Tuesday, February 17, 2009

Haircuts for All... Bailing on Bove... Market Watch... Stock Watch During the Great Depression...

Senator Dodd along with countless other Americans took another haircut today. For Dodd, it is nothing new as he has lived on the edge of controversy for a good bit during his political career in D.C.. Lax accounting rules for Arthur Andersen helped bring about the Enron debacle. And Dodd is extremely tight with accounting companies. Still, Dodd is in power and making critical decisions as a Sr. member of the Senate Banking Committee. I wanted to remind readers that Dodd had received campaign contributions from Countrywide... and Bank of America... Only two Senators received more money from Bank of America Hilary Clinton and Barack Obama. I predict that Dodd will be looking for a new line of work after this next election... After all, 48% of constituents disapproved of him in October of 2008... Do you think things have gotten better? (1) One more disclosure. Dodd received more money in campaign contributions from Fannie and Freddie than ANYONE ELSE IN CONGRESS!!! The question is will the people of Connecticut recall him before they have a chance to throw this guy out of office?

Speaking of hair cuts, Richard (a.k.a. Dick) Bove is no longer employed by Ladenburg over comments he made about a commercial bank. Bove is an excellent analyst who ranks among the upper 20% of analysts covering commercial banks. However, Bove has been strongly criticized over his comments. "In March 2008, Bove said the U.S. financial crisis was over and it was a "once in a generation" opportunity to buy bank stocks, a call which clearly proved to be wrong." (2) For instance, Bank of America was trading at $37.14 back then... Today BAC closed at under $5.00 per share.

The market is currently testing the November lows almost to the point as of today. GM and Chrysler are back asking for more money, and unless they get major concessions on retiree health care plans it is all over!!! These liabilities have grown in size and create an unsustainable cut into profit margins... And, at the end of the day, every company in the United States is out for a profit... unfortunately for some Wall Street firms, greed killed. As of now, GM and Chrysler plan to cut 50,000 more jobs and are seeking an additional $21 Billion dollars in aid!!!! The good news is that they are not alone... Toyota and Honda are both showing weakness as well. Give me the opportunity, I will always prefer to by American!!!

Bubble Bubble Toil and Trouble
Corporate bonds and Treasury Bills are supposed safe havens. (3) However, they are over-bought and are in need of correction. Blue chip stocks were safe havens... but even Wall Street darling WMT is taking a hit as of late. I believe this explains the continued flow into precious metals in general, and gold in particular. Also, there are a number of bear or ultra short funds that are gaining a bit of momentum. The key is taking profits in this environment. To continue referring to this meltdown as a recession... or deeper recession could well be a modest assumption. I still don't believe things have gotten ugly yet, and I hope they don't either. This is what ugly looks like:

Please note the market direction after the Great Crash in 1929... In the grand scheme of things, it was continued slide into the abyss that did most investors in... and that is when true credit destruction took place.

1. http://en.wikipedia.org/wiki/Christopher_Dodd
2. http://www.reuters.com/article/idUSTRE51G5VU20090217
3. http://bloomberg.com/apps/news?pid=20601087&sid=a89zvSJtufjI&refer=home


AX said...

I'll hope that your characterization of Bove as an "excellent"analyst is full of sarcasm. The man lost people millions by suggesting Lehman could never go bankrupt and putting a $43 target on Sun Trust even though he characterized it as dead.

Tiger Coach said...

Ax... A hint of sarcasm indeed... I am curious what the average return is for any of the banking analysts... It is my guess that there is a lot more to his dismissal than meets the eye... Like lawsuits... Add EEV to the list...


Tiger Coach said...

make that eev

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Anonymous said...

last few days our group held a similar talk on this topic and you point out something we haven't covered yet, appreciate that.

- Laura