Is it time to start buying bank stocks? - Mercedes-Benz Forum

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post #1 of 18 (permalink) Old 01-28-2009, 06:24 PM Thread Starter
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Is it time to start buying bank stocks?

Stocks jump on reports of plan for bad bank assets: Financial News - Yahoo! Finance
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AP
Stocks jump on reports of plan for bad bank assets
Wednesday January 28, 7:13 pm ET
By Tim Paradis, AP Business Writer
Stocks surge on reports White House is considering absorbing bad bank assets; Dow jumps 201

NEW YORK (AP) -- The optimism is building on Wall Street.

Financial stocks led Wall Street sharply higher Wednesday on investor hopes the Obama administration will create banks to absorb the bad assets weighing down the financial system. The Standard & Poor's 500 index, a benchmark for the overall stock market, completed its first four-day rally since late November. And the Dow Jones industrial average jumped 201 points.

Financial companies surged on the notion that the government could take soured debt like defaulting mortgages off the hands of banks and place them in a so-called bad bank to hold toxic assets. Investors have been worrying that banks won't be able to resume more normal levels of lending without somehow dumping or walling off the bad debt that is corroding their balance sheets. And the economy can't recover from a 14-month-old recession without improvements in lending and consumer confidence.

Robert B. MacIntosh, chief economist at Eaton Vance Investment Management in Boston, said many questions remain about how a plan would work to take up bad assets. He added, though, that financial stocks have been so beaten down that a rally isn't a surprise.

"The financials are just begging for good news here," he said.

Bank shares jumped: Wells Fargo & Co. surged 31 percent, Citigroup Inc. jumped 19 percent and Bank of America added 13 percent.

Investors showed little reaction to an economic assessment statement from the Federal Reserve that contained almost no news. The central bank left interest rates near zero percent after its two-day meeting. Policymakers also predicted a gradual recovery in the economy will begin later this year but they cautioned that significant risks remain.

"I don't think there is anything terribly surprising here. I think the surprise, or the good news of the day, was the bad bank proposal," said Jerry Webman, chief economist at Oppenheimer Funds Inc. in New York.

Investors were also more upbeat ahead of a House vote on an $819 billion stimulus plan that contains a mix of new spending and tax cuts. Wall Street hopes the stimulus and other measures will help free the economy from its worst recession in decades.

Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said any steps Washington can take to revive the economy could help the market. He said the plan to help neutralize bad bank assets could speed a recovery.

"We aren't really going to see any great economic news anytime soon so if there is any positive movement in Washington toward the problem, that would stabilize the decline," he said.

The Dow industrials rose 200.72, or 2.46 percent, to 8,375.45.

Broader stock indicators also rose. The S&P 500 index jumped 28.38, or 3.36 percent, to 874.09. The index last recorded as many straight advances in a five-day run that ended Nov. 28.

The Nasdaq composite index rose 53.44, or 3.55 percent, to 1,558.34.

The Russell 2000 index of smaller companies rose 17.44, or 3.83 percent, to 473.02.

The number of stocks rising outpaced those that fell by more than 6 to 1 on the New York Stock Exchange, where consolidated volume came to 6.07 billion shares, compared with 4.66 billion traded Tuesday.

Bond prices tumbled as stocks gained. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.67 percent from 2.53 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.17 percent from 0.13 percent Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose 58 cents to settle at $42.16 a barrel on the New York Mercantile Exchange.

The advance in financial stocks gave support to the overall market. CNBC reported Tuesday that the Obama administration is considering a plan to buy bad assets.

Wells Fargo jumped $5, or 31 percent, to $21.19 after the company said it would maintain its dividend. The company reported results that included write-downs to reduce is exposure to the risky assets of Wachovia Corp. Wells Fargo also added to its reserves for future losses. The company acquired Wachovia on Dec. 31.

Other banks charged higher on the notion that Washington could vacuum up some of their bad debt. Citigroup Inc. rose 66 cents, or 19 percent, to $4.21, while Bank of America Corp. rose 89 cents, or 14 percent, to $7.39. State Street Corp. surged $6.15, or 31 percent, to $25.77.

Some analysts attributed the run-up in banks partly to investors buying up those stocks to cover bets they made. Investors who sell a stock "short" are betting a stock would fall. They are forced to step in and buy the stock if it appears they were wrong and could lose money. This buying, in turn, can drive stocks higher.

Investor sentiment has been buoyed this week by somewhat improved corporate results. After weeks dominated by terrible results from the banking industry, investors have welcomed news that some companies were still able to gather profits in the final three months of 2008 despite the weak economy. Companies from United States Steel Corp. to American Express Co. turned in earnings that helped lift stocks moderately Tuesday.

Overseas, Britain's FTSE 100 rose 2.40 percent, Germany's DAX index jumped 4.52 percent, and France's CAC-40 rose 4.11 percent. Japan's Nikkei stock average rose 0.56 percent.
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post #2 of 18 (permalink) Old 01-28-2009, 07:17 PM
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Of course it is.
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post #3 of 18 (permalink) Old 01-28-2009, 07:28 PM
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No, but I will load the boat with SKF when it's within a 80 to 100 dollar per share range.

When devils will the blackest sins put on, they do suggest, at first with heavenly shows - Othello
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post #4 of 18 (permalink) Old 01-28-2009, 07:42 PM Thread Starter
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Originally Posted by cozette View Post
No, but I will load the boat with SKF when it's within a 80 to 100 dollar per share range.
Why are you seeing a down slide?
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post #5 of 18 (permalink) Old 01-29-2009, 05:51 AM
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Why are you seeing a down slide?
Traders on the floor of the NYSE are calling the "Bad Bank" Crappie Mae!! Gotta love that. IMO it is an act to sweep the dirt underneath a rug. Transferring the toxins from one book to another. Just because we don't see it... they are still there. I really don't know how this can work.

When devils will the blackest sins put on, they do suggest, at first with heavenly shows - Othello
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post #6 of 18 (permalink) Old 01-29-2009, 06:34 AM
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the Bro and I are considering "short selling" ( well sort of ) HSBC shares belonging to an old uncle. As recommended by his accountant.
they are worth little enough now that capital gains are not an issue.
Plus as a potentially exempt transfer, the lower the value the better, iffen the ould bugger pops his clogs anytime soon.
I would intend to buy them back and hold.
Ideally he should transfer them to us direct, but apparently cannot do this transaction
Fingers crossed.
Or should I buy investment property?
Market cant go much lower , can it?
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post #7 of 18 (permalink) Old 01-29-2009, 07:37 AM
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post #8 of 18 (permalink) Old 01-29-2009, 07:54 AM
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Dirt as in property is the only really good investment, thats what my dad taught us. He was a broker in the 60's and 70's who fully felt that dirt was the best thing as God wasn't making any more. He stuck us, my brother and myself with lots of it when he passed and later my brother went to be with him so I'm stuck paying taxes on all of it..... oh well. I don't spend much time fretting about the market and the like as I know it will all come back, just need to be patient.
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post #9 of 18 (permalink) Old 01-29-2009, 08:00 AM
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Bill
I am with you on that one
as they say over here
"they are not making any more of it"
referring to farmland
Unfortunately they ARE making waaaaay tooooo many houses,
But I suspect that current depressed property prices in NI are actually well, well at least a bit, below their "real" value.
The Missus will be hard to persuade though.
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post #10 of 18 (permalink) Old 01-29-2009, 08:09 AM
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Ireland is supposed to be a beautiful place, perhaps I should buy a spot over there as well. As for developers, none of my stuff is for sale to them. The neatest place I had was a single home on 10 acres in San Diego county. Had horses there and would still be there if they didn't break me up so damned much. When you get to a certain age you just have to let someone else do it, so I sold it to a family that had a bunch of horses.
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