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- The Retail Mind Game
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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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POPULAR TRADER TALK POSTS
- Stocks Lurking Near New Highs Again
- Risk Trade Is Back On
- This Week's Biggest Story: The Dollar
- Corporate Issuance Continues at Torrid Pace
- The Bernanke Dollar Bounce & Gross Says Forget About Rate Hike
- Colgate Really Sparkles After Hours
- Light Volume Has Traders Complaining
- Gold Shatters Another Record
- Have Retailers Reached Their Limits?
- The Retail Mind Game
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