Fast Money: Rapid Recap - The first and only official show synopsis
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Bove: 26 Banks May Need To Raise More Capital
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However, many domestic banks traded higher after Goldman Sachs said Citigroup [C Loading... ()
], Bank of America [BAC
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], JP Morgan [JPM
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] and others US financials should avoid a major hit because they have a lot less direct exposure to Dubai than their European counter-parts.What must you know to trade banks in the wake of Dubai? For insights we turned to widely followed analyst Dick Bove of Rochdale Securities.
Bove on Dubai
I think it’s clear the worst is not behind us, says Bove. If Dubai gets away with what they’re doing – which is in essence not paying back on a number of loans -- will Greece do the same? Will Lithuania do the same? Will Turkey?
In other words, will a series of other emerging nations continue to pay their debt or will they take the route that Dubai is taking?
And the other thing we don’t know is -- who is the counter-party to all this debt. Also when Dubai starts selling assets to satisfy the debt, they will likely sell trophy real estate. Will that depress the price of other real estate?
In other words, we don’t know the true cost of the Dubai failure and I don’t think we’ll like what we see.
The one upside for our nation is that American banks lost a fortune in foreign investment in 1990 and since then they just don't do it anymore.
But there's a much bigger issue facing American banks.
Bove on New Requirements
I’m concerned that the goverment wants to increase capital requirements for banks, he tells Fast Money -- specifically Tier 1 increases in loan loss provisions.
I’ve taken a look at the top 30 banks in the country by assets size and there are only 4 that don’t need to raise capital if we go to a 12% capital ratio.
They are Citigroup [C
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], State Street [STT
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], Northern Trust [NTRS
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] and First Horizon [FHN
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].
(In other words, Bove is concerned that most banks will have to raise more capital to meet the new criteria - and they'll likely do it by issuing more stock.)
What's the trade?
In general, my feeling is stay away from bank stocks at least until the beginning of the new year, Bove concludes.
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Trader disclosure: On November 30th, 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); Finerman's Firm Owns (PLCE), (MSFT), (WMT), (PDE), (RIG), (TGT); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Calls; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Is Short (IJR), (IWM), (MDY), (SPY), (USO), (UNG); Najarian Owns (AAPL) Call Spread; Najarian Owns (BRCD) & (BRCD) Calls; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (DELL) Calls; Najarian Owns (DE) Call Spread; Najarian Owns (FCX) Call Spread; Najarian Owns (INTC) & (INTC) Calls; Najarian Owns (UAUA) Call Spread; Terranova Owns (SU), (GOOG), (AAPL)
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