Bad is Good

We’ve reached the stage of this rally where bad is good. It started innocently enough in early March when Citigroup (NYSE:C) shocked the world by saying it was making money. A few earnings surprises have helped it along. But now, good news is running out, and to fill the void, investors are saying that bad news is actually good. 

Big Banks: They All Fail

I figured Citigroup (NYSE:C) would be asked to raise more cash to insulate it against further losses. But when I read that the Treasury will raise reserve requirements for all 19 banks subjected to the Treasury’s "stress tests," it suddenly made sense.

Swine Flu Impacts the Rally

Somebody’s lying. Bank of America CEO Ken Lewis is on the verge of getting sacked because he failed to tell BAC shareholders that he was buying Merrill Lynch for $29 billion while it was losing $15 billion in the fourth quarter of 2008. The revelation that Merrill paid out $3.6 billion in bonuses during that miserable quarter really got shareholders upset.

Another Oil “Super-Spike” Coming

*****As you know, we are watching oil prices as a measure of economic health. Today, it’s reported that March existing home sales fell by a bigger than expected 3%. And new claims for unemployment benefits rose a bit more than expected. 
Consequently, oil prices remain below $50 a barrel. 

Three Top Picks from Options Expert Bryan Bottarelli

*****I received a very topical question from a Daily Profit reader … 
Do you think that Obama is a legitimate "for the ordinary people" real deal, or is he just another cleverly marketed pretty face representing the interests of the ruling class? If you prefer call them the rich, the wealthy, the owners, the bosses … whatever works for you. In the end they are the same people. I deliberately did not label them as capitalists because I believe that they are corrupt capitalists, scamming the game in their favor even though their performance is proven to be mediocre. In real capitalism, ability and performance matter. As in, let the failed banks, brokerages, etc fail and allow the strong to take them over. When I read about these recent government led bailouts it becomes clear that we have been set up and conned into taking the hit for the unworthy managers, making it possible – inevitable – for the rich to triumph regardless of their audacious arrogance and incompetence.  This is not what I understand capitalism to be – and it stinks!

Where the S&P 500 is headed next

Treasury Secretary Tim Geithner is having his "Lucy" moment today. Yes, he’s got "a lot of explaining to do …" 
He’s speaking before Congress today to answer questions as to how the Public-Private Investment Program will actually remove toxic assets and protect taxpayer money at the same time. Also up for explanation is how the remaining $110 billion in TARP money is enough to fund any future bank rescues. 
I don’t envy Geithner one bit. That’s because there’s no way he can adequately answer these questions:

Bank Stress Test to Discredit BAC and C Earnings Report?

Banks are getting pounded this morning after Bank of America (NYSE:BAC) handily beat earnings estimates. Analysts were expecting $0.04 in earnings per share; BAC came in with $0.44. 
As I write, BAC shares are down 15%. Now, after Citigroup’s earnings, BAC was expected to beat its number. Are you wondering why investors seem so disappointed at what looks like a solid quarter from a troubled bank?

Earnings Expectations and Toxic Assets

Stocks have marched steadily higher since March 9. The first 10 days or so of the rally was a mad dash, which is how recovery rallies behave. But since the huge up day on March 23, stocks have settled higher. The S&P is now within spitting distance of its 2009 highs.

Builders PHM, CTX, HOV in the News

The saga continues for the homebuilders. Last week, we saw the first steps toward consolidation in this sector when Pulte Homes (NYSE:PHM) bought out Centex (NYSE:CTX). This came on the heels of some slight improvements in existing home sales.  
Even yesterday, a builder sentiment survey showed an improvement among builders. That got investors excited for this morning’s housing starts number. Unfortunately, the optimism was misplaced. Housing starts came in below expectations for March.