Investors were celebrating Bank of America’s 41% crash in profits this morning. Quarterly earnings were nearly cut in half from this time last year, as the bank struggled to cap $2.3 billion quarterly losses stemming from its recent acquisition of Countrywide.
But as with Citi and J.P. Morgan last week, losses weren’t as bad as the Street expected. Thus, BAC shares are up 7% as we write, and the financials rebound chugs along.
“Our guess – and its only a guess,” advises our investment director Eric Fry, “is that investors should keep on selling the lousy stocks they were selling two weeks ago and keep on buying the good stocks they were too afraid to buy two weeks ago. In other words, the shares of finance companies might bounce a bit -- they might even bounce a lot -- but investors would probably fare much better to buy the shares of companies that are GROWING, not those that are SHRINKING. The only thing growing at most finance companies is the share count, as these desperate, near-bankrupt enterprises issue gobs of new shares in exchange for cash infusions.”
Mr. Fry and Dan Amoss will both be slammin’ shooters at the Whiskey Bar on Wednesday here in Vancouver… again, more on that below.
“It’s very early in the loss curves,” said J.P. Morgan CEO Jamie Dimon on a conference call last week. He’s talking about mortgage-related losses for the legendary brokerage house… let’s listen in for a sec:
“You saw subprime go first, and then, on a slight lag, you saw home equity and now in the lag, you’re seeing prime go. And it’s exactly the same loss factors. But remember, the components of where we are in the states…[are] very different. And we started doing more jumbos in ’07, so a lot of that is -- part of that is ’07 vintage, which I think I told you at the time we were going to do and grow our balance sheet and gain share. And we were wrong. You know, we, obviously, wish we hadn’t done it… “Prime looks terrible, and we’re sorry.”
Sorry… hmnn. That ought to do it.
But as with Citi and J.P. Morgan last week, losses weren’t as bad as the Street expected. Thus, BAC shares are up 7% as we write, and the financials rebound chugs along.
“Our guess – and its only a guess,” advises our investment director Eric Fry, “is that investors should keep on selling the lousy stocks they were selling two weeks ago and keep on buying the good stocks they were too afraid to buy two weeks ago. In other words, the shares of finance companies might bounce a bit -- they might even bounce a lot -- but investors would probably fare much better to buy the shares of companies that are GROWING, not those that are SHRINKING. The only thing growing at most finance companies is the share count, as these desperate, near-bankrupt enterprises issue gobs of new shares in exchange for cash infusions.”
Mr. Fry and Dan Amoss will both be slammin’ shooters at the Whiskey Bar on Wednesday here in Vancouver… again, more on that below.
“It’s very early in the loss curves,” said J.P. Morgan CEO Jamie Dimon on a conference call last week. He’s talking about mortgage-related losses for the legendary brokerage house… let’s listen in for a sec:
“You saw subprime go first, and then, on a slight lag, you saw home equity and now in the lag, you’re seeing prime go. And it’s exactly the same loss factors. But remember, the components of where we are in the states…[are] very different. And we started doing more jumbos in ’07, so a lot of that is -- part of that is ’07 vintage, which I think I told you at the time we were going to do and grow our balance sheet and gain share. And we were wrong. You know, we, obviously, wish we hadn’t done it… “Prime looks terrible, and we’re sorry.”
Sorry… hmnn. That ought to do it.
No comments:
Post a Comment