It has been about a year since Lehman Brothers failed and this financial crisis started, and it has hit many of the banks hard including Bank of American (NYSE: BAC), Citigroup (NYSE: C) and America International Group (NYSE: AIG).

There has been one thing that has been bugged me in the coverage of it since then. Frequently, reporters use words like unprecedented or unparalleled to describe it. That is false! Financial crises, panics, crashes, bubbles, and bank failures are really about a dime a dozen.

Continue reading Are we going to crash again?

Are we going to crash again? originally appeared on BloggingStocks on Mon, 14 Sep 2009 14:20:00 EST. Please see our terms for use of feeds.

This week saw the Dow Jones Industrial Average register its worst losses ever, extending October's reputation as a bad-news month for U.S. stocks. With banks failing domestically and abroad, and Iceland -- Iceland? -- on the verge of national bankruptcy, it's hard not to feel panicky about the state of the market.

In fact, not even market professionals are immune. On a routine visit to my dentist earlier this week, the good doctor informed me my blood pressure is high (yes, he's a very thorough dentist). My first response was, "Have you seen the market lately?"

It then occurred to me how much worse my hypertension might be if I didn't have the wisdom of market veterans to rely on each day at the office. With this in mind, I decided to survey a few of of my learned colleagues here at Schaeffer's Investment Research to see what advice they could offer you in the face of this unprecedented market turmoil.

Ryan Detrick, our senior technical strategist, notes that "It's all about a lack of confidence." (In light of the week's roller-coaster Dow ride, this seems to be the case for both bulls and bears alike.) Detrick explains that it's simple economic physics at work: "When you see banks going under in a matter of days, no one trusts anyone else to lend to them. This, of course, leads to a huge economic slowdown and in a very quick fashion."

However, he says, U.S. investors can at least indulge in a bit of schadenfreude. "The reality of the situation is, Europe is probably in worse shape than the U.S.," observes Detrick. "It seems like nearly every day Europe is bailing out another bank. We've had crises before, but this is the first one in our generation that has spread throughout the globe."

So, with panic sweeping the known universe, what's a trader to do? "Don't panic" seems like obvious advice, but our resident blogger and senior equities analyst, Nick Perry, finds that a bit trite. "I've lost count of how many times I've been told that 'now is not the time to panic,'" he says. "This bothers me for two reasons. One, is there ever really a time to panic? Two, it's like telling someone who's on fire to 'think cool thoughts.' In other words, it doesn't help."

Continue reading Don't panic!, and other words of wisdom from seasoned market vets

Don't panic!, and other words of wisdom from seasoned market vets originally appeared on BloggingStocks on Thu, 09 Oct 2008 11:30:00 EST. Please see our terms for use of feeds.

The free-fall in the shares of Citigroup Inc (NYSE: C) have been breathtaking. I've been thinking of picking up some -- but, then, somehow the stock goes down even further.

Yes, it's usually not a good idea to catch a falling knife.

But have investors overdone things?

Perhaps so -- at least according to a piece in Barron's [a paid publication].

Keep in mind that Saudi Prince Alwaleed bin Talal, the biggest individual shareholder in Citi, is a bull. And he's been an investor since the early 1990s (a time when things looked bleak for Citi).

Basically, he thinks investors are in the panic mode. And, no doubt, this could be a big opportunity -- especially for long-term investors.

Interestingly enough, the Prince is also upbeat on Citi's diversification model (often called a global "financial supermarket").

To get some more perspective on things, I actually talked to a marketing/pricing expert, Rafi Mohammed. He is the author of The Art of Pricing and a consultant to major companies.

According to him:

Continue reading Barron's: Banking on a Citi comeback?

Barron's: Banking on a Citi comeback? originally appeared on BloggingStocks on Sat, 10 Nov 2007 20:10:00 EST. Please see our terms for use of feeds.

Volatility Index S&P 500 Options-VIX up 6.30 to 36.97; 10-day average is 26.78

E-Trade (NASDAQ: ETFC) put volume & volatility at Panic levels on sell-off. ETFC is recently down $3.28 to $10.60. SBSH said on 8/12 "Disclosure in 10-Q short on substance from our viewpoint. Mgmt provided minimal new information on the composition of its $28 billion mortgage portfolio."
ETFC call option volume of 37,882 contracts compares to put volume of 87,399 contracts. ETFC September option implied volatility of 210 is above its 26-week average of 37 according to Track Data, suggesting large price fluctuations.

Countrywide Financial - (NYSE: CFC) put volume & volatility Spike; indicating Crisis. CFC, a home mortgage lender, is recently down $4.18 to $17.13. CFC announced "it has supplemented its funding liquidity position by drawing on an $11.5 billion credit facility." Moody's Investors Services downgraded CFC rating to Baa3. CFC call option volume of 204,765 contracts compares to put volume of 412,286 contracts. CFC September option implied volatility of 210 is above its 26-week average of 56 according to Track Data, indicating larger price fluctuations.

Continue reading Options update: Options indicate Elevated risk

Options update: Options indicate Elevated risk originally appeared on BloggingStocks on Thu, 16 Aug 2007 16:45:00 EST. Please see our terms for use of feeds.