Thursday, 09 April 2009 01:00

Wells Fargo Reported "Better than Expected" Earnings

I will take the extreme pop in price of JPM (assumed, after they announce) and Wells as an opportunity to dig beneath the numbers and the government authorized rhetoric to see if there is an opportunity to profit once again from these companies' concealing of the facts from the investing public.

Hopefully, my stress tests will be done in time. I no longer have any positions in WFC, having taken profits a while ago, but we shall see if they are harboring considerable non-performing assets under the auspice of a significantly relaxed regulatory and reporting environment - which is what I suspect. If so, it is very bad for the consumer and unsuspecting investor and very good for the investigative, forensic speculator given the pop in price.

CNBC sports the headline "Wells Fargo Projects Record Profit" - a tad bit optimistic considering this bank's exposure to consumer debt, CA mortgages, and swallowing a very large bank that was literally collapsing under it's own NPAs and bad mortgages. I won't know for sure until I take a close look, but I believe this record profit is sans the weight of the non-performing assets, which would be quite misleading, indeed.

Last modified on Thursday, 09 April 2009 01:00

58 comments

  • Comment Link shaunsnoll Monday, 13 April 2009 16:07 posted by shaunsnoll

    if i was trading i would fight the fed with all my money. those guys are a room of idiots. and anyone trading while ignoring the technicals deserves to be burned. resistance at 869 and then again at 944. everyone just watch the technicals and enter your positions carefully. and getting "hurt" matters not at all until you lock in the cash loss, until then its just as real as the bank earnings (ie: all on paper). if you care to swing trade like phirang of course you can make money, the worst companies go up the most on the corrections. however, reggie's style and what he proposes is not this. whatever works for YOU is what works best :)

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  • Comment Link phirang Monday, 13 April 2009 10:39 posted by phirang

    lesson learned?

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  • Comment Link NDbadger Monday, 13 April 2009 09:48 posted by NDbadger

    I have to agree with you, I started the year off great, but am now down for the year. In retrospect, I did not cover as much as I should have when the market was at 670ish. I really thought at least Citi would go into receivership. In any case, I'm not complaining, but I am down. And I like to believe I'm only short term down. Only time will tell. But I continue to be very bearish. If I'm wrong, I guess I will be down more.

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  • Comment Link uniprof Monday, 13 April 2009 09:45 posted by uniprof

    you are right. i will keep my mouth shut (or fingers off keyboard) :)

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  • Comment Link Daedal Monday, 13 April 2009 08:40 posted by Daedal

    What amuses me is how everyone is both 'hurt' by their short positions after this rally and are still 'up' for the year. With the exception of Reggie, who at least documents his research, these comments are about is believable as those found on Yahoo Message boards.

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  • Comment Link uniprof Sunday, 12 April 2009 23:11 posted by uniprof

    Sorry i mistook your response to phirang as to me.

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  • Comment Link uniprof Sunday, 12 April 2009 23:10 posted by uniprof

    I am not a bull and had a wonderful year last year and a great first ten weeks this year. But have gotten hurt in the last four weeks (not complaining too much as I still up about 25% this year and triple digits last year), but I think this is the bankster's last big push/heist and they will pull out all the stops. It is working. My mother who after pleading for over six mos. I got out of WMU at 20, GE at 15, JPM at 25 has gotten back into the market big time. She believes Obama, Summers et al. I am certain she will be destroyed, but when?

    I simply couldn't take any more pain last week and on Friday unloaded all my puts at the opening -- and ended up glad that I did. The time for the bears will come again, but it might be a wait.

    I am extremely bearish in the long term. I would not be surprised to see the S&P hit bottom at 300, but when???? I subscribed to Reggie because his fundamental analyzes are correct, but like syphilis or AIDS the diseases he discovers can be hidden for relatively long times, but eventually they emerge. We need to be there just before the truth emerges and we will be rewarded.

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  • Comment Link rayshafie Sunday, 12 April 2009 22:02 posted by rayshafie

    It seems you are the contrarian in this forum, you have very bulish views I have shorted Jpm At 30 both stock and I have puts , I am going to get slaughtered or the short overbought indicators I see are correct and there will be mild correction

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  • Comment Link uniprof Sunday, 12 April 2009 22:02 posted by uniprof

    Denniger says that GS is going to report a blow-out quarter probably because they supergamed AIG and they know what gov and fed is going to do beforehand.

    Yes it is corruption and yes it will eventually fail, but they are going to pump the market, have their propaganda organs going full blast, and have their Chicago shill Obama give financial advice (wtf?). My guess is that we need to get out of the way of this freight train. Eventually reality will reassert itself and we will have a long way down.

    The final endgame to all of this will be frightening. The time to cry for what has become of our country is not yet, but it is coming.

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  • Comment Link SamGoody Sunday, 12 April 2009 21:20 posted by SamGoody

    The offending blog run by Mike Morgan:

    http://www.goldmansachs666.com/

    The news article:

    Goldman Sachs hires law firm to shut blogger's site
    Goldman Sachs is attempting to shut down a dissident blogger who is extremely critical of the investment bank, its board members and its practices.

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5137489/Goldman-Sachs-hires-law-firm-to-shut-bloggers-site.html

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  • Comment Link phirang Sunday, 12 April 2009 20:49 posted by phirang

    under $10.

    Otherwise, there's no "value" argument.

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  • Comment Link rayshafie Sunday, 12 April 2009 17:45 posted by rayshafie

    Reggie
    What your thoughts on JPM, have they changed your previous comments were insolvent
    the technicals look bullish
    thank you

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  • Comment Link shaunsnoll Sunday, 12 April 2009 16:44 posted by shaunsnoll

    the market can and will do anything over the short term. but over the long term valuations and ruined fundamentals will overcome short term BS every time. just a matter of how strong your hand is and if you have the cajones to hold on. ignore this short term shite, do you really think that in 1 year JPM will be at 50$ a share? or that all these ultra screwed REITs and homebuilders will be prospering? you think the flim flam scam will just pound out huge cash flow and become some incredible company for all others to compare themselves too?

    my answer is NO F'ing way! so use this rally as an opportunity! i've said it before and i still feel this way, in 8 months everyone here will look back at this rally of lies and see it as a GIFT or a missed opportunity. this is the same strategy that reggie has used and he is up 0980980980980% or something. so if i was you i would stick with the guy who is up a million percent in the hardest market since the 1930's and ignore the daily noise as much as you can.

    just my thoughts :)

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  • Comment Link nvguser Sunday, 12 April 2009 03:14 posted by nvguser

    Reggie,

    The only part of the equation that doesnt add up is the assumption that if any of the banks issue X billion of shares, that the stock prices would necessarily go down. It seems that results are being pumped up for Q1 primarily to facilitate massive share issuance. The way the market is going, the share prices will rise after the share issuance.

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  • Comment Link Leech Saturday, 11 April 2009 21:15 posted by Leech

    http://www.time.com/time/business/article/0,8599,1890560,00.html

    Reggie, get with the program! ;D

    {sarcasm off}

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  • Comment Link Reggie Middleton Saturday, 11 April 2009 19:27 posted by Reggie Middleton

    josh4580, your comments are being removed because you are discussing subscription material in an open forum. Use the subscribers discussion forum in the left menu to discuss subscription content.

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  • Comment Link NDbadger Saturday, 11 April 2009 13:46 posted by NDbadger

    I share a lot of your sentiments. There is a great interview with Bill Black in this week's Barrons. He helped manage the S&L crisis and says there was perhaps even worse corruption back then (if you can believe that!). He says Obama needs to change course dramatically or the current crisis will make Teapot Dome look like a kid's doll set. He is still optimistic that all the big banks will be put into receivership. I wish I shared his optimism. To me, the corruption seems too deep.

    But I agree with you that the stress tests will not go well for the banks and that many will be forced to raise capital. Your thoughts on my list of those most likely to be forced to raise capital and face substantial shareholder dilution would be much appreciated: BAC, C, WFC, AXP, RF, & FITB. (or really your thoughts on the best banking shorts).

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  • Comment Link prescient11 Saturday, 11 April 2009 02:30 posted by prescient11

    Reggie, check out the latest post on zero hedge with regard to quant funds and limited liquidity. Do you agree that a black swan event may be on the horizon.

    This rally is ridiculous. Loaded some srs and sds into the close yesterday. We shall see. Thanks for all the good work man, I spread the word that WYNN is always a good short to at least $20. It's as if they built the fucking titanic and right next to it they built the same ship on the same course, and they called it Encore... LOL.

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  • Comment Link shaunsnoll Saturday, 11 April 2009 01:04 posted by shaunsnoll

    my theory is that the gov handed tons of money to the banks through AIG position unwinding (google it or check out zerohedge, its a big fraud) and other methods and once the equity gets a huge pop they'll basically force these banks from the inside to issue massive amounts of equity now that the stocks are up a bit, the stress tests are NOT going to go well for these guys and the reason that the results are being postponed is so all the financials can issue equity and debt while its relatively easy to do so. why would the gov issue the stress tests BEFORE the banks issue a ton of equity? they'll have to backstop the banks either way, and its much cheaper to funnel a few billion $'s into the banks for them to have a blow out quarter, and with all the people short, they had to know they'd get an incredible pop in the stocks if that occured. so if you were in their position what would you do?? i can tell you that i would just hand over a few billion to them to push the stocks up against the shorts and then make all the banks issue equity and debt and sell assets during this rare opportunity before declaring them all insolvent. you would never do it the other way around. it also wouldn't surprise me to see them ban shorting again just to push the equity up more before the inevitable huge dillutive equity offerings.

    there is no way the gov can simple come up with another 2 Trillion out of their back pocket without seriously debasing the US currency and that has perhaps larger economic consequences than a few bank failures. and there is also simply MUCH less public support for all this bailout shit. right now the US people want some rich investment bank CEO's heads on a pike out in front of the white house if they are going to dish out another Trillion $'s, you've got people looting banks in the UK, the US gov will not get out of this without murdering at least a bank or two simply because its not good politics. i agree this rally could continue, but anytime the gov starts actively manipulating the markets everything is going to be amazingly volatile, i bet 10$ we see a very serious correction at some point in the next few weeks.

    these bear market rallies push out the weak hands. so don't be weak. keep alot of cash and keep your position size small. nobody trading these days should need to hear this. also, for all of you complaining about option implied volatility its getting much cheaper. alot of this has also been driven by short covering, and also very very low volume, this market could turn just as quick as it has risen. imagine what would happen monday if on sunday the gov decided that Citi was going to be nationalized and all its managment fired? i would be surprised if something like this does NOT occur in the next 6 months.

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  • Comment Link NDbadger Friday, 10 April 2009 21:43 posted by NDbadger

    Reg,

    I don't think you are taking the stress tests seriously enough. I know many investors think they are bogus, and I agree the assumptions are bogus, but I would not at all be surprised to learn that at least some (maybe many) of the 19 banks will be asked to raise capital as a result of the stress tests, severely diluting shareholders. This is one reason I am trying hard to hold on to my shorts even during this bear rally. This could happen as early as the end of the month. Really, we should talk about what are the weakest banks of the 19 and make sure we have adequate shorts on them.

    Here is a list of the 19 banks assumed to be too big to fail from the IRA: JPM, BAC, C, PNC, STT, WFC, MS, GS, AXP, USB, BK, COF, STI, BBT, RF, CMA, NTRS, KEY, FITB.

    there is a reasonable chance the weakest ones will be asked to raise capital and shareholders will be severely diluted. I would not at all be surprised if BAC, C, WFC, AXP, RF, & FITB are asked to raise more capital. (Thus the motivation for the WFC earnings release).

    Phirang, the Fed doesn't care about shareholders, they care about bondholders, because they believe that if they let bondholders go, the system will cease to function, and this will hurt average americans more than just the route they are pursuing. I think this concern is misplaced. I think bondholders should be forced to take a haircut and that there would be very little side effects (even if there are, it is still the right thing to do because the taxpayers can't absorb the 10-15 trillion in losses in the system-eventually bondholders will have to take a hit, so they might as well do it now and get it over with). But I'm not running the show. In any case, shareholders will take a beating in the truly insolvent banks. The key is figuring out which are the truly insolvent.

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