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Stocks ripped higher on the last day of a shortened trading week after Wells Fargo [WFX
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] released record profit forecasts, leading a rally among other financials during today's session.
The financial giant stated they would easily exceed Q1 earnings estimate with over $3B in profits and a TE ratio of 1.1% -- beating the Obama administration's "stress test benchmark" -- and also announcing that its takeover of Wachovia was proceeding better than expected.
The Fast Money gang is joined once again by Whitney Tilson of T2 Partner, who only two weeks ago appeared on the show and advised going long on Wells Fargo -- sound advice, it now seems. Today he says that today's news was " unexpected" but his firm are "neither buying or selling" on it.
On that prior appearance on "Fast Money," he had predicted 8-10% pre-tax, pre-provision earnings and they came in today right on the mark at 9.2%.
But the "shocker" was Wells Fargo's $3.3B of charge-offs -- Tilson's firm expected at least $8B on a run rate with Wachovia's charge-offs tacked on, but there appears to have been a "one quarter benefit" in which Wells applied its charge-off methodology to Wachovia.
Don't get too excited however, Tilson warns. WFX is still looking at a number of losses over the next few years. It should be able to earn its way out of too much trouble, but "anyone baselining at $3.3B per quarter is crazy."
Macke, always the cynic, questions Tilson on whether today's rhetoric of Wells beating Obbama's stress test actually means anything of if it's just "noise." Tilson: "I don't think Wells Fargo is going to need to be bailed out under any scenario."
Tilson also points at his other favorite stock, American Express [AXP
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], which also jumped today. "Same story there," he says. "Blue chip companies that are earning a ton of money are going to be able to earn their way out of problems."
He warns against "low quality" financials, of which there are still many, but, "you can make money on the good ones."
- Your First Move For Wednesday November 10th
- Web Extra: The Best Trades In Tech
- Pops & Drops: UPS, Electronic Arts...
- Take Your Position: Retail Earnings
- The Return of Dividend Investing?
- Should You Believe in this Rally?
- Trading in this Technicals-Driven Market
- HALFTIME REPORT: How to Trade Senator Dodd's Financial Reforms
- Your First Move For Tuesday November 9th
- Web Extra: The Dow's Only Loser
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Trader disclosure: On Apr 9th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WFC), (AAPL), (WMT), (GS), (GE); Seymour Owns (AAPL), (AA), (BAC), (BX), (EEM), (FCX), (MSFT), (RIO); Seymour's Firm Owns (PBR); Najarian Owns (AXP), (BIIB) Calls, (DELL), (HUM) Calls, (JPM), (NTRS), (TTWO), (VAR), (TXT), (WFC); Finerman's Firm Is Short (IJR), (MDY), (SPY), (USO), (IWM), (BAC), (BBT); Finerman's Firm Owns (BAC) Preferred, (AXP), (MSFT), (RIG), (WFC) Preferred, (UNH); Finerman Owns (BAC) Preferred; Finerman's Firm Is Short (BBT), (WFC)
Data is a real-time snapshot *Data is delayed at least 15 minutes