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Have I cast the seeds of doubt for Wells Fargo?

Written by Reggie Middleton
Thursday, 14 August 2008
I targeted Wells Fargo in May, as part of my Doo Doo 32 bank series - see The Drill Down, the Forensic Analysis and the more general "Anatomy of a Sick Bank"! If I am not mistaken, I made it perfectly clear that Wells Fargo is not what it is cracked up to be, name brand investors notwithstanding. Well, it appears that the popular media has jumped on the bandwagon. See the following from the Wall Street Journal: Wells Fargo Stirs Doubts Close Examination Of Balance Sheet Reveals Problems By PETER EAVIS August 15, 2008 More chinks are appearing in Wells Fargo's armor. The San Francisco bank avoided large subprime slip-ups, which has persuaded investors to award it a premium valuation. Wells Fargo, the No. 3 bank by market capitalization, trades at just over two times its book value, double the multiple the market is placing on J.P. Morgan Chase, also relatively unscathed by the credit crunch. Likewise, Wells Fargo's stock is down just 10% over the past 12 months, a period that has blown up other banks' balance sheets and sent the KBW Bank Index down 36%. But it is time to rein in the optimism about Wells Fargo. Second-quarter results, posted in mid-July, showed that Wells Fargo's bottom line got a sizable boost from volatile trading income and a write-up of some mortgage-related assets. Investors shrugged, bidding Wells Fargo's shares up nearly 50% since then. But new financial disclosures, contained in a quarterly financial filing released Friday, bolsters the fear that Wells Fargo's earnings aren't all they are cracked up to be. To members of the press: I do this stuff all day every day, and I would love to have a relationship with you guys. Contact me and I can feed you all types of stuff on all types of companies that most may not see coming for months. We can even have a good time at it. If I get enough feedback while the boating season is still here, we can have a media party on the MotherLand. The BoomBustBlog events are a lot of fun. Click the pic below to see an example. Add this page to your favorite Social Bookmarking websites Set as favorite Bookmark Email This Hits: 1537 Trackback(0) TrackBack URI for this entry Comments (5) Subscribe to this comment's feed ... written by Tony Piggs, August 15, 2008 I saw this article this morning too (and looked at WFC's press release) and had similar thoughts. I felt the same way about MBIA when they released earnings, that they were using accounting gimmicks to prop up their earnings. Now MBIA is buying back shares with the capital they raised to satisfy regulators (and of course diluted existing shareholders) and the stock is taking off. Some very strange things are going on. Would love at some point to hear an update on your thoughts on MBIA and ABK. +0 ... written by Kip Coon, August 15, 2008 Funny, I came back to WFC as time for a PUT option play. I chart stocks a little differently and WFC showed to be at the top end position of my chart showing a roll over. WFC had run up far enough off bogus tactics and hype. I held off on the put position and came across some additional WFC news yesterday regarding the Fitch document. The WSJ article was icing on the cake. Yesterday, the put option activity in WFC was huge in September. It's up big again today. Time to make money all over again on most of the same plays. ROUND 2!!! Something to note.... Credit markets are acting a bit strange. Spreads are getting wider overall. Also, the indexes - DowJ30, Russell, are failing. The S&P is near a top. Keep focus on the 1321-1322 level. This level completes an open gap. It's also technically, the level everyone keeps saying is the resistance level for the S&P 500 (SPX). Note that typically the DOWJ will roll first. The NASDAQ is most often the lagging index. For any other chartologists out there, I found an interesting number on the SPX. It is: 1313.15. Why that number? It is just shy of 1313.83 which is a 78.6% Fib Retracement from the 1994-2000 bull run. Those that follow Fib Retracements know the 78.6% number is an important one. When the SPX hit 1313.15 last Monday, that was the high of the day in addition to marking the reversal of the day. On the SPX, draw a trend line from the July 15th low. Look at how many times the SPX has hit this trend line and bounced up. It is acting as a resistance level. When the SPX breaks this trend line on a CLOSE. We should have the bear market rally TOP in. Next move is down past the 2008 lows. Kip +1 ... written by George Schubert, August 15, 2008 A friend of mine works for WFC and has the worst job in the world he forecloses on people houses, man is he one of the most hated guys around. +0 Impact of Buy Back written by Anil Goyal, August 15, 2008 Hi Reggie, Can you please guide as to what shall be the impact of these securties buy back by the banks. Does these banks like WB/C have these billions sitting to buyback and pay fines. How will the valuation of these securties effect future earnings. Thanks Anil +0 ... written by Marc Authier, August 15, 2008 Yes you have. +0 Write comment Name Email Website Title Comment smaller \| bigger Subscribe via email (Registered users only) I have read and agree to the Terms of Usage. Write the displayed characters
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