WED. OCT. 15- Nationalizing The Banks

While it is stunning that the U.S. government has chosen to spend a chunk of its $700 billion grant on nationalizing many of the private banks by buying preferred shares in the firms, it is hardly unprecedented. The U.S. has a culture centered around laissez-faire capitalism in which ostensibly ‘anything goes.’ However, in the last century, the U.S. has nationalized railways, coal mines, steel mills, and taken a majority holding in certain banks when it deemed necessary. In 1917, in the name of national defense, the Feds seized the railroads for the purpose of making sure goods moved smoothly during World I; the bondholders and stockholders were paid quite nicely and the railroads were re-privatized in 1920. In 1952, President Truman seized 88 steel mills throughout the US amid worries of strikes although this was eventually rule unconstitutional by the Supreme Court. Most relevantly, in 1984, Continental Illinois was ‘deemed to big to fail‘ out of fear of a massive systemic breakdown. ‘Nationalization’ is a word certainly not popular in the U.S. as it (accurately) alludes to socialistic tendencies. The problem is two-fold- first, where does one draw the line? Should GM be nationalized? Second, the moral hazard issue- why should, say, MS get money pumped into it yet LEH was allowed to fail? Furthermore, it puts the finances of many at risk due to the sins of a few. However, rather than merely bailing banks/bad loans out as was originally envisioned, what is going on here is that the Fed is flooding the system with money and putting the name of Uncle Sam behind it. Ergo, by taking the ownership stake, it buys a lot of time as well as provides a backstop (along with the additional measures) to allow the banks time to heal. The hope is that the time that is bought will allow the banking system to become restore. The option of doing nothing is the one we faced last Friday morning: a complete meltdown of the system (i.e. Iceland as discussed yesterday). So, is this the right thing? It is not for anyone to say at Protrading Network and the taste of forced nationalization is a bitter one. However, nobody doing anything will keep the credit lockdown in place and further intensify for that matter. Yet, we do not want to follow in the zombie bank schematic that Japan managed to implement inthe 1990's by artifically keeping dead banks alive only to watch them fail when the monetary life support was removed. In the interim, we as day traders MUST pay attention in detail to what is going on because each headline can move the markets thus why so much time has spent in this space on the ongoing crisis.



Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified


Good-

INTC- warned on revenues, but stock bounced anyway…more evidence of the fact that numbers this quarter probably will not matter per blog entry last week

DNA- missed on quarter with in-line guidance, but up amid speculation its deal to close imminently

ALTR- good earnings

CSX- neutral earnings (which should theoretically be good)

TIXC- huge rally into close

HBAN- very strong all day yesterday

KO- very good earnings

JPM- good earnings; short thru unch if market weakens assuming as it is up in pre-open

Bad-

EYE- very weak yesterday; if it gets down there, short 6.30s at yesterday’s low

ES- weak yesterday after warning; looking to short 5.30ish if it gets there

LLTC- weak earnings guidance

GHM- in midst of reversal after recent run-up

ATPG- massive reversal from 14 to 10 yesterday

ATVI- reversal from 15 ½ to 13

NIHD – reversal from 30 ½ to 25 ½

LEA- broke to new lows yesterday; if move continues today, look for A-B-A2 to downside particularly through yesterday’s low around 3.75

Earnings-

WED OCT 15 BEF

ABT .77/7.35B 1.04/8.21B 3.28/29.62B 3.66/32.09B

AMR -1.50/6.31B -.95/5.89B -4.94/24.03B -.43/24.23B

ASML ? ? ? ?

DAL .01/5.67B -.27/4.99B -.61/20.91B .86/21.31B

DRH .33/159M .47/224M 1.47/696M 1.33/688M

JPM -.08/16.72B .57/19.92B 1.73/72.97B 3.42/85.02B

KO .77/8.60B .64/8.03B 3.08/33.22B 3.36/35.40B

MI .23/648M .27/658M -.47/2.58B 1.50/2.71B

PJC -.16/94M .04/100M -.66/384M 1.65/446M

STJ .57/1.08B .62/1.16B 2.32/4.38B 2.62/4.80B

VCP -.16/376M .33/370M 1.20/1.45B 1.73/1.86B

WFC ,44/11.07B .48/11.35B 2.07/44.33B 2.30/46.92B

WED OCT 15 AFT

AF .42/127M .45/133M 1.57/482M 1.88/553M

CCK .67/2.37B .22/2.02B 1.67/8.45B 1.98/8.86B

CX .70/5.90B .42/5.49B 2.29/23.03B 2.13/22.42B

EBAY .41/2.16B .49/2.46B 1.75/9.00B 1.92/10.01B

KMP .59/3.41B .59/3.48B 2.47/12.75B 2.72/14.69B

LSTR .59/702M .60/717M 2.19/2.72B 2.49/2.96B

NVLS .04/246M .06/251M .32/1.07B .67/1.10B

PLCM .35/279M .40/293M 1.47/1.10B 1.71/1.23B

STLD 1.12/2.63B .98/2.62B 3.86/9.37B 3.97/10.08B

VMI 1.15/466M 1.26/482M 4.96/1.87B 5.86/2.11B

XLNX .37/483M .39/494M 1.53/1.97B 1.72/2.11B




Good luck today.

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