"Sent you a message on your Facebook acct...you adding to Merrill Lynch (MER - $42.97)? Can't get a read on the big pullback..do the institutional traders know something we dont?"
I'm not adding to MER and I'm actually out of it for a while. My stop loss rule got me out just after I wrote about Thain. (Sadly, I did not apply that same stop loss rule to some other stocks recently).
The institutional traders are selling everything financial. There is nothing special happening with MER that isn't happening with Lehman (LEH - $42.03 ), Goldman (GS - $160.92), Citigroup (C - 20.16), Morgan Stanley (MS - $40.62) and the rest. And if there is I'm not sure what it is. Unless you have really done a lot of research and figured out something special about specific financial companies, I'd rather play the financials using the financials iShare (XLF -23.66) at this point. I'd rather not take the specific risk of any one company at this point. If you believe financials are cheap you might as well buy them all. The fund provides diversification and thus is much less risky. I don't know if any of these firms are going under but I'm sure they are all not. And when they bounce back up they will NEARLY all bounce together.
Three factors will keep the cash register ringing for investment banks: 1. Demographics of baby-boomers saving for retirement. 2. The cheaper dollar, meaning that foreign firms will be on a shopping spree for U.S. companies, which will help M&A advisory. 3. Mortgage portfolios that have been marked to market. When liquidity retuns to this market, portfolios of mortgages will start to show profits.
It would seem that Wall Street also hasn't forgotten that it is the second most regulated industry in the U.S. (after nucular energy) and that it needs to keep track of where its bread is buttered. Banks are betting that the butter will be spread by a Democrat in 2009.
On the next pullback, which I think is coming once all the shorts are done covering, I'll be looking to buy the investment banks cheap again. Look out for U.S. firms like Goldman Sachs (GS - $179.63), Lehman (LEH - $48.65), Morgan Stanley (MS - $49.67) and Merill Lynch (MER - $46.71) to continue to do well. I own the investment banks directly, but rather than pick individuals, the Exchange traded fund (IAI - $39.43) works well as a proxy.
John Thain to Takeover at Merrill: I'm a Buyer Written By: David Neubert 2007-11-14 16:22:24 Well it turns out Joe Capone is wrong after predicting to me months ago that John Thain would run Citigroup after Prince was fired. But he's not that wrong because after watching Thain's interview on CNBC I'm sure he was offered the job and chose Merrill instead.
Knowning that Thain worked in Mortgage Backed Securities at Goldman and the fact that he got to see the books of Merril before he took the job were two factors that made me buy Merrill Lynch (MER - $57.88 close) in the aftermarket today at $58.15. I don't think Thain would have taken the CEO job at Merrill if he didn't figure out that the mortgage positions there are managable.
Merrill Lynch is trading cheap, so I'm getting one of the best private wealth management franchises in the world at a bargain.
Besides, now that I've trimmed my broker exposure a bit, I'm putting it back up with Merrill. Now I feel like I own them all. Might Merrill go down before it goes up? It the absense of further bad news, I'm likely to be a buyer if it does.
Well it turns out Joe Capone is wrong after predicting to me months ago that John Thain would run Citigroup after Prince was fired. But he's not that wrong because after watching Thain's interview on CNBC I'm sure he was offered the job and chose Merrill instead.