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- What Citi Is Doing
- Why This Was A Different Sell-Off
- Trader Voices Growing: Break Up Citi
- Trouble With Stocks: Lost Identity
- The Doomsday Scenario For Automakers
- Money Manager Peter Schiff Had It Right In 2006
- Traders Expecting Market Rise At Today's End
- Why There's No Market Rally
- Guidance Is Now A Tricky Business
- Out with Cox, in with Uptick Rule
- Pops & Drops: Hewlett-Packard, JP Morgan & Air Wagoner
- Mad Money Green Week: Owens Corning
- Fast & Furious: It's All About Soup
- Web Extra: The Trade on Walmart and RIMM
- Chartology: Grossly Oversold and Favoring the Upside
- The "Armageddon" Gameplan
- What's Next for Citigroup?
- What to Expect From a Geithner-led Treasury
- Global Markets Want Catalysts For Buying This Week
- Economic Team Obama: Will It Help Settle Markets?
- American, Asian Leaders Push Free Trade To End Crisis
- Citigroup Talks, But Nothing 'Walks' To Stabilize
- Soros: More Money Needed For U.S. Bailout
- HP Earnings: How Much Will "Hurt" From Economy?
- Obama Warns On Economy: Works On Stimulus Plan
- Citigroup's Ills May Signal Market Isn't Near Bottom
- US Inflation Bonds Hit by Deflation, May Recover
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We will start earnings in earnest tomorrow as banks like US Bancorp [USB
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]report, along with Intel [INTC
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]and Johnson & Johnson.[JNJ
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] Banks are oversold and cheap by historical standards, and while a few that report decent numbers will definitely bounce, it is unlikely to eliminate worries over more capital raising.
There's additional worries, as now many are concerned with deterioration in other parts of the banks' portfolios, like credit cards, auto loans and commercial real estate.
The reason these banks are continuing to see selling is that the Street is now taking down estimates for the second half of the year AND 2009.
The failure of IndyMac[IMB
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], as well as the continued willingness to sell into any rally in financials, put pressure on regional banks, many of which were down double digits today.
President Bush's lifting of the Executive Order banning offshore drilling, as well as the usual trend toward staying long energy stocks, lifted E&P and oil exploration stocks today.
The stocks moving today are the ones that make sense: National Oilwell[NOV
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] (makes components for oil rigs) and U.S. drillers like Transocean[RIG
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], Diamond Offshore[DO
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], and Noble[NBL
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]. Large oil service companies like Schlumberger [SLB
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]are also strong.
Here's two problems:
1) Fadel Gheit at Oppenheimer, as well as others, have pointed out that the cycle time for any discoveries is at least 3-5 years. In other words, in the best case scenario we will not see oil for at least 3 years.
2) Most stocks already trading at high multiples; for example E&P companies like EOG [EOG
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]are trading at 12.8 times forward earnings; Chesapeake [CHK
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]at 16 times forward earnings.
A company like Exxon[XOM
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]? Only 8 times forward earnings, in fact Exxon is down 10 percent this year, while the E&P and oil service stocks are killing. Why? Because energy stock traders only go to Exxon when oil drops, as a safe investment.
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