|
Stock
|
Daily return (April 9, 2009)*
|
|
Bank of America (NYSE: BAC)
|
28%
|
|
JPMorgan Chase (NYSE: JPM)
|
12%
|
|
US Bancorp (NYSE: USB)
|
13%
|
|
Citigroup (NYSE: C)
|
10%
|
|
SPDRS ETF (NYSE: SPY)
|
3%
|
*At approximately 2:27 p.m. ET. Source: Yahoo! Finance.
Of course, buying the shares once the news is out isn’t a good plan
if you’re trying to beat the market (in the short term, anyway).
Although no one could have known that Wells Fargo would post a record
quarter, there were some elements to suggest that results would be
good, and possibly excellent.
Less than a month ago, in “Buffett Likes Banks,” I relayed some of the positive remarks the chairman of Berkshire Hathaway (NYSE: BRK-A) made about the banking sector in a widely covered three-hour appearance on CNBC. During the interview, Buffett said:
The banks are getting their money very cheaply,
deposits are coming in, spreads have never been wider, all the new
business they're doing is terrific. They will earn their way out of it
[in the] overwhelming number of cases.
Buffett likes banks
It should be clear that when a bank can borrow at near-zero cost and
its marginal competitors have been eliminated (it’s no longer
fashionable to offer mortgage loans on uneconomic terms), that can only
be described as a positive operating environment. Those factors are
borne out in today’s earnings pre-release.
Short-term spike vs. long-term value
If
you are a short-term trader, don’t bother acting on the news. If you
are a long-term investor, Wells Fargo’s announcement could still have
some value in prompting you to re-think your expectations for bank
earnings over the next couple of years; indeed, it’s not clear that the
best-run banks are fully valued, even after today’s rally -- although
they’re certainly closer than they were a month ago.
Copyright © 2009 Universal Press Syndicate.
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