Should we be bullish about financials?

When you flip on CNBC, they tell us we should. But I am not so sure about that. Accounting 101 and 102 would tell you that the write-offs and write-downs are two different types of losses. More importantly, when you look at the sentiment, especially for companies like MER, it seems as though the invisible hand (i.e. inside pumpers and dumpers) are moving this stock back and fourth. Could the news get any worse? No, we already know what is going on. Could the debt to income ratio continue to increase? Yes. But why would that be important, right? I mean, it is all about chart reading, not fundamentals; right? Bullshit. I am going to valuate the broker section and perhaps give you a little information on who is undervalued and who is overvalued. There is a simple way of doing this and it allows gives you a pretty good picture, especially if you want to act fast.

Key Analytic Tools

First and foremost, there are many key tools to look at when looking at financials. I would first like to see what the average P/E is. I would think that the average P/E would be 10 for this sector. Given the EPS, this would be relatively simple to look at.

Goldman Sachs: This is traded at 8.9 P/E. GS’s earnings per share are 21.30 per share. If you were to multiply the EPS x the P/E, you would get the fair value of the stock. That would be around 213.00 give or take. Since it is trading at 190.00 per share, that is a nice gain in the short or long run, so I think that it is worth an under valued rating.

Lehman Brothers: LEH has a 7.64 P/E. Their current earnings per share are 6.10. If you were to multiply the average EPS x the P/E, you would get around $61.00 per share. Given the fact that we are not certain of LEH full exposure to the sub-prime mess, I would put a hold on this. But, if their numbers are consistent for the next two quarters and the P/E doesn’t rise, but the earnings per share does, I would place this in the buy category.

Merrill Lynch: MER amazes me, maybe I am missing something, but this stock is not even worth the paper it is printed on. MER P/E is traded on a Forward P/E (Which means the can not even calculate this number until 12/09, meaning that this number is guesswork or as I call it Wall Street Horse Shit) of 9.43. The EPS is amazing! It is -14.23 per share. So basically, this stock has no value, it has not book value. I think this is a strong sell. Stay away until these numbers flip. This stock is overvalued.


Morgan Stanley: Well, as you may already know, this pig needs to pop! First, it is traded at a P/E ratio of 26.20. Its EPS is only 1.92. Given the multiple of 10, the stock is really only worth $19.20. Given that it is traded at $ 50 dollars per share, any bad news would cause a sell of. Stay away! This stock is overvalued.

JP Morgan: This is in the same boat as Morgan Stanley, although investing in this company is a bit more realistic. The P/E is roughly 12.72 and the earning per share are 3.71. Given the average P/E of 10 and the EPS of 3.71, this stock should be traded right around $37.00. But it is not, it is traded at $47.00. Therefore, I think this stock is overvalued.

I am able to deduce that there is nothing to be bullish about in this sector; as a matter of fact it is probably one of the worst performing sectors on the market. Be aware and be ware.

Calling on CNBC News catalysts to be fired! Bring Some Honest People in! This will be the key to Ending the Recession!


“Come on now”, that is what I tell myself every time I turn on that damn channel. “Are they telling the truth?” I find myself asking that same question as well. Anyone with a formal education in finance and/or accounting is able to sit there and pick holes in everything they are saying. It is not hard to do, especially when they are telling you to BUY MER and to NOT BUY GOOG, and if they are wrong, they switch it around the next day and pretend they never gave such ill-advisement. A simple way of looking at this wayward thinking is that MER has NO book value and Google does. MER did not profit anything in 2007 and lost all profits from 2005 and 2006. Google has profited and continues to profit. It makes you wonder, how much do these analysts have vested in their current interests? One could say it is a lot. Because of this misguided analyses, the consumer is now losing the greenbacks that could put back in the economy. This loss hurts in many more ways then one, not only is the cash not going back into the economy but it cannot even be invested into something else.

I know, anyone can take it or leave it, which is the power that every trader has. But that is just the problem, we should be taught to be investors, not traders. I think there is a huge difference between Jim Cramer and Macke type of money versus Warren Buffet type of money. First, it was how it is earned. CNBC boys and girls get paid to pump hype, hence there salaries and large portfolios. Warren Buffet actually makes his living off of investing. The point I am trying to say is, the common man has been tricked into the thinking that the stock market is the largest casino, when inherently, the stock market should be an income, investment tool. We have to remember as investors, not traders, that CNBC is full of shit. They have their agenda and we have ours. We like stable growth, not a swing up and down loss. Most people do not even know how to trade in the environment. A word of advice; do your homework, seriously. Look at what they are saying versus reality. You will find yourself in a better boat and able to sleep tonight. Turn off your TV and crack open the Intelligent Investor. Here you will find the truth, not hype, of how to successfully grow your portfolio!

Senior Manipulation and his Girl Friend Full of Shit

I know! (MER) is scaring the shit out me too. I mean since when does a stock ever go up when the reports show that this is a loser, I mean a big loser. But to the great ability of my esteemed colleagues, I find it only appropriate to take a closer look at MER. Lets remove the hype and get down to the core.

Key Analytic Tools

There are a number of key analytic statistics that warrant looking at; the first would what I call the price bounce. Basically, this stock is hovering over its low and came screaming down from its high of 95. I tend to think there is a ton more to lose here and that it’s low should be around 28.50. Everyone knows though that the big boys will not let this happen. The P/E is what gets me, it is -3.8. Basically, it is not earning enough to pay back any of its loans, let alone stand in the market. SO, basically if the stock market would crash tomorrow, you would end up owing (technically) if you held onto this stock as there is no, I mean, no par value. Its beta is 1.53, which means it can take a path of its own, like today.

Key Fundamentals

Well, this is horseshit too. I mean look at it; P/E -3.8, Price/Sales 0.7, Price/Book 1.3. The kicker is price to cash flow, which is 0.0. Again, 0.0! They probably need to read the article, “How to get cash flow to really flow”. That is the beginner’s investment guide at Wharton. The RTO is -2.1 and climbing, the current book value is 34.1 and the institution selling is as close as institutional buying which we lead me to think the insiders are pumping and dumping, as you can see with the radical price variance.

Key Ratios (In the long term, not short term)

CVAD: Very Bearish

OBV: Very Bearish

Price Break: Very Bearish

(RSI): In between days

My Investor Hat:

Well if you bought the April 18th puts at a strike price of 45.00 or below you are fucked. Sorry, that is the way it is. The powers that be will not let you take a profit from their ignorant, misguided investment styles. May and June, that remains to be seen, but I feel a little more love in those months. As for the long term, are you fucking kidding me? There is no long term growth for sometime here as we cannot even get MER to give us what their real write-downs, write-offs, and total losses are. I am sorry bulls, but this stock is a huge pile of steamy cow dung.