Thursday, November 29, 2007

E*Trade gets $2.5 Billion

Citadel antes up the coin, and E*Trade's (EFTC 5.28) CEO Mitch Caplan is gone. Remember the analysts saying E*Trade was toxic? Jim Cramer had this to say about E*trade yesterday:

Purchased HELOC, home equity loans bought, is the most dangerous kind of business, one that Wells Fargo which prides itself on rigorous lending, should never have participated inThis is also the paper that E*trade has in abundance. In fact purchased HELOC is what I think will make it so E*Trade has an awfully hard time surviving.

It took just a day for E*trade to survive.

But don't miss this big picture. This distressed debt was purchased because Citadel thinks it is at a bottom. So go buy Washington Mutual (WM 18.31) and CITI group (26.24). These stocks were also panned by Cramer-but if they had the same "stuff" as E*Trade, then they'll get a reprieve also. (I'm not saying they have the same assets. I'm saying you have to think like Wall Street, so you can trade off of what they are thinking.) And at these prices, the news is already reflected in their prices.

And they can thank the sovereign oil money "threat" from making Citadel to act so quickly.

So when the bears come out today with the "Bridgewater" report, dismiss it. Ignore it. Remember how Wall Street works. If they thought these financials were over-priced why put out a report? Unless you already are short. Which they are. And they need them to come in. Which they are not.

So position yourself to make money, and disregard Wall Street's "agenda."


Anonymous said...

CIT Group is interesting, but why the high interest premium on their latest source of funds? (7.76% or so)

I would think they would have access to funds closer to the Fed window...

And is $2b enough to wait out this storm?

Palmoni said...

At least in the market's eyes. Secretary Paulson is meeting w all the mortgage honchos today, so it will be interesting to see what words of wisdom come from that. But with C, FRE, FNM and ETFC being rescued, I'd expect WM,CFC and CIT to be on deck. And one other thing-I believe that there will be some bailout bids in the junk securitization area. give some juice to th ebuyers of the debt, and the rest will step to the plate.