Pros Say: Banks Will Boom — Beware Hyperinflation!
The U.S. government's plan to inject $20 billion into Citigroup seemed to drive a stock market rally Monday — but failed to reassure analysts and investors overall. CNBC canvassed the experts for their outlooks going forward. Despite the uncertainty, one strategist says financials will lead the recovery — and another sees hyperinflation as the real danger ahead.
Keep the Tax Breaks — Keep the Rally
Stanford Financial Group's Greg Valliere said that if President-elect Obama says he'll wait until the Bush tax cuts expire at the end of 2010, it'd be a tremendous encouragement to the markets. He sees former Treasury Secretary Larry Summers as the economic power behind the throne, with Obama's Treasury Secretary-designate Tim Geithner as the detail man.
Financials Led Us Into This Mess; They'll Lead Us Out
The government has come up with a clever arsenal of tools to help financial institutions, said Jim Hardesty of Hardesty Capital Management. What is needed most is a consistent approach. JPMorgan Chase and Wells Fargo seem to be the big banks doing the best; perhaps a plan should be modeled on them.
'Citigroup Common is Toast'
Christopher Whalen of Institutional Risk Analytics said the deal to save Citigroup means that the financial giant's common stock has effectively been written off: "The government is continuing to pretend they're just like any investor. And they're not." He said the government will have to break up Citi and sell its pieces. Whalen expects JPMorgan Chase to face a similar fate in coming months.
Gold Rally Signals Hyperinflation Threat (!)
A big rally in the price of gold prompted Peak Trading's Charlie Nedoss to say there are already fears of hyperinflation from all the money that is now being pumped into the market. Boris Schlossberg of GFT Forex said that's a story for late 2009, but not right now.
Citi's Pandit Must Fall on His Sword
Former Northfork Bancorp CEO John Kanas said that politically, there is no way that Vikram Pandit can survive as CEO of Citigroup. But he pointed out that Pandit inherited "damaged goods." Kanas suggested that Citigroup preferred stock be converted to common stock.
Still Bullish on Commodity-Intensive MLPs
Robert Longfield of the CSG Research Advisory Board thinks high-yield master limited partnerships, which many investors have been forced to sell, are good opportunities to position for a turnaround. He notes that they're not directly pegged to commodity prices, although they have suffered indirectly.
Buffett's Berkshire to Reveal Derivatives Info
It was reported that billionaire investor Warren Buffett plans to divulge far more about Berkshire Hathaway's derivative positions. In an email sent by his assistant, Buffett says investors will be informed of "all aspects of valuation" for the contracts, in data to be included in the company's annual report early next year.
Former AIG CEO Sees 'Tragedy'
Maurice "Hank" Greenberg, now chairman and CEO of CV Starr, said the government is being much more indulgent with banks than it is with AIG, forcing punitive interest rates on his previous company while giving banks a pass. He foresees AIG being broken up rather than regaining financial health.
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