Minyanville's Take on the Tape: Morgan Stanley, Bank of America, RIM
Sniffing through the earnings dew.
Mother Morgan (MS), my former stomping ground, reported a smaller-than-expected loss on better-than-expected equity trading revenue (always the most volatile component in the earnings mix). Insofar as Morgan was the only firm (of the five major banks) to post a positive P&L for 2011-and perhaps more importantly, the perception of an imminent European implosion has abated-the stock is higher as we fire up the jets.
Bank of America (BAC) notched a quarterly profit, although it achieved its results through a different route-the company sold assets and cut expenses. Still, given the widespread panic in the name-concerns over mortgage exposure and the near-death experience at the $5 level (which would have prohibited some funds from holding the name)-the news has buyers licking their lips in the early going. We opined a few months ago that the reverse head-and-shoulders formation "worked" to $9 but I got shaken out of the name (it happens). Still, remember that banks look ahead, not back, when they report earnings.
Research in Motion (RIMM), a stock that I'm involved with, exhibited impressive price action yesterday following the outright denial of interest by Samsung. While perception remains that other potential suitors exist, I peeled out of most of my exposure on Tuesday following the 40% run in the stock (too much fast money piled into the name, in my view). $16 is trendline support, but that may prove penny-wise and pound foolish. I continue to watch the name, and will look to buy dips should they occur.
Finally, while the market has "room" to S&P 1360, as discussed in December 2011, the reaction to news is always more important than the news itself. Please keep that in mind during the first 30 minutes of trading as there's always a ton of noise in and around the opening, and a truer tenor tends to emerge at 10:00 a.m EST.
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- Has Europe figured it out? I don't know, but it seems they've taken some steps in the right direction. The question I wrestle with is: What if they have? What if austerity and higher taxation is the 'solution' (neither of which is pro-growth)? Does that matter? Or will it only matter in time, and we've got a window between here and there? (If I knew the way, I would take you home).
- Can a 68% writedown (on Greek debt) actually be deemed "voluntary"? And how will the counter-party risk reverberate up and down the financial food chain?
- Am I the only person in America who is short Tim Tebow?
- Do you remember when the smartest guys in the room were screaming, "Get Out of the Market!" and we postured the "other side" of that trade? Given the tape hasn't looked back since (S&P +8%), where are we in the psychological continuum: denial, migration or panic?
- My bride-to-be suggested last night that I've outgrown the nickname "Toddo" and I should adhere strictly to my given name, Todd. While I've been practicing my "Yes, Dear" (with a smile and nod), I've never been one to conform. As such, from here on in, I'll be known in the 'Ville as The Trader Formerly Known as Toddo.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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