Two Ways: Not So Fast, Wells Fargo
Strengthen your portfolio in good times and bad.
According to Bloomberg, KBW's Frederick Cannon says his firm expects Wells Fargo to suffer as much as $120 billion of "stress" losses should unemployment reach 12% and the recession continue through 2010. Further, Wells would need to raise another $25 billion on top of the $25 billion it already owes to the US government.
In the report, Cannon stated the preliminary results had more to do with "merger accounting, revised accounting standards, and mortgage default moratorium, rather than underlying trends."
Last Thursday Wells Fargo said its first-quarter net income rose 50% to approximately $3 billion. These early results were above even the most optimistic of consensus expectations. Shares jumped 30% on the news and sparked a broad market rally.
See Minyan Peter's The Call of Earnings Humility.
From the Bull Pen: Watch the behavior of the banks this week. For financial bulls, a more conservative approach is to buy when stocks pull back to support. One can fade (read: buy) the Financial ETF (XLF) into $10. Remember to keep a tight sell stop.
From the Bear Cave: Bears can look to housing. The Homebuilders ETF (XHB) might be tracing out a double top sell signal near $12. One can attempt the downside with a buy stop above that level.
Have a great night!
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