Today Wells Fargo claimed to have made $3 billion in the current quarter. How'd they do that?
They just reserved $3 billion less for loan losses than they did last quarter. Easy enough, right?
Flashback to last July, as Wells was getting its butt handed to it, in a show of false bravado they decided to raise their dividend. The stock rallied from the low 20s to eventually 44.00 in part on that BS lying. Then of course, only a month ago, they reduced their dividend essentially to zero - from 38 cents to a mere 5 cents per quarter....and the stock fell below $8.00 per share.
I also read that Wells actually made half of this alleged $3 billion on a Rohm & Haas stock position. That may be real money, but it's also a one-time charge. I'll need verification on this point.
Wells also lied about loan loss provisions and got caught in the fall. See - Wells Fargo Number Fudging.
So with that (recent) history, I say good luck to anyone buying the stock today at $19.00!
Here's the first of what'll probably be 100 articles this weekend calling BS on Wells.
Last year I got caught short WFC and that single position almost wiped me out. In the end, I didn't make that much money on the stock trade; however, I made a bunch of dough buying Jan 30 and April 30 puts when they were OTM, covering at around $14.00 early this year.
Today I averted my eyes all morning. I just knew something bad was going to happen. I saw the market up 155 points on the television at McDonalds around noon. Then later on I came home from the park and witnessed the damage to my account up close. My profits for the year are now whittling down to almost nothing.
This afternoon I tripled up my FAZ position at 11.65.
Bullets are running low....
12 comments:
Moral support--got into FAZ at the end of the day. So far, haven't held it more than three days on previous trades, and don't want to now.
If only I'd been limiting my holding period...
Though upticks have been scarce these past several weeks.
I am about ready to throw in the towel on Faz. It would be one thing if we were taking on the market forces, it is clearly another when they have the full strength of our tax dollars as well. You know BAC and Citi will come out with "surprising" figures as well tanking this ETF even more. The foreclosures and credit care defaults will hurt but what is stopping uncle sam from handing over more cash to stem the loses? I fear that this will only get worse before it gets better...
Kfell
The problem these banks have with reporting *profits* is that is might make it tougher for them to get Federal money or political sympathy. Though, given the generosity thus far....it certainly seems like they have blank checks.
A lot of WFC's (and BAC) revenue this quarter is from refi's. Do you think long rates are going lower? Where is the next refi boom? How about 10 years from now?
In other words, this revenue is a one-time shot.
Furthermore, if they do a refi, that's an extension of their mortgage portfolio, right? (Unless they pawn it off on taxpayers aka FHA).
In many parts of the country, e.g. NY, MA, Seattle,... houses haven't even really depreciated yet. So these banks are levering up into a still inflated market with a piss-poor economic backdrop.
Long term Treasuries are going to collapse one day. At that point it will be game over for the banks, for the economy. Let's hope it's not too far off - from the standpoint of our positions anyway.
I've been very happy with BAC (entry @ ~3.40), the XLF (~6.50), and the overlooked XRT (~18.60).
CN, "interesting" hypothoses, though it may be difficult to profitably trade "game over" for the banks and US economy as counterparty destruction could pose a collection problem!
I haven't checked FAZ in weeks - from 115 to 10 in around a month!
Those are DAY TRADING vehicles and NOTHING MORE!
My parents refinanced and consolidated a bunch of rental properties last quarter. The fee was $3,000 on just over a $100,000 mortgage. If Wells had $100 billion of refi's, then 3 billion of booked profit this quarter doesn't seem unreasonable. Although, I assumed Wells only got a point or two on refi's. So, I also assume my parents were slyly fleeced.
Very interesting article about the state of the market:
http://zerohedge.blogspot.com/2009/04/incredibly-shrinking-market-liquidity.html
It's hard for me to grasp why you are still adding to your FAZ position. I know that you believe that financials are like a giant iceberg [They are showing less than what they have on their books] and they will eventually go down, it still doesn't explain why you would add huge losses and keep some cash with yourself and wait for Q1 results.
I have gone through your posts from 2006 and I really admire that you were correct in identifying housing bubble. Even then, it took almost 2 years for the bubble to pop. I hope you will have the capital to survive till this rally breaks.
Good luck!
RJ
Hope your not on the edge of the Tobin bridge with the red sox fans. Retail sales plunged in march, like this is really news to anyone with their eyes open...
Do we need to put out an APB for C-Nut? Did Ken Lewis send out his henchmen to silence his biggest critic?
RJ,
Me too! I hope I have the capital to survive - and thrive.
I've been busy with inlaws since Wednesday. Friday I went to a Celtics game. Saturday I went boozing (also). Sunday was Easter which we hosted for 20 people. There was a lot of pre-cleaning, shopping, cooking, inlaw management, and post-cleaning. I've taken siestas the past two days!
And anyone who mistakes me for a Red Sox fan deserves Marginalization. The slow start of the Sox is the only *plus* of the last few weeks!
Some of my past rants here.
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