Bull Market? Bull Crap!

kenneth lewis b of a ceoI am bullish by nature, but I can smell bull from a mile away. BAC reported earnings yesterday with a “better than expected profit”. If I had a quarter for every time I heard that quote, the last month I could report my net worth as “better than expected profit”. One breath of fresh air is the market reacted as it should.


If the government injected 40, 50, 100 billion into a company, they better report a profit. It’s the source of the profit. Do they really think they can report all time losses for the past two years, and then miraculously report record highs? It is the same mentality when the market jumps up 500 points in one day, it’s superficial. You know the following day or two all those gains will be washed away and we’re back to square one. Don’t get sucked into earning reports, especially during this market.

Quarterly earning reports are as worthless as Morningstar reports for mutual funds. I don’t how many times I had wholesalers pitching me how their fund is so amazing because of their 5 star rating. All the fund has to do is perform at a certain level for one quarter and they can receive that illustrious rating. I even had wholesalers who confessed how their company “did what they needed to do” to keep the rating. It’s all about putting up a front and looking good.

In September of last year, amid all the bank bailouts, Morgan Stanley held a company wide meeting for all brokers. In this meeting, John Mack reported that Morgan Stanley had 180 billion in cash; that’s right a 180 billion in cash. He went on to say the company had enough reserves to continue business for the next 2 ½ years no matter what happens to the stock price. Then why did Morgan Stanley have to become a bank? Why did they accept 10 billion from the government and 9 billion from Mitsubishi? It’s all about looking good.

We all know business is business. But what we don’t see is how companies fluff their numbers. If Morgan Stanley had 180 billion in cash, (which turned out to be cash assets and even that was a stretch) then why accept bailout money? Some things just don’t add up.

Obviously expect some rebound with financials in the next few days as the shorts sell off, but it will not last. MS more than likely will not report gains as high as other financials as their bonds have taken a swing recently, resulting in a 1.2 -1.7 billion dollar loss. Keep your eye out and there might be a play for all you shorts.

BAC, C, JPM, GS, WFC all reported profits this past quarter. Coincidence? If this is truly the case, in my opinion, then we are on the way up and this recession has seen its days. Don’t believe it. It’s all about looking good and every company is putting on a brave face, but there is no depth. This may be one of the few times I agree with the emotion of the market. Consumers are not buying into these inflated numbers and rightfully so. As others report, the market will continue to drag its feet, expect more pull backs as fears rise.

Amidst all of this there are some opportunities out there. Keep an eye out for FAS as a put option. The tech sector and consumer spending sectors from EBAY to AMZN to AXP should all follow suit from the financials, which by the way if you're looking for a good brokerage account with low cost trades, TradeKing is a great option.

-Chad Carlson

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6 comments:

  1. Anonymous Says:

    I bought 3000 shares of FAZ at 13 today morning. THe stock is at 9.9 now. What should I do now. Is there going to be bear phase in the near future. Please give some answer

  2. Anonymous Says:

    just a reminder to FF that faisal is back, spamming the chat again, and generally being a nuisance. it would be nice if you could remove him again. the past 3 days without him have been great.

  3. 5U Says:

    hahaha

    that guy is funny

  4. Chad Carlson Says:

    anonymous:
    I anticipated a slight jump today due to all the sell off of shorts, but it won't last. there are too many problems with the banks that their numbers don't hold up. i expect a sell off in the next few days to a week. just hold tight, the dow should retract.

  5. U Stink! Says:

    Not a bad article... grammer stinks but much better than the fluff you wanted us to follow last week.

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