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Thursday, August 13, 2009

Remember this?

We have all this hoopla because John Paulson decided to buy Bank of America--and we also know that he picked up 100 million shares at BAC's offering at $10.

I of course, touted the stock then when they had that offering, here, on May 20, after I touted the stock here, on March 10, when it was just $4.79.

But this is what you need to remember. On March 18, with BAC at 7; I said "But it's just getting started! What's the difference between 7 and 12? In valuation, in Bank of America, there isn't any!"

So now BAC is at 17.

What is the lesson to be learned by this? Well, I touted this number to 22 on my Dow year end piece, and that's where it is going.

But Wall Street doesn't learn lessons. Because if they did, they would be buying Citigroup right now, because at 4, it is on the way to 7, and then on the way to 12, just like BAC.

Because what's the difference between 4 and 7 for Citigroup when insolvency is taken off the table?

There is none! Just like there wasn't a difference with BAC either!

I'm giving you the script before it happens, but no-one on Wall Street wants to hear it.

You don't buy my reasoning? You don't have to--I'm not touting my reasoning; I'm touting the stock. That's what you need to buy. But if you want some circumstantial evidence, then take a look at Regions Financial, which was up 8% today to $5.20 on 66 million shares.


Now didn't we hear the bears breathlessly proclaim yesterday that Regions was insolvent? And didn't we have this nice little picture to go with the story?

A cursory look at the highlighted area will show that the fair value of $90.8 billion of loans is just $68 billion by Region's estimations.

So what happened to the stock? With this supposed $22 billion "ding."

Didn't it go up?

And what's the market cap of Regions? $6 billion?

So then, why would Citi be hurt if Regions can't even get dinged with news like that?

The high frequency traders (remember that story?--whoops is it over already?) are just frustrating shareholders of C, just like they frustrated shareholders of FITB before it doubled, a number I was touting at half the price at $5.34, in my "Rainbow Twenty" piece.

And now, I have to get another model on this piece, just to get someone to look at it.

Because Wall Street always looks in the rear view window, instead of looking at where things are going.

So enjoy the rear view.

I'm checking out where they are heading! And when will it hit these targets?

Well last I looked, it said Christmas Delivery Guaranteed!

10 comments :

Anonymous said...

I must say, I really enjoy the pictures!

Hey if you like oil, you gotta check out ATPG. They are going to christen their ATP Titan which is a 70 story tall structure and it'll be moved to their Telemark Hub field later this year. That alone will increase their oil production by 2x. Plus there's a huge short interest so it can get interesting.

Palmoni said...

I'll check that number out!

Anonymous said...

Palmoni, do you think i should get out of my bond PIGSX in my 401k? i have about 50% of my money in there. i can't buy stocks directly and am limited to some other mutuals.

Palmoni said...

At least that's safe!

I'm a speculator, so I couldn't really tailor any advice your way on that--but I can say that at least it is a conservatively managed fund which counts for something!

And if you're 50% in bonds and 50% in stocks that's probably a good mix, but I have to give the same disclosure--You better check with your financial advisor!!

But in all seriousness, if you have any mutual funds in your plan that you are considering, throw a name up here, and we'll take a look at it.

Anonymous said...

Thanks Palmoni, always responding and very helpful. Here are some of the mutuals i can choose from:

IARAX
ALVIX
TWEIX
ABALX
TWHIX
ARTQX
BGRFX
PNESX
BRESX
AEPGX
KAUAX
FMDCX
TOSXX
FSIAX
AGTHX
AIVSX
PYODX
RYLPX

any recommendations would be great!

Thanks!

Palmoni said...

I'll look over them this weekend when I get done flying

Anonymous said...

thank you very much. You're the best!

Palmoni said...

PNESX is just an equivalent of the S&P 500 index fund

IARAX is a bet on real estate, but you're probably long a home already, so who needs more RE exposure?

ALVIX touts itself as a Rusell 1000, but it really is a play on mega cap stocks, and "value" plays

TWEIX is another big value play masquerading as an Income fund--If you like income, this will give you that, with dividend protection--not high octane, but a more conservative play

ABALX is another value play, but I like energy, but no-one seems to like energy now, and if you think oil is going up, look for something different to hedge gasoline, since by definition, anyone who drives is short gasoline!

TWHIX will give you more juice than the bigger cap stock funds, because they are placing their bets on smaller cap stocks--ie 5 billion versus $50 billion.

If the economy rips, historically the smaller companies will do better than the bigger companies-not bad

ARTQX is more concentrated and will give you better returns than some of the others in a bull market

BGRFX is supposedly run by a smart guy who takes positions in stocks that become 4-5 baggers in 10 years--which means by definition, he sometimes is too close to the companies. But that means he at least allows the winners a chance to run-his turnover rate is probably 1/5 of his peers-I don't like his position on the education stocks, but I guess I never understood their valuation and they make up 10% of his fund.

It also means he takes outsize positions in companies and he holds them, which takes the supply of stock out--which means some of his performance is because he reduces the supply of the stocks he buys. My beef with his is simple, even though Wall Street loves him--I can't really give you a decent opinion on where a company will be 6 months from now, let alone in ten years, unless they have really have a moat around their franchise.

But by buying good franchises and holding on to them, is how you make money in big bull markets--and I think we are in that--and less turnover is better under those circumstances.

Buy and hold used to be a joke--I think it will come back--but then you come back to the issue of the moat--Do these companies really have a great moat around them, or is it just that holding stocks in a bull market that gives you the return?

Which just basically means that I think "genius" on Wall Street is just overstating the position, because most of the people that work on Wall Street, already had that position given to them. It wasn't earned.

But he does have a decided advantage. Since he is a long term shareholder, he normally is more privvy to information from companies than other shareholders, despite reg FD.

And Baron is always managing to get in spats with his neighbors in the Hamptons--probably because he doesn't get his share with the companies he invests in.

BRESX is just a play on International stocks and a weaker dollar as is AEPGX

KAUAX is more weighted on Healthcare--If Obama can't pass health care legislation, it will help this portfolio more than others while FMDCX will get you whatever the mid cap indexs do--judging by the protests it looks like Obama may have some selling to do.

TOSXX-cash

FSIAX labels itself as income, but it's throwing money in all kinds of different income arenas, and has a high turnover and it's just an income fund for bond jockeys flipping around trying to get the biggest bang for the dollar. Don't let the returns fool you--It makes money by trading aggresively, and all the Govvie bonds in the fund is just for show--the juice comes elsewhere.

AGTHX & AIVSX classic growth fund

PYODX I like this low turnover, seems unexciting, but their strategy should work in the current market environment--names we all know is what they hold

RYLPX classic smaller cap fund

If it's 401K money--remember your risk tolerance is the most important aspect versus the returns you want

Anonymous said...

thanks Palmoni for taking a look at my 401k funds. I appreciate all your insights and your willingness to help a stranger. I'll think about the strategy. i'll see what i want to do with the other 50% since i have 50% in the pigsx-govt bonds.

some disclosure here...i'm 28 with a baby girl and i'm renting right now living SF, so i don't own a home since it is still really expensive here.

I work for a public REIT. so i'm holding only 5% of 401k in the real estate...

btw...i jump on your suggestions of HBAN, MGM, and NVDA...will probably hold for a little bit after going bear from March to June (OUCH) read the wrong blogs and was in Real Estate so i thought really bad things were going to happen very soon.

once again. Thank you very much and keep up the great work! Don't slow down and let us know the minute you think the bears come out of hibernation.

Palmoni said...

Could be a rough day in the mkt tomorrow because of Bob Janjuah's bearish call.