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Two Ways To Play: Credit Crunch Time


Strengthen your portfolio in good times and bad.

More Bank Losses Ahead

According to Bloomberg, Wachovia (WB) and Fifth Third Bancorp (FITB) are facing more losses tied to hedge funds managed by Citigroup (C). WB and FITB reported more than $600 million of losses in bank-owned life insurance programs (BOLI) tied to the Falcon Funds. These funds used trading strategies that provided an alternative to the typical less risky holdings of Treasury notes and select corporate bonds. These funds plunged more than 50% in the last year as the credit markets deteriorated. Analysts predict there will be more losses with other banks as total BOLI holdings of U.S. banks topped $120 bln at the end of 2007. See related column, Debt, Dilution, Default, and Denial by Bennet Sedacca.

From the Bull Pen: Bulls continue to favor plays like Visa (V) and can fade into this stock in the $75-80 range.

From the Bear Cave: The bears are playing the downside in the financial ETF (XLF). Buy-stops can be set above $26.50.

HD Beats The Street

Home Depot (HD) reported better-than-expected results this morning. The biggest home improvement retailer said first quarter earnings came in at 41 cents a share, excluding one-time items, 4 cents above consensus estimates (37 cents per shares). Revenues fell 3.4% year-over-year to $17.9 billion vs. $17.6 billion consensus. For a related perspective in the retail sector, see Professor Jeff Macke's Lowe's: Victim of Reaction.

From the Bull Pen: Bulls continue to favor Wal-Mart (WMT) in the retail space and see an attractive pull-back towards $55. Near-term sell-stops can be set below that level.

From the Bear Cave: With continued weakness in consumer sentiment and in the housing sector, bears believe there is more pain for HD. Buy-stops on downside tries can be set above the 200 DMA ($29.90).

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.

Quick Check Around the World

Asian trading closed with the Hang Seng -2.23%, Nikkei -0.77%, Sensex -1.17%, Taiwan -2.43% and Shanghai -4.48%.

Over in Europe we find the CAC -1.11%, DAX -0.94%, FTSE -1.36%

As of 8:45 AM EST, S&P futures are lower -9.3 points to 1420, and Nasdaq Futures are down -13 points to 2012.

A Look At Commodities

Commodities are higher. Crude oil is up +0.13 to 127.18. Gold is higher +1.50 to 907.20. Silver is higher +0.076 to 17.050, and copper is lower -3.55 to 376.00.

The dollar index is lower -0.519 to 72.527.

On the Radar

PPI (m/m): 0.2% vs. 0.4% cons.
Core PPI (m/m): 0.4% vs. 0.2% cons.
PPI (y/y): 6.5% vs. 6.7% cons.
Core PPI(m/m): 3.0% vs. 2.9% cons.

10:00 IBD/TIPP Economic Optimism: 38.0 cons.

Click here for the full trading radar.

Good luck, Minyans!
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No positions in stocks mentioned.

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