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Two Ways To Play: Think Banks Are Well Capitalized? Think Again.


Strengthen your portfolio in good times and bad.


Don't Bank On It

US banks like Morgan Stanley (MS), Goldman Sachs (GS) and JPMorgan Chase (JPM) will need to raise more capital. So says Meredith Whitney of Oppenheimer & Co. According to Bloomberg, Whitney believes asset prices will continue to drop and credit ratings will be cut on securities related to home loans, leading to another $40 billion in writedowns in 2009.

Capital ratios will be a focus of the first quarter, and Whitney believes these measures of financial strength will decline "materially" for US banks.

See Professor Bennet Sedacca's The Ultimate Bull Trap?

From the Bull Pen: Bulls can consider State Street (STT) for a trade. One might be able to catch it on a pull back toward $40. A sell stop can be set below that level.

From the Bear Cave: For a trade, bears can play the downside in Goldman Sachs. The stock has nearly doubled since its October nadir. A buy stop can be set above its recent high (near $90).

Quick Check Around the World

Asian trading closed with the Hang Seng -3.37%, Nikkei 1.74%, Sensex -7.25%, Taiwan 1.32% and Shanghai -0.68%.

Across the pond, we see the CAC -.18%, DAX -0.74%, FTSE -1.28%

As of 8:20 a.m. EST, S&P futures are trading -6.50 to 924.00, and Nasdaq futures are -7 to 1264.00.

A Look At Commodities

Crude oil is trading +0.54 to 48.84. Gold is -3.90 to 862.10. Silver is -0.06 to 11.385, and copper is -2.65 to 155.65.

The dollar index is -0.550 to 83.1700.

On the Radar


07:00 MBA Mortgage Applications
07:30 Challenger Job Cuts
08:15 ADP Employment Change -480k

Click here for the full trading radar.

Good luck and have a great day!

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No positions in stocks mentioned.

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