Trader Talk

Financials: It Could Have Been Worse, But Will It Get Better?

It could have been worse. Wachovia'shorrible earnings report,along with a dividend cut and a $7 b capital raising effort, dropped many financials two to six percent or more, with small regional banks that have significant real estate exposure particularly hard hit.

While the largest financials, like JP Morgan ,Merrill ,  and Bank of America , were not hurt as badly, they still declined; they have been down now for five days in a row ahead of their earnings this week. Bottom line: the Street is anticipating poor results, and Wachovia has only confirmed that the earnings estimates, while dramatically lower than a couple months ago, are still too high.

Wachovia also confirmed that there will likely be little good news this quarter:

--Deteriorating credit quality spreads to auto, credit cards?
--Weak revenue growth
--Capital markets weak
--Reserve building

Will anybody report an improvement? Bears are openly skeptical. They point to JP Morgan's comments that home equity continued to see deterioration, and our parent GE noting that the end of March got worse.

What to do? The answer to every question (what to buy? is my job secure? what is the meaning of life) seems to be, "Buy Potash." And oil exploration stocks. Both of these groups (agricultural commodities, exploration and production) again hit new highs today.

Questions?  Comments?