Trader Talk

Deutsche Bank: A 'Remarkable' Rebound


Deutsche Bank held its annual news conference in Frankfurt this morning. Despite taking hits from the credit markets, they are sticking to their 2008 earnings targetsbecause of robust earnings in other business areas, capital gains, and tax benefits.

This is rather remarkable: despite taking a eur 2.2 billion charge for various losses, third quarter profits will still exceed the profits from the third quarter a year ago. Chief Executive Josef Ackerman also gave said there many opportunities to profit after the current difficulties end.

Here is a good example of what the bulls have been saying about the nature of global banks: their revenues and profits are increasingly diversified, so that losses--even significant losses in one area (in this case, fixed income), are offset by gains elsewhere.

Much of course depends on the global economy continuing to grow, which provides opportunities for the Deutsche Banks of the world to invest--and profit. Deutsche Bank is up about 3% pre-open.

Not a great morning for chip companies. Intel and AMD are both down fractionally this morning after Morgan Stanley initiated coverage with an Underweight rating on concerns regarding overcapacity, which may result in lower prices. There is some debate about this: recall yesterday JP Morgan raised estimates on Intel, noting specifically the global strength in the PC market. Both unit demand and the pricing environment are stronger than expected in Q3, JP Morgan noted.

Micron is down 4% after the chip company announced they had a net loss for the quarter due to declining prices for its memory chips, though the loss was within the expected range. Price fluctuations are a never-ending problem for Micron.

Technicians are again noting the weak link of the rally of the last two weeks (which has seen the Dow move 600 points) has been demand: volume has been comparatively anemic. It is one of the axioms of technical analysis that rallies based on falling Supply rather than rising Demand are usually considered suspicious (as Lowry, the dean of technical analysis services, has pointed out many times in the last week).

Questions?  Comments?