by Larry Levin
Government bean counters and Wall Street analysts have been telling us there is no inflation, look at the core, they say. Not until headline inflation spills over into the core will it matter. Until then investors should ignore it, they say. Today is further evidence that headline inflation is not only spilling over, it is backed up and flooding the house of cards. What planet do these analysts and BLS statisticians live on anyhow? Cause it ain't Earth.
If you are invested in a company like FedEx (there are others) and chose to ignore skyrocketing fuel costs, while listening to the resident inflation-apologist at your Wall Street brokerage firm, you played a dangerous game of chicken" and lost. FDX is down about 31% from its high in 2007; however, 20% of that drop came within the last 6-weeks. Of course the most recent drop came today with Fed's 4th quarter loss, which was blamed on rising fuel costs.
So how does your analyst square his statements that headline inflation is irrelevant, with the reality that fuel costs are indeed spreading to your brokerage account? Or to put a fine point on it, it is costing you money at the pump, at the grocery store, and now in your brokerage account. The next time that analyst tells you headline inflation is irrelevant until it reaches the core you should tell him to either pay you for your losses in FDX or SHUT UP!
Stocks were also driven lower by the banking sector today yes, the banking sector. I know it sounds like a repeat, but today was a little different. Instead of hearing bad news from one of the behemoth investment banks, today's news was came from a regional bank: the cancerous credit/housing crisis has spread. If you are surprised by this, you must be living on the same planet as the BLS statisticians, Wall Street portfolio managers, and that annoying Pollyanna neighbor down the block. Man is that guy irritating!
Shares of Fifth Third Bancorp plummeted nearly 18% at one point this morning, selling off in the wake of the company announcing a reduction in its dividend and plan to raise $2 billion in new capital from convertible preferred shares and the sale of non-core assets. Officials at the bank said they do not expect conditions to improve any time soon. Wow, now that's an inspiring statement to make to us potential suckers, er ahh, potential investors for the $2-billion offering.
In a similar vein, Goldman Sachs analysts on Tuesday predicted U.S. banks may need to raise an additional $65 billion in capital as they grapple with further write-downs and asset depreciation. And these banks better get that money while the suckers last; excuse me again, while there are enough investors out there with money to throw around. Then again, maybe these suckers are brilliant for they may own the entire US banking system before we know it.
Since I mentioned analysts earlier, I have to mention this guy. An analyst named Peter Winter (I didn't read which bank employed this thought-challenged fellow) cut his price target to $16 from $25 and downgraded Fifth Third to market perform from outperform. Ahhhahahahahaaaa, he just DOWNGRADED this pig from outperform to market perform today. Oh my God, no wonder these banks are in so much trouble! Take a look at the FITB chart and tell me if a market outperform should have been held on this stock until today? Downgrading a stock from market outperform rating after it LOST 87% of its value is moronic and downright sickening.
Since that is probably closer to a bottom than a place to sell out, I would fire his ass tomorrow morning. Then again, I would have recommended shorting FITB months ago, so firing this guy should go without saying.
Listen to analysts at your own peril: they don't give a damn about you or your money. If they did, how could Mr. Winter and 99% of his peers be so incompetent?
Real Time Trading Signals*for
Trade Date: 6/18/08
E-Mini S&P Trades*
(before fees and commissions):
1) B/away sell @ 8:35am at 1343.75 = -2.00 (1 lot)
2) OTF sell @ 10:10am at 1342.50 = +1.50 (1 lot)
3) Algorithm trades (7) combined total +8.00
E-Mini Russell Trades*
(before fees and commissions):
1) Buy @ 8:46am at 733.8 = -.1 (1 lot)
2) Buy @ 8:51am at 732.5 = b/e (1 lot) -$10
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