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Market Insider with Patti Domm Trader Talk with Bob Pisani


  Tuesday, 23 Sep 2008 | 9:13 AM ET

Earning Power Reduced But So Is Risk--That's Good For Now

Posted By: Bob Pisani

Futures are down slightly, but that has little meaning these days. Many traders feel that yesterday's drop was due to:

1) distortions in price discovery created by the changing short sale rules;

2) the realization that many banks are still undercapitalized.

Still, long-term there are benefits to the wrenching process we are going through. More level-headed traders have noted that earnings power is reduced, but so is risk, and for the moment that is what is important.

Banks and commodity stocks are down pre-open.

Commodity stocks: Rio Tinto down 10 percent, BHP Billiton down 4 percent, most gold stocks down 3 to 5 percent.

Financials: UBS, Credit Suisse, Lloyds and Wachovia down 5 to 8 percent.


1) Oppenheimer bank analyst Meredith Whitney cutting estimates (again!) for Citi, Bank of America, JP Morgan, Wachovia, Wells Fargo. "We believe any government bailout plan has little hope of improving core fundamentals over the near and medium term." Her revised estimates are 50% below consensus for 2008 and 90% below consensus for 2009.

2) GE down a bit pre-open as Merrill Lynch analyst John Inch lowered estimates for 2009 and cut his rating to Neutral. 2009 estimates were lowered $0.20, to $2.22, 2010 estimate declines to $2.48 from $2.65 forecast. Fourth quarter 2008 estimate lowered by 2 cents to 68 cents. He believes GE Commercial Finance and GE Money will each see earnings declines of 15 percent in earnings next year, more than the 10 percent decline he had previously forecast.

    • Paulson, Bernanke to Urge Congress Not to Delay Bailout

3) Railroad giant Union Pacific raised their guidance for the current quarter on lower fuel costs.

4) Home builder Lennar reported earnings roughly in line with expectations, but still not sign of a notable turnaround.

5) Circuit City trading up as the CEO has resigned and gave guidance slightly better than expected.

»Read more
  Monday, 22 Sep 2008 | 4:48 PM ET

Wall Street Facing Less Business, Less Pay, Less Reward

Posted By: Bob Pisani

The despair of Wall Street, redux. Volatility with no volume. That's what we got today. The Dow swung in a 400 POINT RANGE, but volume was about half what it was at the end of last week.

Why? Some said too much uncertainty over the Treasury bill, some said with no short sellers adding liquidity, what do you expect? Others said the reflation trade has added another level of confusion.

The markets may have acted negatively over concern about all the strings Democrats are attaching to the Treasury Department rescue plan, but don't kid yourself: a deal will get done.

Still, don't underestimate what this bill is doing to the psychology on the Street. Most stock traders would be willing to accept more help for homeowners facing foreclosure as part of the bill.

What's left? Some Dems want a stake (warrants) in any company that sells assets to the program. That's a problem. We're selling you the assets, below market price probably, and you still want warrants?

Also an issue: drastically limiting pay for executives. We are probably not just talking about CEOs. We're probably talking about anyone in management. And--as we all know--commercial bank management makes A LOT less than investment bank management.

Bottom line: less business, less pay, less reward. That's what Wall Street management is facing today.

Little wonder some guys are thinking of getting out altogether.

    • Bailout Plan Will Be Drag On Fragile US Economy
    • What Democrats Are Proposing
    • Should Homeowners Be Bailed Out Too? Take Our Poll
    • Never Say Never Again With Too Big To Fail

New from CNBC.com:

- The Dow 30 at a Glance


Questions? Comments? tradertalk@cnbc.com

»Read more
  Monday, 22 Sep 2008 | 2:47 PM ET

Traders Oppose Equity Stake For Government

Posted By: Bob Pisani

Miracle of miracles! Congress appears to be moving quickly on the Treasury bill. Rep. Barney Frank said that Treasury was accepting an equity stake in companies as part of the plan.

Stock traders are almost universally opposed to this idea, but it may have enough momentum to go through.

Two topics dominate trader talk today:

1) the cost of selling assets to Treasury. What's the price? Is all anyone was talking about.

a) good news: mark-to-market losses have already been taken on many mortgage-backed securities, so the losses and write-offs here may be fairly limited.

b) bad news: banks hold many whole loans that have also gone bad. These loans have not been mark-to-market (because they are not required to be) and losses here could be substantial if they were sold to the Treasury, or anyone else, compromising earnings for some time to come.

    • Democrats Push for Major Changes In Rescue Plan
    • What Democrats Are Proposing
    • A $1.8 Trillion Bailout: Where the Money's Going

So will the banks sell? The bet is most will sell their problem assets, because the market may simply force them to do so. If they don't? A repeat of what we saw: rating downgrades, credit default swap disasters, and other issues.

2) the reflation trade--the move up in commodities--is also getting attention midday.

»Read more
  Monday, 22 Sep 2008 | 12:00 PM ET

The Horse-Trading Has Begun

Posted By: Bob Pisani

The Dow dropped about 70 points as Sen. Chris Dodd said Democrats wanted shares (warrants) from companies from whom they would be buying assets.

The Street is asking: if we sell you an asset at a fair market price, why would we give you warrants? Dems will argue, "Wait a minute: if it's such a fair market, why did you need us in the first place? We are facilitating this, and we want something for it."

    • Senate Democrats want pay limits, equity in bailout
    • A $1.8 Trillion Bailout: Where the Money's Going
    • Should Homeowners Be Bailed Out Too? Take Our Poll
»Read more
  Monday, 22 Sep 2008 | 11:16 AM ET

Valuing Assets The Government Is Buying

Posted By: Bob Pisani
For many assets, pricing is already being done, and this is the value of that rule last year that required mark-to-market accounting. We have recently seen marks on many portfolios of CDOs. »Read more
  Monday, 22 Sep 2008 | 9:11 AM ET

Fundamentals Will Again Matter--Soon

Posted By: Bob Pisani

Morgan Stanley popped 14 percent at about 8:30 ET on word that Mitsubishi will buy up to 20 percent of MS.

Regardless, futures are practically unchanged, with many traders noting this morning that hedge fund and mutual fund companies are continuing to see redemptions, and the profit outlook is still poor. As a result, there is debate about how strong buying interest will be here.

Remember, this craziness will eventually subside, and fundamentals will matter again. Soon.

We start the week with several regional banks at or near new highs, including PNC Financials, US Bancorp, BB&T, and Wells Fargo. With the nice pop in prices, don't be surprised if some banks issue new equity or even merge in the next few weeks.

Most financials are trading lower pre-open.


1) The addition of 30 new companies to the list banned from short selling includes one curious choice: General Motors. The reason is that you don't have to be a company that is in the financial business exclusively; you just have to have a majority ownership in a company (subsidiary) that is a bank, savings association, registered broker or deal, insurance company, or something "similar." GMAC fits the bill, apparently. Pretty loose criteria, and it seems there may be many other companies that fit this criteria. GM ip 6 percent pre-open.

Our parent company General Electric, which has also been added to the list, up 3 percent pre-open.

»Read more
  Monday, 22 Sep 2008 | 8:43 AM ET

New Companies On "Short" List Ban

Posted By: Bob Pisani

NYSE-listed companies added to the list as of Monday morning, Sept. 22, 2008:

LG GLG Partners, Inc.

GE General Electric Co.

OCN Ocwen Financial Corporation


GFG Guaranty Financial Group Inc.

MFG Mizuho Financial Group, Inc.

FMR First Mercury Financial Corporation

STC Stewart Information Services Corporation

FCF First Commonwealth Financial Corporation

MTB M&T Bank Corporation

DFS Discover Financial Services

BMO Bank of Montreal

TD Toronto Dominion Bank

CM Canadian Imperial Bank of Commerce

FMD The First Marblehead Corporation

BBV Banco Bilbao Vizcaya SA

CIB BanColombia SA

LM Legg Mason, Inc.

NFP National Financial Partners Corp.

AXP American Express Company

CIT CIT Group Inc.

GM General Motors Corporation

HIG The Hartford Financial Services Group

ADS Alliance Data Systems Corporation

ALD Allied Capital Corporation

RAS RAIT Financial Trust

DRL Doral Financial Corporation

FSR Flagstone Reinsurance Holdings

MCO Moody's Corporation

COF Capital One Financial Corporation

New from CNBC.com:

- The Dow 30 at a Glance


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 19 Sep 2008 | 5:01 PM ET

One Historic Week: Dow Moves 1,000 Points In Two Days!

Posted By: Bob Pisani

For all that, the Dow, S&P, and NASDAQ ended unchanged! (all right, Dow was down 0.3 percent).

We saw the mother of all short coverings at the open, fueled by the government's proposed RTC-type bailout, the ban on short selling in financials, and a quadruple witching expiration.

But after the initial short covering, financials quickly came off their highs. Morgan Stanley,for example, opened near $34 but quickly moved as low as $26 in the first 40 minutes, before trading in the relatively narrow range of $26 to $30, closing at $27.21.

Most other financials also came off their highs at the open and then traded in a fairly narrow range. Result: another day of near-record volume, 9.3 billion shares traded in NYSE listed securities.

In general, traders have been in favor of some kind of "brake" on short selling (bring back the uptick rule, etc.) but they are NOT generally in favor of banning short selling.

New from CNBC.com:

- The Dow 30 at a Glance


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 19 Sep 2008 | 3:18 PM ET

Why Bankers Group Hates Money Market Insurance Plan

Posted By: Bob Pisani

The American Bankers Assocation has objected to the plan to guarantee money market funds on the grounds that it will REDUCE deposits in the nation's banks.

Huh? I just got off the phone with them, here's their reasoning:

1) investment bank money market funds pay higher yields because they are not insured, but now they ARE getting insured;

2) banks have been paying premiums into the FDIC for years -- THEIR money market funds ARE insured and always have been, but their yields are a little lower;

3) investors in bank money market funds may start switching to investment bank money market funds because: a) the yields are higher, and b) there appears to be no limit to the amount of insurance you get.

The ABA thinks this is a threat to their deposit base.

Just one more little effect. Is it worth abandoning the insurance program for this? No, but some oxes are getting gored a little here.

CNBC's Names in the News:

- Morgan Stanley

- General Electric

- Wachovia Bank


Questions? Comments? tradertalk@cnbc.com

»Read more
  Friday, 19 Sep 2008 | 1:11 PM ET

Volume: We Should Pass All-Time Record Of NYSE-Listed Stocks

Posted By: Bob Pisani

What a stew!

Throw into the pot a:

1) ban on short sales in financials, with

2) an announcement of an RTC-type organization to buy the bad debt;

3) sprinkle in a quadruple-witching expiration, and you have a stew of volume and volatility like no one has ever seen.

Record volume: just under 1 billion shares were traded on the NYSE floor in the first half hour of trading today. The previous record was about 808 million shares in the first half hour.

We will almost certainly pass the all-time record volume of 10.2 billion shares of NYSE-listed stocks changing hands, a record which we hit...yesterday!

Specialists saw volume 5 to 20 times normal at the open, depending on the stock. One last stat and I'll go: the Dow moved 1,025 points from its low yesterday to it's high this morning.

New from CNBC.com:

- The Dow 30 at a Glance


Questions? Comments? tradertalk@cnbc.com

»Read more

About Trader Talk with Bob Pisani

  • Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.


  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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