Wells Fargo

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Wells Fargo

Postby kiryan » Thu Mar 05, 2009 7:39 pm

I don't understand it. The stock has absolutely tanked from $30 to $8 for really no good reason in my opinion.

WFC's lending standards are as tight as they come. Thousands of people who couldn't get financed from Wells Fargo switched to WaMu who happily loaned to them. WFC announced a pitiful amount of losses in the past 12 months (I think a total of 4 billion plus setting aside 2 billion for future losses) other than the billions they wrote down at the end of 2008 as a result of taking over Wachovia.

Now Wachovia is a brilliant move, they bought wachovia to expand their operations to the east coast... but more importantly the bought Wachovia so they could write off Wachovia's losses against their profits. The price they paid for Wachovia was a great deal for just the assets let alone the consideration of the Wachovia's losses as tax deductions. This was a phenomenal deal, but the market is punishing them and Moody is talking about downgrading them.

Am I missing something other than herd mentality against all financial companies? Sure I see some justification in the resetting of P/E ratios, but not enough to justify hammering one of the best financial companies out there IMO. They were quoted as telling Bernake and co we dont need your bailout, yet they were literally told you are taking this money, go lend.

I ask because I'm thinking about buying a several hundred shares immediately and continuing to add to my position as long as it remains under $10. I think this stock is a winner in at least the mid term, but I thought it was a winner at $24 bucks a share too and now its $8.
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Re: Wells Fargo

Postby Alta » Fri Mar 06, 2009 4:53 pm

I probably don't know enough about stocks to add a comment, but I do wonder if the drop in WF stock came from the slashing of dividends paid to 5 cents a share, down from 34 cents.

http://finance.yahoo.com/news/Wells-Far ... 64360.html
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Re: Wells Fargo

Postby kiryan » Fri Mar 06, 2009 6:21 pm

you slash your dividend to up your capital to lower your leverage and meet the expectations for what is considered to be a "well capitalized" institution. The Moodys downgrade warning is based on questions about capital levels.

The stock decline is clearly tied to the wachovia acquisition... WFC declined like 8% in 2008 vs 50% for banking index, and since the completion of the acquisition has fallen something like 70% compared to 40%. I just don't see the damage unless Wachovia is not worth what they paid, which I find highly doubtful.
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Re: Wells Fargo

Postby Lathander » Sat Mar 07, 2009 2:23 am

look up "Golden State", wachovia and "option arm"
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Re: Wells Fargo

Postby kiryan » Sun Mar 08, 2009 11:08 pm

I know wachovia has a ton of bad loans. The thing is that for what Wells Fargo paid, the bad loans cost them nothing. They bought Wachovia to expand their business to the east coast and paid a very small sum to do so given the high cost of entry in east coast markets.

I don't see how they could run into any trouble related to the Wachovia purchase. There is going to be some big losses in a very technical sense, but Wells Fargo won't be actually losing any money since they paid pennies for the loans. Their fundamental capital position has not changed minus the debt offering they used to purchase Wachovia.

I think at least...
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Re: Wells Fargo

Postby kiryan » Mon Mar 09, 2009 9:00 pm

http://biz.yahoo.com/rb/090309/business ... ffett.html

What Warren Buffet has to say on Wells Fargo
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Re: Wells Fargo

Postby Sarvis » Mon Mar 09, 2009 9:02 pm

You almost had me talked into buying too... I was just afraid because my last few tries aren't doing so well. :(

Then again, HSBC dropped interest rates again so why the hell not?
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Re: Wells Fargo

Postby kiryan » Mon Mar 09, 2009 9:18 pm

I've already got a lot of eggs in the WFC basket otherwise I would've already bought regardless of my fear that I am missing something everyone else can see.
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Re: Wells Fargo

Postby Sarvis » Fri Mar 13, 2009 3:00 pm

Stupid NAACP

Down like $0.60 since that story hit. :(
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Re: Wells Fargo

Postby kiryan » Fri Mar 13, 2009 9:26 pm

Interesting story, Wells Fargo will settle, the NAACP and the lawyers will get paid and nothing will change for people who were ACTUALLY taken advantage of.

Wells Fargo had super tight control over its lending business and standards. I have a little doubt that the NAACP can find some legitimate examples of discrimination in the loans that WFC made. I suspect that they are going to pull in loans WFC bought rather than ones they originated AND/OR that WFC will produce hundreds of loans that prove no discrimination for every loan they show proving discrimination. Regardless, the lawyers and the NAACP will get paid.

Since we started talking about htis WFC has gone from 7.80 a share (3/5) to 14 (today). Another opportunity missed. I was sure the price was too low, but I was worried about it being so low lol.
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Re: Wells Fargo

Postby Sarvis » Fri Mar 13, 2009 9:35 pm

kiryan wrote:Interesting story, Wells Fargo will settle, the NAACP and the lawyers will get paid and nothing will change for people who were ACTUALLY taken advantage of.

Wells Fargo had super tight control over its lending business and standards. I have a little doubt that the NAACP can find some legitimate examples of discrimination in the loans that WFC made. I suspect that they are going to pull in loans WFC bought rather than ones they originated AND/OR that WFC will produce hundreds of loans that prove no discrimination for every loan they show proving discrimination. Regardless, the lawyers and the NAACP will get paid.

Since we started talking about htis WFC has gone from 7.80 a share (3/5) to 14 (today). Another opportunity missed. I was sure the price was too low, but I was worried about it being so low lol.


I wish I'd listened to you sooner, I could have gotten it at $9 something. I actually bought in at... hrm... 11.61 I think. Wish I'd noticed that story soon enough to sell today. It was up like 40 cents before that story hit. :(

Think it'll bounce back?
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Re: Wells Fargo

Postby kiryan » Sat Mar 14, 2009 6:44 pm

I think its a much better bank than its competitors. I don't know about the short term volatility. I don't think any drop due to the lawsuit will stick. However, I think its pretty clear that the stock price is being driven less by company fundamentals and prospects, and more by how investors feel about the banking sector.

In that case, the bear market has rallied now for 4 straight days. We've seen 1000 pt rallies of 3-4 days on at 4 occasions in the past followed 2x by a long gradual declines and 2x by a sharp declines. My guess is that we'll see a slow decline by mid this week. Although I wouldn't be surprised if the government tries to take advantage of the current situation and announce something big like Geithner's foreclosure plan or if Obama gets out there and stumps some more which might extend the rally another 3 or 4 days before leveling off.

You also have the end of the 1st quarter coming up. I think we are going to hear some "good news" in terms of profits because companies have been cutting the crap out of costs (employees). The bad news will be that across the board sales will have been down, but if the costs dropped faster, then the market ought to cheer...

I'd hold if I were you unless you see something major. You've got what even Buffet says is a solid company with great long term prospects. They just expanded to the east coast for next to nothing, and I hear from some Wells Fargo banking divisions managers that they had great sales in Q1 probably due to the lack of competition from WAMU in the west.

The one thing that I keep forgetting... is the lawsuit over how they acquired Wachovia, but resolving that is years down the road even if the government doesn't strongly encourage them to squash it.
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Re: Wells Fargo

Postby Sarvis » Mon Mar 16, 2009 7:26 pm

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Re: Wells Fargo

Postby kiryan » Mon Mar 16, 2009 8:57 pm

Several reasons.

#1, The details of the plan are unknown. Anything unknown is dangerous and a big part of why the markets have been in a tailspin is that investors don't know who has these toxic assets and their affects on 2ndary and tertiary parties.

Take AIG, if AIG collapsed how many 2nd parties would collapse that were relying on AIG to make them whole on their bad best... how many 3rd parties would collapse when the 2nd parties collapse ect ect ect...

If investors don't like the plan, financial stocks will suffer even though the situation hasn't actually changed and irrespective of whether you are a good bank or a bad bank. Part of this is investors having already made bets that the government plan will be a game changer, part of it because there are banks that need this to survive.

AIG share holders are virtually wiped out as a result of the government bailout. What if the new plan has the same affect on banks with troubled assets by taking the assets, but requiring the banks to "insure" them against a portion of the losses... then giving the govenrment control to set the price of those assets (and losses).

#2 A price for "toxic" assets which may be lower than what is currently on the books which will require banks to take more "losses" (although they havent actually lost the money you cant have assets on your book at a higher value than the market will pay).

#3 Government meddling if you are involved in the program... and an unfair playing field if you are not involved in the government program. Damned if you do, damned if you don't.
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Re: Wells Fargo

Postby Sarvis » Tue Mar 17, 2009 7:39 pm

Ok, and apparently this is good news? http://wallstnation.com/MTM_03172009.html
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Re: Wells Fargo

Postby kiryan » Tue Mar 17, 2009 8:44 pm

first off there is two different way to look at news. in terms of stock and in terms of the company.

When you look at that graph, it shows the MTM losses of 1 trillion dollars. Yet the actual losses are very small and the expected "lifetime" losses are very small.

What does that say to you? To me it says the company is fundamentally sounds, the assets are grotesquely undervalued and the stock is way undervalued as a result. Except its not that easy, because if banks don't maintain capital levels then they pay more for FDIC insurance, they lose Moody ratings, they lose confidence of their customers.

The majority of these "losses" that are in the news every day are paper losses... they are "impairments" against these mortgage securities to represent expected losses rather than actual losses. These impairments are because the original booked value of the asset might've been 100k, but today on the market you can only get 50k. So you book a 50k loss on that asset. However, its possible, maybe even probable that you will get the full 100k out of that asset. As the market value of the asset rises and the actual profits accrue, the company will book "profits" by reducing the impairments.

If they change the MTM regulations, stock of sound banks will double and triple or more very rapidly. If they don't, then there will be more uncertainity which will keep the stocks low until the government addresses the capital requirements that these "losses" are triggering.
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Re: Wells Fargo

Postby kiryan » Wed Mar 18, 2009 8:31 pm

"Fed reignites stock rally"

figured this was coming. now look for some "rosy" #s on government controlled statistics in 2 weeks to continue to stimulate the rally... nevermind that the statistics will later be revised downwards on page 6 of the newspaper next month... Obama will probably talk up the economy on Leno as well.

I think we just bought ourselves another week or two of rallying. I'd give it a 50/50 on whether this is the turnaround.
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Re: Wells Fargo

Postby kiryan » Thu Mar 19, 2009 5:03 pm

In my defense, I thought they were only buyiny 200 billion in treasuries. I would've had a different opinion if I had understood that its as much as 1 trillion.

This is the fed printing money to buy US bonds. That's basically devaluation of the dollar and your oil prices are going to go up as a result.

The risk of another market decline are definitely stronger with investors worried about inflation again.
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Re: Wells Fargo

Postby kiryan » Fri Mar 27, 2009 6:24 pm

http://www.marketwatch.com/news/story/m ... _Mod_mktwN

This is probably part of why Wells Fargo tanked to $8 a few weeks ago. People knew this... had heard the whispers the rumors. Some was obviously the broader trends (and how the market likes finance stocks).

This is not good for wells fargo stock price in the short term. Especially if its based on legitimate concerns and not overly pessimistic projections. Moodys was overly optimistic before (which is why we had mortgage backed securities based on subprime loans with AAA ratings), so I think they have gone 180 and are overly pessimistic now... but they may not be.

If you are trading stocks (vs investing for the long term) I would think about a stop loss order (one that automatically sells your stock if it drops below a certain $$). One principle I believe in is never give away your earnings. If you won, don't give it back.

Do be careful though and fully understand how stop loss works. Just because you have a stop loss order in, doesn't mean you sell at that price you set. The market has been notoriously whimsical with stocks dropping by large % in overnight trading and then rocketing back up to right where they were in a couple hours. You could close out a good, winning position just on normal volatility (normal by todays terms).
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Re: Wells Fargo

Postby Sarvis » Fri Mar 27, 2009 6:29 pm

You couldn't have told me that Wednesday night? :P

So the overnight trading does affect the price? Meaning that if I decide to sell after market hours and the overnight trading changes the price, I'll run the risk of getting the lower price in the morning?
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Re: Wells Fargo

Postby Ragorn » Fri Mar 27, 2009 6:33 pm

kiryan wrote:Do be careful though and fully understand how stop loss works. Just because you have a stop loss order in, doesn't mean you sell at that price you set. The market has been notoriously whimsical with stocks dropping by large % in overnight trading and then rocketing back up to right where they were in a couple hours. You could close out a good, winning position just on normal volatility (normal by todays terms).

Yes, this is why I don't put any money in the market right now unless I can devote a portion of my attention to following its price on a minute-by-minute basis. If I have money in, I try to always keep a small ticker icon on my desktop so I can catch big rallies or sudden slides without needing to rely on stop loss orders.

Not everyone can spend that much effort on tracking their investments, but it works for me.
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Re: Wells Fargo

Postby Corth » Fri Mar 27, 2009 6:56 pm

I couldn't time the market if my life depended on it. If I buy something its with a minimum time horizon of a couple of years. That way I don't have to care about blips in one direction or another. I never use stop losses - which I'm not saying is a good thing.. its just not my cup of tea.

As for financials.. you may as well put all your money on a roulette table in vegas. Its a black box. Nobody knows whats on their books and how appropriately its assets are valued. Nobody knows ultimately how policy decisions will affect them. My skin is too thin for financials right now. They may be insanely undervalued.. or, on the other hand, the entire industry might be insolvent and about to be nationalized.
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Re: Wells Fargo

Postby kiryan » Fri Mar 27, 2009 7:08 pm

I didn't know about the Moody's thing until today. Since my investment in WFC is an investment, I don't look at it on a daily basis or like Ragorn prudently does... constantly. The moody's thing had the potential to send the shares down several dollars. You only think you lost money, you got lucky. 2 years ago, when moodys was trusted you probably would've lost your shirt over the past 2 days.

West coast traders get up at 3-4 am to do their research and be ready when the market opens which is where the majority of the volatility typically happens. If you think about it, people all across the world invest in the US stock market, but transactions are only conducted officially in 8 hours. So these orders or decisions stack up over night and flood in in the morning. You're stoploss order is a decision to sell once the stock breaks a certain threshold. Millions of other people are selling at the same time, there is nothing to guarantee your price. Your stock is the same as their stock and its all on the market to be sold. You have to compete with them to get "sold".

You can't take vacations when you trade because you are playing short term stock moves. I still think WFC is a great investment. Right now, I'm unsure of its value to a trader. The rally was pretty strong, the stock is up to at least a reasonable level ($8 was unreasonable). If I was trading WFC, I'd probably dump it now unless you expect good numbers for Q1 banks or the economy. I don't.

The government is going to try and keep this rally going to cure the systemic lack of confidence. They will fudge the #s and downgrade them later. Believe that the market is manipulated that politics are very real and very important. It'll be easier for Obama to sell his budget if the stock market is winning and Amercians are happier and more confident.

I just heard that several readings were revised downwards from January and February. Its a brilliant system, you say one thing when you need it and it gets a lot of playtime on the front page, revise it downward the next month and release another overly optimistc "reading" the next month. You get a lot of good news, and the bad news / truth is buried on page 5 or paragraph 10 of the article.
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Re: Wells Fargo

Postby Sarvis » Fri Mar 27, 2009 7:11 pm

kiryan wrote: You only think you lost money, you got lucky.



No, I'm actually up by a decent amount. It's just that it was an even more decent amount Thursday morning... ;)

So you don't think it'll make it back up to where it was ($20 range?)
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Re: Wells Fargo

Postby kiryan » Fri Mar 27, 2009 7:35 pm

I wouldn't be surprised by a $2 change in either direction short term. I believe fundamentally the stock is a good value at $22-24 and that it couldn't possibly be worth less than $18 (which is why it concerned me greatly that I didn't know something when it plunged to $8). If the economy turns around, $28+ by year end. However the market doesn't care about fundamentals of a specific bank right now. It cares about the banking industry and rewards / punishes all players together. If investing hold, if trading, watch closely and sell out at first sign of bad news. but of coruse, I had no idea about the Moodys downgrade either, so take my advice with a grain of salt.

I think the acquisition of Wachovia allows investors to think of WFC just like all the other banks who took bad risks. Which is why their stock dropped steadily after they finalized the acquisiton by Jan 1st and why its moving with BoA and Citigroup now where it wasn't when the financial crisis first broke. They had been largely insulated from beign associated with them until January and for good reason since they had such stringent underwriting standards.

From what I hear from the Wells Fargo managers I know, they had a strong 1st quarter sales. 1st quarter is generally the toughest quarter for sales (annual sales goals are distributed evenly so its toughest to meet Q1 goals). They work their ass off to not fall behind and in doing so, they usually end up ahead by Q4. If they had a strong Q1 across the nation, then I would expect a strong Q4 finish and higher stock prices throughout the year.

Again... what the stock does short term, I can't say with much clarity especially if its not trading based on WFC fundamentals. I'm starting to get a sense that the broader market rally is fading on profit taking and the realities, but the profit taking has been modest. Most people are believing which may give us a plateau waiting for the next bit of news.

I do expect to see some good Q1 numbers across the board as savings from job cuts take hold... but I don't think they will be based in reality. Job cuts afticially make the #s look better in the short term, but teh job cuts cripple long term strategy and production of these companies. Can you run your company on half as many people... probably, but for how long and what are the soft costs? Good #s ought to rally the shares some (I think the overall feelin is the #s will be good so it will take great #s to make large moves), bad #s will most likely cause another rout of the market in general.
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Re: Wells Fargo

Postby kiryan » Wed Apr 01, 2009 11:19 pm

ADP jobs report was out. Unqualified disaster. 742k jobs cut, 656k had been expected.

I'm leaning more towards the market hitting new lows within 6 weeks. I still believe Q1 earnings reports will be stronger than expected because of the massive job cutting, so I wouldnt' be surprised to see another 500-1000 point gain... but I'm seeing more and more downside risk and a lot of irrational "hope" that things are turning around.

IMO, there is no support for the hope that the economy is turning around. Manufacturing is still contracting, the auto makers are on the verge of bankruptcy and being taken over by the government, we are sheddign jobs left and right, banks are returning TARP money for fear of being controlled or tained, government is inflating the crap out of the currency and spending massively. Reality will set in eventually and punish those who banked on hope. Everyone is trying to sell you on this being the "best" time to buy everything from houses to cars to stocks... I think we are being sold a line of crap.

The economy is going to continue shrinking until it gets to a "sustainable" level which means it will dip (until supply is worked off) then bounce (because we cut too much supply) then plateau at a new sustainable level. All those people out of work, are not going back to work in the short term and when they go back to work, they will be paying off debt they accumulated while out of work which will not increase demand. I don't expect there to be any need for more production... whether its goods or services for a while.

This means I think stocks are going down, not necessarily right away. There may be another good rally left depending on Q1 earnings.
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Re: Wells Fargo

Postby kiryan » Thu Apr 02, 2009 12:33 am

http://money.cnn.com/2009/04/01/markets ... 2009040113

Heres a guy who is saying that Q1 earnings are going to stink... and he doesn't quite come out and say it but indicates large losses are going to be booked despite "turning a profit on oeprations."

If you read between the lines of the congress / government discussions over the past month about "suspending mark to market"... you might see some agreement here that there are significant losses looming and that they were trying to avoid taking them by getting a change to the regulations so they didn't have to.

At worst, I would expect Wells to write down 1 billion of its stuff, but the bigger problem is the news it will get writing down Wachovia's assets (which was expected and does not represent a loss for Wells). They'll get punished despite the fundamental differences and the lack of real losses. Also... if it does get crushed, I'd think seriously about picking some back up a day or 2 later when it is oversold.
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Re: Wells Fargo

Postby kiryan » Thu Apr 02, 2009 4:36 pm

http://money.cnn.com/2009/04/02/news/fa ... tm?cnn=yes

So they changed the mark to market rules some. Not sure that I understand or believe the nuances they are indicating. Another person saying that banks are going to have a bad earnings season.

It'll be interesting to see if they delay earnings report because of this last minute change... stock usually gets punished if you delay earnings, and a delay would mean that the rule change had significant impacts... or whether they knew it was going to happen all along.
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Re: Wells Fargo

Postby Sarvis » Thu Apr 02, 2009 4:50 pm

When are the earnings reports supposed to come out?
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Re: Wells Fargo

Postby Ragorn » Thu Apr 02, 2009 5:49 pm

I woke up this morning, saw the huge upswing in financials, and jammed the SELL SELL SELL button at 9:30:06 until my order went through. Picked up a 10.3% profit off the financial ETF I picked up last week, and I'm glad I sold when I did... it's down 3% since this morning already.

Thinking about throwing some cash into an UltraShort ETF and hoping the earnings are bad... but undecided. What do you think, kiryan?
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Re: Wells Fargo

Postby Sarvis » Thu Apr 02, 2009 6:28 pm

Ragorn wrote:I woke up this morning, saw the huge upswing in financials, and jammed the SELL SELL SELL button at 9:30:06 until my order went through. Picked up a 10.3% profit off the financial ETF I picked up last week, and I'm glad I sold when I did... it's down 3% since this morning already.

Thinking about throwing some cash into an UltraShort ETF and hoping the earnings are bad... but undecided. What do you think, kiryan?


WFC Reports a profit 5 minutes after your post convinces me it's time to sell, and their stock price starts going back up.

And you wonder why I never listen to you? ;)
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Re: Wells Fargo

Postby kiryan » Thu Apr 02, 2009 7:05 pm

I actually personally believe the earnings reports will be better than expected (that doesnt mean good) and the market will rise then crash next week.

Companies right now have been trying to lay on as much "bad news" early (especially ones that changed CEOs) so that they can emerge "profitable" earlier than their competitors. There were a lot of job cuts and some massive Q4 writeoffs (for tax reasons), that should make the bottom line look better.
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Re: Wells Fargo

Postby Ragorn » Thu Apr 02, 2009 8:10 pm

On a whim, I took the cash from my financials ETF and threw it in a Financial Bear 3x ETF at 3:30 this afternoon. For those who aren't familiar with the terminology (and I wasn't either, until last week), a Financial Bear 3x is like a grab-bag of financial stocks. The difference is, as the financial stocks go down, this ETF rises (because it's an ETF that sells short). And the 3x means that this ETF will rise and fall three times faster than the actual stocks itself.

Anyway, I figured that the rally caused by today's M2M announcement would result in a lot of profit-taking right before the bell, which would drive down the share price of the financial stocks. Turns out I was right... at 3:57, as the bank stocks were giving back their gains from the day, I sold off all the ETF shares I'd just bought and raked a 3.2% profit. Not bad for a half hour of exposure.

I love stock trading. It's like a game, but you get money when you win.
Last edited by Ragorn on Thu Apr 02, 2009 8:14 pm, edited 1 time in total.
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Re: Wells Fargo

Postby Sarvis » Thu Apr 02, 2009 8:13 pm

Ragorn wrote: The difference is, as the financial stocks go down, this ETF rises (because it's an ETF that sells short).


Maybe I still don't understand short selling... I thought you had to buy back in just before the stock goes back up for that to work?
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Re: Wells Fargo

Postby Ragorn » Thu Apr 02, 2009 8:19 pm

I don't know if this will help explain, because I don't know how familiar you are with the terminology:

http://en.wikipedia.org/wiki/Inverse_ex ... raded_fund

The Financials 2x ETF I sold this morning was UYG. The Financials Bear 3x ETF was FAZ. I bought FAZ at 3:30 for 17.35, and sold it at 3:57 for 17.90. Right now at 4:21, after-market trading has FAZ at 17.25. Yes, I am VERY glad I sold out before the bell.
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Re: Wells Fargo

Postby Corth » Thu Apr 02, 2009 11:46 pm

Word of warning about the leveraged index ETF's. They can be very valuable short term trading tools. However, do not keep your money in it for a long term trade. The way they are structured even if the market goes in your direction over the long term you will lose money. Its called 'beta slippage' and its due to the fact that the starting point for calculation of % gain or loss is reset every day. Any type of choppy back and forth market will lose you money, even if the longer term trend goes in your favor.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Wells Fargo

Postby Sarvis » Fri Apr 03, 2009 5:46 pm

Those ETF things look a little scary, probably going to stay away unless Kiryan's right and the market starts to nosedive next week.

In the meantime... what are your opinions on GE?
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Re: Wells Fargo

Postby Corth » Fri Apr 03, 2009 5:58 pm

GE has been around forever and is one of the bluest of the blue chips. Originally it was an industrial company but in recent years it got heavily into finance related business, and they have taken a big hit on that lately. They're dividend, which used to be considered very solid, was reduced by quite a bit recently. Besides industrial and finance related businesses, I believe they also own NBC. One thing they probably stand to gain from is the Obama administration's infrastructure spending. I believe they are leaders in smart electric grid technology that a lot of people are talking about. On the other hand, my personal rule is not to go long on any finance related company because they are quite simply black boxes. There is no way to get a good idea of the relative toxicity of their balance sheets.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Wells Fargo

Postby kiryan » Fri Apr 03, 2009 9:01 pm

Also adding, GE finances a lot of its customers purchases. They recently lost their AAA rating (which increases borrowing costs) and was long talked about as being a central strategy.

One thing about GE that they have been questioned about over the past few years is how they always... always meet the market expectations. This obviously can only be done by some sort of manipulation which was GE finance.

I'm not sure about GE. I think its probably a good investment, but theres that black hole Corth was talking about. They do make a lot of high end stuff that people aren't buying (like 5 million dollar MRI machines) which is bad short term. But government is about to open up a huge floodgate of cash that will buy a lot of kinds of things GE makes (like 5 million dollar turbines).
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Re: Wells Fargo

Postby Sarvis » Thu Apr 09, 2009 1:32 pm

Sarvis wrote:
Ragorn wrote:I woke up this morning, saw the huge upswing in financials, and jammed the SELL SELL SELL button at 9:30:06 until my order went through. Picked up a 10.3% profit off the financial ETF I picked up last week, and I'm glad I sold when I did... it's down 3% since this morning already.

Thinking about throwing some cash into an UltraShort ETF and hoping the earnings are bad... but undecided. What do you think, kiryan?


WFC Reports a profit 5 minutes after your post convinces me it's time to sell, and their stock price starts going back up.

And you wonder why I never listen to you? ;)


Holy Crap! It went up $4 overnight: http://www.google.com/finance?q=NYSE:WFC

I blame you Ragorn. I would have almost doubled my money if I'd waited until today. :(
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Re: Wells Fargo

Postby Ragorn » Thu Apr 09, 2009 3:13 pm

Stock investment is a game of risk and reward. You could have put your money into Wells Fargo and doubled it, or you could have put it into AIG and lost 90%. Remember those two ETFs I was talking about a couple days ago? I was seriously considering buying into the bear ETF (the one that predicts the market will fall). If I had done that last night, I would have woken up a thousand dollars poorer today.

My advice is never to use the phrase "if I had only" when looking at your investments. Sometimes there are poker hands where 7-2 offsuit really does beat pocket Aces... but you can't see it happen and then say "next time I'm going all in on 7-2." You have to play strong all the time, manage your risks, and try to avoid getting impulsive when you miss the opportunity for a big score.
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Re: Wells Fargo

Postby Sarvis » Thu Apr 09, 2009 3:26 pm

Ragorn wrote:and try to avoid getting impulsive


Yeah. All kidding aside, that's probably going to be a problem for me...
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Re: Wells Fargo

Postby Corth » Thu Apr 09, 2009 3:30 pm

Heheh, Ragorn. I bought the ultrashort financial ETF (SKF) yesterday, and I'm down like 13% overnight. When it comes to actually timing the market, I'm a great contrarian indicator. Just do the opposite of me and in the short term you'll do quite well.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Wells Fargo

Postby Sarvis » Thu Apr 09, 2009 3:39 pm

Corth wrote:Heheh, Ragorn. I bought the ultrashort financial ETF (SKF) yesterday, and I'm down like 13% overnight. When it comes to actually timing the market, I'm a great contrarian indicator. Just do the opposite of me and in the short term you'll do quite well.


Can you start letting us know what you're doing? ;)
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Re: Wells Fargo

Postby Corth » Thu Apr 09, 2009 4:23 pm

Sure thing. I don't make many moves, but when i do they almost always go against me in the short term. You can make some serious money fading me. Just don't hold too long - I make money in the medium and long term.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Wells Fargo

Postby kiryan » Thu Apr 09, 2009 4:44 pm

http://money.cnn.com/2009/04/09/news/co ... tm?cnn=yes

Wells Fargo predicts a $3 billion profit. Up 32% today. Theres that profit I was expecting. They specifically mention Wachovia working "better than expected".

I am still worried about banks. Loosening the rules on mark to market are ... a transparency disaster which affects invester confidence (assuming you're an investor and not a stock gambler). Also, I think I read that 13% of prime mortgages are delinquent now. This is way higher than any of the banks expected when they wrote the loans. They were expecting 3-4% I believe. This is turning "good prime" mortgages into "toxic assets" and now that makes me worry about Wells Fargo more.

With the economy continuing to shed jobs... These numbers can only get worse. If prime loans are going bad at 3x the expected rate, I don't know how "safe" Wells Fargo is. They set aside another 1.3 billion for loan losses. They set aside 5 billion about 2 quarters ago and said all our losses will come out of this 5 billion. Now I'm unclear if this is a new 1.3 billion or an additional. I suspect its an additional.

You also need to think about what the future "banking business model" will look like. We may have a massive restructuring of banking business (partly through regulation) that will put a crimp on their traditional profit centers (loans and credit cards and fee income). How much is a business worth that is pushed into being a tool of the government to manipulate the markets with little opportunity for profit?

I'd continue to hold Wells... but I'd probably watch the next 7 days real closely and sell out if they drop. We could get some banks reporting bad losses which would probably drag Wells down too (for no intrinsically good reason). I'd then look for an opportunity to buy back in at a low.

If you sell out, you are betting against a lot of "hope" in the marketplace that things are turning around this summer. Don't underestimate hope, its an extremely powerful market force. This could be the rally that leads us out of the recession simply on the back of hope and the market typically rally's a quarter or 2 before the recession "ends". The numbers out there are bad, but companies cut hard and fast and the government is acting swiftly (compared to other countries). At some point you have to expect that business succeed in dropping production below demand (whether its services or products). I don't see how this can go on for more than 2 more quarters... and if it does... will anything matter? Selling out at a small low could cost you a great position on a major advancement over the next 4 quarters.
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Re: Wells Fargo

Postby Sarvis » Thu Apr 09, 2009 8:14 pm

Question about stop-loss orders:

I've seen the prices of stocks change pretty drastically overnight (like WFC last night) and I'm wondering if a stop-loss order would still trigger at the price you set when something like that happens? Basically that first stock I bought a few months ago is finally above the price I bought it for, and I'm wondering if it's a good idea to set a stop-loss at a price at or just above what I paid... but worrying that it could drop drastically overnight.
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Re: Wells Fargo

Postby kiryan » Thu Apr 09, 2009 11:52 pm

Your stop loss is triggered by the sale of other people's stock below your stop loss level. You are basically telling your broker to take your shares and go sell them immediately for whatever he can get. I'm not sure how stop loss works with overnight stuff... since they aren't official. The orders come in and queue up so you can kind of get an idea where the stock is going, but its the situation where people in China say sell for any price, people in Japan say buy at X price and the sell orders come in first pushign the price way down before the Japan orders come in buoying the price. It just depends on timing...

Lets say you owned Enron and it was trading at .50 cents after the whole disaster and during the bankruptcy... on the day the bankruptcy court decided that bond/stock holders would retain no equity... those stocks became literally worthless. Of course the bankruptcy wasn't final yet, but basically on that very instant they were worth 0... if your stoploss was 40 cents, how would your stock get sold for 40 cents?

There do always seem to be people who days later were still buying Enron stock for 4 or 5 cents (despite people who understand bankruptcy knowing they were worthless). Most of not sure exactly what they thought was going to happen, but I suppose someone could've come in and offered to buy Enron before the bankruptcy was completed and they could've maybe made a killing... but basically they were throwing their money away even at 1 cent.

Brokers bemoaned the electronic brokerage houses because they make buy and sell fairly instant. Brokers used to smooth the markets out a bit by not immediately posting a sell if they had a buy coming in. They would handle it slower and not take it out to the market. This smoothed out the price fluctuations especially during short duration "panics". If you had a nasty rumour going around you might get an avalanche of sells but if you could hold it off 5 minutes for a news conference the buys would come in and even it out some.

I'm not an expert on stoploss. I'm still learning the nuances of trading vs investing.
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Re: Wells Fargo

Postby Ragorn » Fri Apr 10, 2009 4:05 am

I pushed into FAZ (the bear ETF) right before close today at $11.00. I'm hoping that the huge upswing today will be followed up by some profit-taking overnight and tomorrow, and I'll be able to squeeze a couple percentage points on the pullback.

Of course, tomorrow could be another red-letter day, and I could lose a bunch of money. I'm a little nervous tonight. This might be more risk exposure than I'm comfortable with...
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Re: Wells Fargo

Postby Sarvis » Fri Apr 10, 2009 3:27 pm

Ragorn wrote:I pushed into FAZ (the bear ETF) right before close today at $11.00. I'm hoping that the huge upswing today will be followed up by some profit-taking overnight and tomorrow, and I'll be able to squeeze a couple percentage points on the pullback.

Of course, tomorrow could be another red-letter day, and I could lose a bunch of money. I'm a little nervous tonight. This might be more risk exposure than I'm comfortable with...


Err... I wouldn't worry about today, markets are closed. :P
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