B of A, Shut Up and Buy It!
Research for Online Investors

by -John Dalt

4/23/09

The Dow reached 8044 yesterday before selling off in the last hour.  Apple reported good numbers yesterday, reporting profits of $1.33 per share, expectations were for $1.08  Apple gave conservative guidance going forward, but they always do, their routine is to beat down expectations then “beat the street” when they report.  The market discounts this, so there was little surprise.

EBay beat estimates on reduces sales, but the slide was less than expected, signaling success that their effort to overhaul their auction and retail site may be working.

Ken Lewis, CEO of Bank of America, is pushing back on the Treasury and Fed forcing his bank to buy Merrill Lynch. He claims he was told not to disclose any information about the losses at Merrill Lynch. Testifying under oath before the New York AG in February, Lewis says he was pressured not to discuss or disclose the mounting losses at Merrill Lynch, and wanted to back out of the deal, but was told he had to complete the acquisation as failure would “impose a big risk to the financial system.” The threat was that he, and the board, would be replaced at Bank of America if they did not complete the purchase. B of A had received $25 billion in bailout funds, and received another $20 billion to help absorb the losses at Merrill Lynch. The Wall Street Journal broke the news today; you can read a follow up story here.

According to the Financial Times, Fiat is talking to GM about buying GM Europe.  This is while Fiat is also in talks with Chrysler negotiating a 20% stake, which would qualify Chrysler for more government funds.  Sergio Marchionne, CEO of Fiat, says, “Chrysler remains my first and foremost objective.”  Fiat sold two million cars last year; Marchioness’ goal is six million, which he believes market conditions favor.

We got through Earth Day.  I feel better.

Today has been a slow day for trading.  There is a pall over the market; everyone expects the market to back test the gains we have recorded in the last six weeks.  Include me in this group, as I have bought a few ultra inverse ETFs to capitalize on a fall in the market.  I spent the afternoon voting proxies.  The only joy in this exercise is reading Berkshire Hathaway’s Annual Report.  The annual meeting is May 2 in Omaha, I may attend.  If you are going to be there let me know, I would enjoy meeting you.  I hope to be as honest as this statement from the Chairman’s Letter to Shareholders, “During 2008 I did some dumb things in investments.  I made at least one major mistake of commission and several lesser ones that also hurt.”

News came out this afternoon that over one-third of the banks that applied for the TARP program withdrew after congress changed the rules. Today 250 banks consider themselves lucky they did not get involved. It is more difficult to get out of the program now. The Treasury announced their goal is not to own the banks, they will hold the stock in trust and sell over five years, but they still won’t let you repay the loan without their permission.

Tomorrow banks will find out how they did on the “stress tests” that were applied by the Treasury Dept. We do not expect actual results until next week, but should understand how the tests were performed. I’ll bet on a statement that all banks passed, this will probably juice the market. Look for some banks to release statements concerning their reports.  Next week reality will set in, the banks are not in good shape and facing more defaults in the next year. Commercial real estate and low doc loans are hanging over their heads like a storm cloud.

Rumors are swirling that Chrysler may file bankruptcy as soon as next week.

  The President saved the plane, apologized to Chavez, now he is going after the Credit Card Companies.

Super OH! Bama

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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