two groups once every three to six months. And, he notes that within the dividend-paying universe, those in the utilities, staples and telecom sector are far more expensive than those dividend payers in energy, health care and defense.
Sure feels like we should have a good day tomorrow.
ReplyDeleteLot's of negativity, people looking for a pullback, good news via a huge takeover, nothing bad (so far) from Europe, S&P futures up slightly, gold down a bit and oil and copper up.
BB- Sadly, I agree with you.
ReplyDeletenew post
ReplyDelete