Citigroup (C 37.73) fires Chuck Prince (..ooops he resigned) and reports future losses between $8-11 billion depending on which "model" you use. Meanwhile Berkshire Hathaway, which doesn't use any models posted net income of $4.55 billion, or $2,942 a Class A share. In the year-earlier period, Berkshire reported a 373% surge in earnings to $2.77 billion, after Buffett's bet on the weather (no hurricanes) came in. This quarter he booked his bet on Petro China, showing that no matter the weather, or the investment climate, smart people make money. Citigroup and Merrill Lynch? You decide if their "model" is broken!
But if you really want action, get up early and trade Wellcare (WCG 27.37). The stock cratered from 122, when the FBI raided the building, as market players panicked selling stock while shorts piled on. They report earnings at 8:30 a.m, and won't say a word about the investigation. But the WSJ did. They alleged that there was $35 million of state federal healthcare over billing the past 5 years. That's $7 million a year. In dollar terms the market lopped off $4 billion of market value for a "parking ticket." A Cayman Island subsidiary could also have some "holdback" issues, and patients at WCG had referral fees that are at a higher reimbursement level. But the stock is down 100 points. And the market will focus on the $35 million figure, and come to this 10 second "guesstimate."
Assume the $35 million is right. Pay a fine of treble damages, and let WCG director, ex Florida Governor/Senator Graham smooth things out. Lop off $140 million, (35+105=140) and you have a company with $4-6 earnings power, 2.3 million patients (do you think they are going to switch providers?) and $33 of net cash. The stock doubles in a heartbeat, and the nimble traders get a piece of that.
Do we know any of this to be true? No. But that's how Wall Street works, and you need to play buy their rules to make money.
So that's the script for the market as I see it. It may sound outrageous, but wasn't that a song in Britney Spear's album, "In the Zone?"
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