On Tuesday September 30, 2008, I wrote this: “ It is indisputable simply by studying the numbers that a bank run at Wachovia (WB) as a simple example that the system is in trouble. WB has $300 billion in loans, $53 billion in debt, and an estimated $42 billion in losses on the loans. The FDIC has an estimated $43 billion left in it. Therefore, any bank run would have depleted the FDIC without the entity opening up taxpayer coffers and would have set up bank runs at other places as people panicked” along with “It will NOT get better until/unless SOMETHING is done to spark hope…and if it does not happen soon, Dow 10000 will be a very distant memory for a long time to come.” I am wrong a lot. I know because my wife tells me that all the time! But, unfortunately, I was correct in this instance. It’d take a darn near 50% move for the Dow to now get back to 10000. But on point, the chairperson of the FDIC- Sheila Bair- noted earlier this week that the FDIC is in danger of drying up due to a surge in bank failures. She now wants new fees placed on the banking industry in stating rather direly: “Without these assessments, the deposit insurance fund could become insolvent this year” in a March 2 letter she penned for all of the nation’s bank presidents. Last week, the FDIC approved a one-time ‘emergency’ fee and other assessment increases due to the rise to $250,000 insurance guarantee and the fact that the fund now has $18.9 billion in it. By the way, it is worth noting that these fees particularly the ‘one-time emergency fee’ could literally wipe out a majority of a smaller bank’s 2009 earnings according to Camden Fine, the president of the Independent Community Bankers of America. FDIC Chairperson Bair has rejected arguments that the agency should use government aid to rebuild the fund yet the FDIC already has authority to access a $30 billion line of credit…oh, and there is pending Congressional legislation which would boost the amount to $100 billion. So, either taxpayers pay or the Fed borrows from the Treasury thus increasing the money supply. Awesome options. Furthermore, the top story on many business newscasts this morning was that Senate Banking Committee Chairman Christopher Dodd is on the verge of attempting to allow the FDIC to temporarily borrow as much as –get this- $500 billion from the Treasury Department! Keep this stat in mind also: there were 25 bank failures in 2008, but already 16 in 2009 so far. Thus, what I am saying is that the entire banking system could well be in trouble. The depositors of the rotting banks cannot be covered much longer unless the FDIC gets more money somehow and the Fed cannot keep annexing everything due to lack of resources. For day traders, it is something to begin thinking about. I am not sounding a code of alarm here per se as I did when I took all of my money out of every bank I had funds except for Chase due to fear of having to deal with the FDIC. But for the first time yesterday, particularly when doing FDIC homework, I really wonder if this can get worse than even I thought possible. And by the way, if the market bottoms today, let’s note this piece!
Overnight, markets in Asia were down 1% to 2% across the board with prices in Europe down about 0.5% to 1% on average. The dollar is getting hit with oil up. There is actually a positive feel to the tape this morning…a couple of stocks (WFC in particular) are trading higher on what is traditionally bad news (i.e. cutting of a dividend) and Europe/Asia did not hemorrhage ahead of the weekend. It’d seem no matter how wretched the number is today, the number is factored in. Everybody is waiting for capitulation, but with volume not particularly heavy yesterday, it just doesn’t seem like it will happen today either. In an ideal world, I’d love a gap lower this morning and then you buy anything you can that goes positive. But this is not an ideal world. Thus, best guess is this: we open a little higher to a little lower, sell off a little bit, chop around, and then rally. I could be totally wrong and I am not going to have a bias- particularly on a Friday much less any day, but we ‘should’ be well lower now and we’re not so I am going to take my cue from that off-hand.
Watch list:
362009Eriklist.zip
Reiterating-
Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea.
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
MRVL- decent earnings
ARST- good earnings
COO- decent earnings
AEZS- signed licensing agreement with SNY
TAP- mentioned positively on “Mad Money” last night
HRB- good earnings; beat handily on quarter
WFC- cutting its dividend, but sees merger integration costs below plan and promised future earnings will be higher
Bad-The following stocks have bad news and/or a weak technical pattern
BOOM- poor earnings
FSYS- atrocious earnings
WIND- bad earnings
JTX- closed near a low after posting terrible earnings
CYN- closed near yet another new low
GBX- closed near a low after announcing they may have to cancel a contract with GE
APAGF- two massive blocks crossed on the tape yesterday (look on intra-day and day charts for volumes)…in theory, this stock should bounce today
CVBF, SIVB, ASBC, IBOC, WFSL, SUSQ, GBCI, ERBC- among the smaller banks completely breaking down to new trend lows
WGOV- closed near a trend low
AINV- apartment investor in trouble here too
AAWW, ALK- among the airline stocks which closed near lows
TK, OSG- closed near a trend low
CTB- tire entity closed near a low
SFD- broke to a new trend low
POM- Pepsi arm broke to a new low yesterday
DEI, WL- among land developers/ real estate firms closing on their lows
VOCS- crumbled in closing near a low
LNCR- in danger of taking out major support at 20
GMXR- resources entity broke to a new low
TRMK- closed near a new trend low
HUBG- closed near a new trend low
PRU, ALL, MET, AFL- among the insurance companies closing near lows
MANT- in ‘Sell Block’ portion of “Mad Money” last night
SEPR- one if its drugs failed at the phase II trial level
ANN- missed earnings estimates substantially
Earnings:
FRI MAR 6 BEFORE
ANN HRB PBR
Good luck today.
Epiphany Trading, LLC
http://www.epiphanytrading.com/
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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