Monday, 05 January 2009 23:00

Amid the rally, I look at the Doo Doo 32 and their receipt of the TARP

As I sit back and look at the market go through its bear rally, performing a myriad of what if scenarios on my various bearish positions and generating cash where feasible by selling off profits, I revisited the Doo Doo 32 and a few big name banks. I say to myself, "This year will not be as easy as last year, now that nearly everybody should be aware of the extent of the problem, and the violent bear market rally/option spreads that makes shorting and put buying very expensive." Then I listen to talking heads in the media and the "everbull", long only professionals. I ponder, "Hmm, maybe there is a little low hanging fruit to be had after all". To be sure, we will have to sit through this bear market rally which has to hurt anybody not in all cash or hedged, and there seems to be a willingness of traders to push this one relatively far. The FACTS still remain though, if the stocks of the BoomBustBlog bear targets move much farther, this could very well be another repeat of last year's triple digit performance. Yes, it's risky, but risk is the price of reward, isn't it.

With that disclaimer espoused, let's look at how accurate my longer term thesis have fared. The graph below was taken from the Doo Doo 32 article.

In order to determine how likely the aforementioned event
is, let's create a metric by which Reggie Middleton measures risk. This metric
will be units of risky or non-performing assets as a percentage of statutory
equity. This, of course, can be refined by removing goodwill, Bullsh1t, and the
various accounting pollutants to plain old economic earnings, but less just
start with this. When applying Reggie's Risk Metric to the graphs above, we can identify more banks.


Looking at risk from this perspective, we not only see who has no
clothes on when the tide goes out, but also how well (un)endowed they
are in addition.

Now, compare the companies from the Doo Doo 32 article and the allocation of the TARP program below (sans the companies that have already failed or have been driven into other firms), and you will see that I am on to something. After all, the Doo Doo 32 article was penned on

The credit crisis is (not) waning

Middleton says don't believe Paulson: S&L crisis 2.0, bank failure

Allocation of TARP Capital Injections ($ billions) 100% = $250

Others (201 in total count)

$ 48


$ 45


$ 40

Bank of America/Merrill Lynch/CountryWide

$ 25

JP Morgan Chase/Bear Stearns/WaMu

$ 25

Wells Fargo

$ 25

Godlman Sachs

$ 10

Morgan Stanley

$ 10


$ 8

US Bancorp

$ 7

Sun Trust

$ 5


$ 3

Now "the worst is behind us" Secretary Paulson wants to claim the balance of the TARP that is not already spent. WHY??? Well let's look at it visually.

Big on this list are the recipients of much of my research from early last year. Never let it be said that I don't have a clue about what's going on.

Well, I have some other thoughts on certain financial institutions, the first of which is available below (with at least one other following). Subscribers can view my opinion here. I trust you will find the inconsistencies that I have found to be quite interesting. You will also be wise to beware of those "name brands" that are "too big to fail"! Keep the recent post, "
The banking backdrop for 2009 " in mind as you read the following:

pdf JP Morgan Forensic Highlights 2009-01-06 19:18:08 133.34 Kb

Last modified on Monday, 05 January 2009 23:00


  • Comment Link zahir karim Monday, 12 January 2009 19:28 posted by zahir karim

    JPM has moved up it's earnings release a week early from Jan 21 to this week Jan 15th.
    For all you pros in the Big Apple my question is why ?

    Some have speculated that the news is so bad that JPM wants the news to be buried in the Inauguration hype - would love to hear from you guys on your thoughts....

  • Comment Link DAVE Hoffman Monday, 12 January 2009 17:12 posted by DAVE Hoffman

    Looking like another leg down is upon us.

    Principal Fincl (PFG) downgraded by Argus from Buy to Hold.

    Big declines in real estate investment trusts and life insurers socked the broader financial sector Monday and drove the broad gauge of financial stocks in the S&P 500 down more than 5%.

    Shares of the two largest U.S. mall operators, General Growth Properties (GGP) and Developers Diversified (DDR), fell about 20%.

    Life insurer Hartford Financial (HIG) fell almost 18% and was the top decliner in a sector with broad losses Monday.

    Standard & Poor's said Monday that the sector faces continued headwinds from the worst economy in decades and maintained its negative outlook on life insurers.

    Along with Hartford, shares of Genworth (GNW), Lincoln National (LNC), Prudential (PRU) and Principal Financial (PFG) all fell.

  • Comment Link DAVE Hoffman Wednesday, 07 January 2009 12:08 posted by DAVE Hoffman

    By Marshall Eckblad
    NEW YORK (Dow Jones)--A banking analyst at Sandler O'Neill + Partners said on Wednesday that JPMorgan Chase & Co. (JPM:$29.06,00$-0.82,00-2.74%) will see a fourth-quarter loss of 10 cents a share. The analyst, Jeff Harte, had previously estimated the New York bank would post positive earnings of 16 cents a share.
    JPMorgan stock recently traded down 86 cents, or 2.8%, to $29.02. The bank is expected to report its fourth-quarter and full-year results on Jan. 21.
    A spokesman at JPMorgan said the bank declined to comment.
    Harte dropped his earnings forecast for JPMorgan after concluding the bank will have write-downs - or unrealized losses on assets - of $2.5 billion. Harte had previously expected write-downs of $1.4 billion at JPMorgan.
    "The primary driver of our estimate reduction is capital market-related losses in the investment bank," Harte said in a note to investors.
    As a result, Harte expects JPMorgan's trading revenue will all but evaporate in the fourth quarter, even though the bank recorded trading revenue of $2.5 billion in the this year's third quarter.
    "We expect JPM's trading revenue to decline from $2.5 billion in (the third quarter) to $73 million" in the fourth quarter, Harte said.
    Harte currently rates JPMorgan shares as hold, assigning a 12-month price target of $33.
    -By Marshall Eckblad, Dow Jones Newswires; 201-938-4306; marshall.eckblad@

  • Comment Link w emerson Wednesday, 07 January 2009 12:07 posted by w emerson

    KeyCorp, parent of Key Bank, got $2.5 billion from the government.

  • Comment Link DAVE Hoffman Wednesday, 07 January 2009 10:45 posted by DAVE Hoffman

    Sandeler O'Neill Analyst Forecasts 4Q Loss For JPMorgan

  • Comment Link DAVE Hoffman Wednesday, 07 January 2009 09:33 posted by DAVE Hoffman

    Oppenheimer's Meredith Whitney believes banks will "once again" need to raise fresh capital in 2009 given the correlation between credit-rating downgrades and risk weighted capital requirements as well as the devaluation of housing related assets. Oppenheimer also expects greater than $40B in write-downs and provisions from the banks stock under their coverage in 2009. The firm continues to remain cautious on the sector.

  • Comment Link Kip Coon Wednesday, 07 January 2009 08:40 posted by Kip Coon

    FYI - 87,000 WFC February PUT options traded YESTERDAY. It's beginning to look like a market run up - force up - prior to earnings and then the take down begins. Multiple financials have been accumulating large PUT option interest in February. Keep an eye on the chess game being played in Gold. The central bankers are not having an easy time keeping the gold price down since most of the futures holders wanted physical delivery. I would not be surprised to see the central bankers flood the gold market with sales to drive the price down - ending on or by FRIDAY.

  • Comment Link ray shafie Wednesday, 07 January 2009 03:07 posted by ray shafie

    when are we going to see the after shock Ma doff and are any of the doo doo list going to get spanked by their exposure his ponze scheme

  • Comment Link timobrien Tuesday, 06 January 2009 22:30 posted by timobrien

    At some point, the government is going to have to allow the big banks to fail. C & JPM seem like natural candidates for nationalization.

  • Comment Link timobrien Tuesday, 06 January 2009 22:29 posted by timobrien

    The government has been taking extraordinary steps to reinflate the market. From buying MBS, to allowing RIETS to pay dividends with stock if they need the cash, and most recently potentially allowing banks to go back 5 years instead of 2 with their deferred tax assets. When the banks report at the end of the month, investors will be reminded of just how bad the environment is.

    thanks for the insights into JPM-much appreciated.

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