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Short List – Late Week Update on Banks

I f you took our advice this week then you probably had significant gains, as both the banking sector and retail markets have took some hits.

As of now, Bank of America looks like the sectors fall guy. The forced repurchases should affect those banks most heavily exposed to the real-estate sector. It should suffer further losses; however, these sectors are prone to be propped up by government aide. I wouldn’t be surprised if bank of America already hit an artificial price floor at around 10 dollars, plus or minus a buck or two. I don’t think you’ll see it fall past 8 dollars before the FED steps in, either publicly or under the radar.    

In a more risky play, if you still have faith in the free-market (which I don’t) BAC should find itself at equilibrium around Citi’s currently trading share price. I think if this were the case you would have seen Citi absorbed long ago. For now it looks like being relegated to zombie bank status is the equivalent of what in a free market system would have lead to going out of business.   

Goldman Sachs, JP Morgan, and Citi seem to be sitting outside the narrowing free market goalposts. At the one extreme, Goldman Sachs and JP continue their role as the market makers, seemingly above the law. However, unlike Goldman Sachs, JP Morgan is more directly exposed to the real estate sector. So it could be further affected by the Robo-signing scandal. Keep an eye out to shave a few points off the financial behemoth-- should the courts bear down on the fraud.

Wells Fargo, JP Morgan, Bank of America and Morgan Stanley should remain as “shortable”, although by now the sure bet shorts have taken place.

*** These are recommendations not guarantees. Always do your own research when investing your money. 

BANKS ARE ON THE HOT SEAT, AGAIN

             

BAC

Bank of America Corp.

NYSE

USD

12.60

-0.69

-5.19%

WFC

Wells Fargo & Company

NYSE

USD

24.72

-1.09

-4.22%

C

Citigroup Inc.

NYSE

USD

4.06

-0.19

-4.47%

PNC

PNC Financial Services

NYSE

USD

51.75

-1.17

-2.21%

GS

Goldman Sachs Group, Inc.

NYSE

USD

151.59

-3.14

-2.03%

MS

Morgan Stanley

NYSE

USD

25.44

-0.50

-1.93%

USB

U.S. Bancorp

NYSE

USD

22.57

-0.29

-1.27%

GE

General Electric Company

NYSE

USD

17.16

-0.12

-0.69%

We're DOUBLE DIPPING this week-- with two Short Lists!!! By now it should be clear to everyone that this sector is utterly incorrigible. And their stocks are heading downhill fast. The next week (maybe two) should provide some openings for bank shorting, as the negative press from the ROBOSIGNING fraud and the subsequent foreclosure freezes continue.

Department Stores and Category Killers!!

DDS

Dillard's, Inc.

26.56

-0.23

-0.86%

 

1.76B

JCP

J.C. Penney Company, Inc.

33.10

-0.36

-1.08%

 

7.83B

SHLD

Sears Holdings Corpora...

73.79

-0.04

-0.05%

 

8.16B

KSS

Kohl's Corporation

52.33

-0.68

-1.28%

 

16.12B

M

Macy's, Inc.

24.04

-0.30

-1.23%

 

10.16B

SKS

Saks Incorporated

9.89

-0.08

-0.80%

 

1.59B

SSI

Stage Stores, Inc.

13.77

+0.23

1.70%

 

518.96M

JWN

Nordstrom, Inc.

38.17

-0.26

-0.68%

 

8.37B

 The US retail sector should continue to feel the effects from unemployment, especially the bloated Department Store chains and category killers. Our view is that they'll continue to lose market share to leaner and meaner online (Overstock.com /Amazon) and mass retailers (Wal-Mart/ Target). Although department stores show the most weakness, don't expect big Christmas surges in the category killers either.

Commodities should reign supreme for the next few years. By now it should be clear that the economy is going to remain in the toilet and looking to be flushed along with fiat currencies.  Gold and Silver are entered a parabolic stage last week. As the US Federal reserve plans for more bailouts, which should begin before the year ends and continue on through the winter.

With that said, commodity prices should continue to soar. They’re definitely a good hedge against the dollar’s debasement, which should continue as America looks for ways to unburden itself from the pervasive debt it has amassed.

 

Quest Means Business: Monday – Friday on CNN @ 2000 CET

 

“I think it's more likely that the United States and Europe may sink into what might be called a Japanese-style malaise. Growth might be a little higher than in Japan, because in Japan, population/labor force growth was zero,” Stiglitz said.

Stock

1 GLD 119.26
+1.02 (0.86%)    
2 INX CA$0.45
0.000 (0.00%)    

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