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Bank stocks slipped this week with big news rocking the sector. Perhaps the biggest bombshell exploded on Wednesday’s Fast Money when CNBC’s Charlie Gasparino broke the news that Bank of America CEO Ken Lewis had decided to resign.
Then on Friday widely followed analyst Meredith Whitney wrote an opinion column for the Wall Street Journal in which she said, "Anyone counting on a meaningful economic recovery will be greatly dissappointed. How do I know? I follow credit, and credit is being denied at an accelerating pace...I believe that we are only in the early stages of the second half of the credit cycle. I expect another $1.5 trillion of credit card lines to be removed from the system by the end of 2010."
How should you trade bank stocks going forward? For insights we turned to Christopher Whalen, Institutional Risk Analytics managing director.
He told us the best thing to do is stay on the sidelines though the end of the year. “Banks can not do well when the economy is shrinking,” he says. “I think all of the money-center banks will be downsizing dramatically and they’re going to have to raise cash.”
And he adds, “Frankly, I think Bank of America [BAC
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] could be back in the arms of the government by the middle of next year.”
I tell my clients if you’ve got to own financials only look at righteous names such as Bank of Hawaii [BOH
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], Westamerica [WABC
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], Cullen/Frost [CFR
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], Northern Trust [NTRS
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] or Bank of New York [BK
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].
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Trader disclosure: On October 2, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (C) Calls; Najarian Owns (FFIV) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (INTC) And Is Short (INTC) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (PEP) Call Spread; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (CSCO), (MSFT), (USO); Finerma's Firm And Finerman Own (WFC) Preferred Shares; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (UNG); Finerman's Firm Owns (BDX); Finerman's Firm Is Short (TLT); Finerman's Firm Owns (BAC), (BAC) Calls, (BAC) Preferred; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (WMT); Finerman's Firm Is Short (XRT); Finerman's Firm Is Short (BWA); Finerman's Firm Is Short (USO); Seymour Owns (ABV); Seygem Asset Management Is Short (PBR); Seymour Owns (EWZ); Seygem Asset Management Owns Lukoil Shares
GE Is The Parent Company Of CNBC
NBC Universal Is The Parent Company Of CNBC
For Brian Stutland
Stutland Equities Is A Market Maker In S&P 500
Stutland Equities Is A Market Maker In VIX, Is Short Near Term Volatility, Is Long
Far Term Volatility, Is Long VIX
Stutland Equities Is A Market Maker In (BAC)
Stutland Owns (BAC) And Is Long (BAC) Time Spread
Stutland Is Short (SPY)
Stutland Equities Is A Market Maker In Long S&P 500 Volatility
Stutland Equities Is A Market Maker In VIX Short Near Term Volatility And Long
Far Term Volatility
Stutland Is Short (SPY)
For Zachary Karabell
Karabell Owns (VALE)
Data is a real-time snapshot *Data is delayed at least 15 minutes