[caption id="attachment_2251" align="alignright" width="192" caption="Photo by kevindooley"][/caption]
...should we be bullish about the Wells Fargo guidance that got US investors all excited?
Happy Easter
MT3 says the Bull Train for those who missed the rally from March 9 2009 has left. My wife told me over the weekend that I am too bearish....so how !! Being an analyst for more than 30 years - I will let fundamentals do the talking and allocate about 20% to sentiment. When I saw that the Dow and the Nasdaq had risen by 246 and 62 points respectively on Thursday.....I was beginnning to have doubts that this was a bear rally or is it the early stages of the Bull market. Wells Fargo's comments/guidance that it made US$3bn in Q1-2009 caused financial stocks to stage a strong rally on Thursday. My first response was that the market was "DOUBLE COUNTING" - because this profit comes mainly from the FASB's relaxation of the mark to market rules - for banks this means that banks dont have to charge any losses which they deem to be "temporary" to their P&L. Last week, Wells Fargo said that it would set aside US$4.6bn for bad loans and another US$3.3bn for uncollectible loans - did they charge this to their Q1 numbers of just stated the number and invoked the temporary clause to report the US$3bn profit number ?
The most important number now is the banks loan loss reserve - and are the US banks going to be under-reserving because of the FASB relaxation ? This means that these profitable bank numbers may not be the actual situation and that US banks will probably still need re-capitalisation especially with GM or Chrysler files for Chapter 11. Read more...