Posted by Jack “Stock Guruh” Lee
Bank of America fundamentals, Symbol BAC: P/E 16.9, P.E.G. 2.137, 1.9% above the moving 50 day average. Last traded 30.70 4:12PM. Up 1.72%. High of 31.50 low of 30.26 on a vol of 55,466,859 -14.25% decrease.
The short term prognosis here is guarded due to a pronounced negative banking environment in 08-09 and 10.
In real estate (where you should be watching for clues on financials) it seems FHA loans are suddenly in vogue and that’s not a good sign because we’ve gone from a time of ultra-liberal lending that helped to create the RE bubble to this overly conservative, almost curmudgeonly attitude toward lending (FHA loans). As a consequence of the now famous bursting bubble we have overly strict lending followed up by unhelp[ful government bailouts for all sorts of people who didn’t deserve being bailed out! This will extend the real estate market woes and we are probably looking at a downturn of about 15-18% in home prices over the next 12 months!
No life-line to be found in retail sales either. Wal-Mart Stores Inc, the world’s largest retailer, said its July sales at U.S. stores open at least a year, or same-store sales, rose 3%, missing Wall Street expectations for a gain of 3.4%. Overall the July retail numbers were sluggest.
Financial mismanagement goes a long way toward diminishing public esteem for political leaders. It’s certainly been the undoing of the GOP recently!
SIDE NOTE: And the liberals on the City Council (Chico, CA) want to bet that a sales tax hike will save our city from financial ruin? Fat chance…guess none of our liberals read anything to do with financial news or they might understand sales are slowing. Taxing sales only slows them more. This is basic economics.
Now lets consider last month’s 17 year high inflation numbers. That’s causes the feds to limit things like money supply and the prime rate tends to get adjusted upwardly. Here’s another doosey… every state in the union is carrying some sort of budget deficit! OK, now you see what I mean about a “negative banking environment”.
California lawmakers are telling us the State is now at least 15 billion in the hole and anonymous political insiders are saying that number is really closer to 20 billion! So goes CA so goes the nation…eventually. So goes our financial institutions too.
California’s unemployment rate just rose to 7.3% in July. Nearly 15,000 jobs were lost last month because of ongoing slowdowns in construction, real estate and financial services….there it is again folks, financial services…banking.
“The depth and magnitude of the job losses are accelerating, clearly,” said Esmael Adibi, director of economic research at Chapman University in Orange.
Our national debt is the worst it’s been in over a decade. Each of us now owes $31,516.09 and the debt grows at $1.82 billion a day! That’s a big load for our grand kids to carry isn’t it? “View image”
The last report showed the US dollar is shoring up against the Euro which will negatively impact our overseas trade deficit. Meanwhile US companies are being pressured by globalization to do more and more outsourcing to stay competitive. (See unemployment numbers above) But, it’s almost comical that nobody notices that CEO wages are now up over 821 times minimum wage and that’s despite the recent minimum wage increase! CEO’s are virtually pillaging their company coffers and we won’t get financials back on track until that gets straightened out.
And yes, it still gets even worse. That piddly $600 tax rebate aka stimulus package, well it had zero impact and more of it this time went into savings than the last time we tried it… and it didn’t work back then either. Yes, we should have known it wouldn’t work because history said it wouildn’t,, but that didn’t stop the GOP from trying. More feel good economics I guess. Remember that quote, “Financial mismanagement goes a long way toward diminishing public esteem for political leaders.” Those words are going to be the epitaph for many a lawmaker in the coming elections!
The overseas picture doesn’t look much healthy either. Europe is teetering on recession and I could write pages about that, but for now we want to focus on what is directly going to affect Bank of America stock (et al financials). So let me just say don’t look for any rainbows in Europe until we get our mess straightened out first.
Consumers are not spending enough to keep the economy healthy and they won’t be spending enough while their hard earned wages are being consumed by absurdly high energy costs and threatened by layoffs! A lot of belt tightening going on and some big retail chains are falling on hard times, like the east coast “Steve and Barry’s” clothing retailer with 276 stores…Chapt. 11. Sharper Image has also filed for Chapter 11 and there are rumors about Circuit City being on shaky legs.
This is why I say Bank of America stock was more rationally priced when it was around $20 just a few weeks ago than it is today at $30. A short play makes more sense to me than going long, unless you would like to hold BAC until about 2012?
I called the upswing on financials over at Clearstation and I bought in almost at the bottom as I suggested BAC would probably level out around 33. Now I’m seeing that our #1 leading economic indicator (RE) is still strongly pointing south with few reasons to expect any course corrections soon. The law of economics always prevails and right now is not the time to being betting BAC is going to be making great strides. If in the long shot chance it does get a spike up it sure won’t be because the fundamentals were right…it will only be because of irrational speculation and that will make the next drop even more pronounced!
Akendall at Clearstation says…
“In the housing recession of 1970 to 1974 Bac retested its low in 1974.
In the housing recession of 1987 to 1990 Bac retested its low in 1990.
In the recent housing recession of 1998 Bac retested its low in 2000 due to a recession.
In the next two years, Bac will retest its low of 18.44 due to an economic recession.
Currently we are in the 6th year of an economic expansion and economic expansions never last 8 years, never. The 8th year economic expansions collapsed under LBJ, Reagan and Clinton. In 2010 BAC should retest its low of 18.44.
Normally foreclosures go through a double correction, first due to housing being over extented, then a second wave of foreclosures due to an economic recession. Wait for the second wave or your money will be tied up in BAC for two years with only the dividends.”