BAC at 17.31 with an EPS of 44 cents so far. C trading at 4.42 with losses and huge looming stock dilution and reverse split to provide shorts some food. WFC trading at 28.78 with EPS of 78 cents so far. What is up with this cash for trash situation. Am I missing something please explain?
You are not missing anything, people are betting the banks will make huge money. Unless the FDIC starts to run a federal lottery to the benefit of commercial banks I dont see that happening
I think they are still pretty cheap actually. Earnings you mentioned were rear view mirror. Stocks trade off of future earnings. WFC supposed to make $2 next year. JPM $3. They are trading just over book value. Between 15-18x earnings. What's not to understand? Not trying to be a smartass here, just think historically, they are still a fairly good deal. Citi is doing a secondary to pay back govt and buy back their stake. Govt to privatization is a good thing for stocks historically. We all naturally think they should go lower because of where they went. It was more than a shakeout, historic understandable panic. Corporate debt, converts, hedge funds all crashing, lame duck president . . . to just scratch surface. That being said, many smart analysts/people are still expecting a reversion toward those levels just because they went there once, that's natural but most often wrong. The real reversion is taking these banks back to historic levels. 1.5-2x book, we still have room to run. Don't forget these banks won't be paying taxes because of the write-offs. How's that for screwing the lender (TARP/Gov't) of last resort that saved many of them.
If there is trillion$ on the sidelines like everyone says, then the majority of these moves have been caused by GS black box/front running/high speed trading. Once TPTB determine these zombie banks are at high enough levels, they're going to unload them and the rug will be pulled out from underneath the bag holders. When this insanity finally ends, it's going to be VERY ugly.
If that is the case why is GE trading at a lower level compared to them. Aint GE a financial as well like that list?
The only meaningful way to counter the banks move is to buy 1.000.000 calls ATM. You bet that is a "natural" border...
I'm still bullish on banks historically Citi and BAC have been around for a long time and both companies have managed to survive the depression. You have to think the valuations of these companies went up exponentially after WWII that being the point. How would it not benefit us to buy these stocks when their still priced relatively low in comparison to Book Value. Not to mention BAC has become a larger institution, ever since it swallowed up Country Wide and Merill Lynch. Sure, they didn't buy either company at the best of prices. But, they can honestly say after this mess is over the cash flow will increase from all the extra hard assets, extra information from these new units, and investment management for customers will return a massive return for Bank of America for the long term. Overall Bank of America will be a bigger, heavier, and stronger company in 10 years. Since a lot of regional banks are going out of business customers will be forced to bank at BAC, WFC, C, and JPM. These are the biggest names in the industry and some of them just got bigger through cheaper acquisitions that they thought they would never be able to get 5 years ago. Trust me the book value and the tangibles with earnings from Merill and Countrywide on top of Bank of America's will amount to something wonderful 5-10 years down the road. Bank of America is now officially the biggest bank in the United States and it's short term major risk of acquisitions may just give it a stronger advantage over many others for the years ahead.