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Friday, March 28, 2014

Jim Cramer: Buy Bank of America if We Get Strong Job Numbers Next Week

     Jim is thinking kind of what I'm thinking too. This was a very good week for Bank of America as it aced it's stress test with the Fed and got the ok to raise its dividend-unlike Citigroup who's request was denied. 

      http://finance.yahoo.com/blogs/daily-ticker/-heads-will-roll--at-citigroup-following-the-fed-s-rejection-of-its-capital-plan--belpointe-s-david-nelson-145359847.html

      http://www.fool.com/investing/general/2014/03/28/3-things-that-went-bank-of-americas-way-this-week.aspx

      So if I were going to play it-and with a little cash now, I'm tempted to play-a little bit-this might be a good move: shorting Citi while going long BACr JPM, WFC, or GS as well of course. What I like about BAChough is it's so cheap. It seems to me that whether it's headed up or not, there's little down side-I mean no way does it go anywhere near the levels we saw in 2008. 

     That was my thinking and I'm gratified to see tonight that Cramer is thinking the same thing. He argues that you play BAC if we get a strong jobs number and Sumner's favorite indicator-interst rates-go up. 

      "Jim Cramer discusses the mixed signals that exist in the market regarding what sort of nonfarm payrolls report we will receive next week. He says if we get a strong jobs number, interest rates will rise and investors should buy the banks, a group that's been under pressure with low interest rates. However, if we get a weak number, Cramer recommends looking to stocks like CBS Outdoor, which just became public, REITs like Ventas and utilities like Southern Company and American Electric Power."

     http://www.thestreet.com/_yahoo/video/12559364/cramer-buy-bank-of-america-if-we-get-a-strong-jobs-number.html?cm_ven=YAHOOV&cm_cat=FREE&cm_ite=NA&s=1

     I'm tempted to go conservative and buy maybe 100 shares of BAC. Cramer argues to wait till Frday's  report but of course I'm tempted to jump in on Monday. I like the idea of buying BAC and then buying a lot of puts in Citi. I'm thinking they may drop about 20 percent in the next few months-if you're an investor who wants dividends C is what has nothing to offer you. Also this suggests C's relative weakness vs. these other names. 

     The other thing that interests me is these IPOs. It's been a great year for IPOs. 

     http://finance.yahoo.com/news/top-10-ipos-watch-2014-112450645.html

      The omnipresent Candy Crush IPO went badly the first day-the symbol is KING-but then Facebook started out rough and now it's at $71. 

      http://finance.yahoo.com/blogs/daily-ticker/ipo-market-bubble-145920132.html

      Overall, I'm skeptical that there's a big downside move in the market in the near future. However, even if there is, something like BAC is more or less indemnified in downside risk for the foreseeable future. This is just a very different world than the one I used to trade in back in 2008. Then there was big money to make with short term trading. Back then the guys on Fast Money talked about the end of Buy and Hold  It seemed true then yet since the first big surge after the bottom was reached in the market in March, 2009 the market hasn't really had the volatility you need to really make fast money. At least for me-my strategy was to buy lots of puts in the banks in 2008 which worked very well for a time till I got to aggressive-the end came for me really the day the market hit bottom.

      I still wanted to think that there was more downside and got wiped out when the banks rallied. Now buying up stocks and holding them at least for the short term is the best strategy. It's not going to show the kind of returns my other strategy did-where I'd see returns of 300 or 400 percent but it at least has little downside. BAC is unlikely to go down much from here and likely at least in the next few years should clear $20 and perhaps $30. This is a stock that has moved very slowly since around May 2009. When it gets a new handle-like its recently hit the $17 dollar amount-it tends to stay there for 3 months or more before getting to say $18 though it's possible the new good news about the stress tests and the dividends will change that. 

6 comments:

  1. If you're relying on Jim Cramer for financial advice, I'd rethink the position. Are you relying on the the stress tests being valid? I'd give that a second thought too. My guess is that assets are overstated and liabilities are understated. Remember the suspension of mark to market? I think there are much better opportunities out there, Mike. If your instinct is still bullish on BAC, go ahead. Just don't go all 12 piece chicken on it. :)

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  2. BAC has been pretty consistent over the last 3 or years. I seem to remember you being pessimistic about them in the past too. I really don't see much down side in them.

    If you buy the stock at $17 I mean how much downside can there really be? Seriously how low do you see it going? I think that if you bought say 100 at this price-$1,700 total price buy next hear at this time it would surely be $28 to 30-if it continues the pace it's been growing at. These tests might convince the market that these stocks-outside of C are now a buy.

    Overall, the bear case is the same year after year. Obviously the market wont go up forever but I don't see it going anywhere near the lows of early 2009. I do think maybe Citi is a short here-if you think the Fed tests are softballs, then how bad must C be to fail its request to raise the dividend.

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  3. The question is how do you see BAC growing their business? You've got to have a viable product to produce returns on capital investment. Right? The stock is up 134% since April '09. It was just over 5 and change in Nov. '11. That might have been the time to buy. Now, not so much. I see the stock moving sideways, with a slight uptick, but no where near the price level you're talking about. I still think the economy is sluggish, and it only takes a minor correction to take away a substantial amount of the "gains" since '09. In 2008 it was a 36 dollar stock. I know, that's when I sold it. (Just after BAC made the brilliant move and bought Countrywide.) A lot of that dead weight is still on the balance sheet now. I have zero faith in the people that ruined this once great company. And most of them are still there. But hey, it's your money.

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  4. Gotta say I agree with Nanute Mike. I wouldn't touch any bank stocks with a twenty foot pole

    What I am thinking about doing is getting into Mike Normans currency trading course
    Yes it is pure speculative gambling and not investing at all but there are so many people who are just idiots when it comes to how currency and banking operations work that it's almost necessary for someone to take their money
    I think you should check it out.

    Once my son is out of grad school and squared away with his life I might take some of my savings and take the course

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  5. No problem Nanute. I'm just saying though that you've always been skeptical-when I mentioned it to you a few years ago you said basically the same thing. If it moves sideways then I've lost nothing. I mean if I buy it at $17 and next year its at the same point as this year then I've gained nothing but also lost nothing.

    That's my point-it may or may not continue to climb but there is very little downside. I mean flat is still about the same return as you get in a bank. I also said I see C as a short. I mean at $47 it's already fallen 6 percent since the Fed said no on increasing its dividend. If it falls to even $44 in the next few weeks there could be real money to be made shorting it.

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    Replies
    1. You're right Mike. At least I'm consistent. The C play would be a better bet. Just my opinion. Not giving investment advice.

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