Yesterday's Major League All-Star Game went into extra innings (15 total) before the American League won 4 to 3, earning the home field advantage when the World Series rolls around in October. Yesterday was also the day I called the bottom of our economic woes (see Will Bush throw a change-up at Yankee Stadium?).Calling the bottom should not be confused with the end of the pain. It could get worse but I see signs of the turn, and today the market, for the moment, is up. Oil prices are down, as I write, to $132 per barrel and I do not think we will be seeing $200 oil any time soon, as some have opined.
Today's Wells Fargo (NYSE: WFC) earnings report set things off in the right direction. Wells Fargo: Beating expectations by my colleague Steven Halpern will give you the details, but the highlights are lower earnings, a 10% increase in the dividend yield, and a tolerable and understandable charge for bad loans and to increase reserves.
If Bush's change-up marks the bottom, then WFC is the slugger that hit the ball back over the fence. Can one report from one bank make a difference? Yes it can, if people read it as a sign of things to come. At the same time, the capitulation I describe in IndyMac (IMB) turns to dust is another sign that we may be at the turning point.
Most of the bank deposits that are being withdrawn from the weaker banks are moving to the stronger ones. It is not much of a stretch to think that Wells Fargo, along with J. P. Morgan Chase (NYSE: JPM), Charles Schwab (NASDAQ: SCHW) (yes, they do banking), U.S. Bancorp (NYSE: USB) and even Bank of America (NYSE: BAC), which has to work through its acquisition of Countrywide Savings, will soon report very significant increases in their deposits.
There will also be fewer competitors for all types of loans and bank services and I expect profit margins will be higher too. Wells Fargo closed yesterday at $20.51 is currently trading up by $4.64, passing through $25.00 this morning. UPDATE: closing price $27.23, up $6.72 (32.76%)
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own(ed) shares of IMB and do own WFC.
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Reader Comments (Page 1 of 1)
7-16-2008 @ 4:29PM
nickerson said...
Let's give Bush a little credit. The Congress with people like Sen Reid and Sen Boxer are trying to turn this nation into a basket case like on the left coast. Get the message people and start drilling and putting up plants to process this oil on closed bases and get off this stupid Gore talk that were going to hell in a hand basket.
7-16-2008 @ 4:37PM
Sheldon L said...
Nick, thanks for the note.
All for drilling, and to the degree that Dems do not support it, they are asleep. Not sure Bush was the leader on this. Kinda late in the game for him.
My post on the subject:
Start drilling offshore: ATW, DO, ESV, HERO, NE, PDE, RDC, RIG
http://www.bloggingstocks.com/2008/06/25/start-drilling-offshore-atw-do-esv-hero-ne-pde-rdc-rig/