What We're Reading

Who doesn't love the lame duck session?  It's that special time of year when Santa comes early to Wall Street and you too, can benefit.  As one example, outgoing Congressmen and woman who lost during mid terms, tend to throw in the towel (they won't be around next session anyway) and all types of goodies get through the Congressional pipeline which were stalled during the normal session.  This years winners if you're an investor are:

• Banks and insurers.  Congress repealed a portion of Dodd-Frank so that derivatives will now be covered once again by FDIC Insurance, thus lowering the risk to banks and insurers like AIG.*
• Health insurance companies get to keep their special tax breaks.
• Tourist destinations like Las Vegas get their travel promotion subsidies.*
• In a victory for food companies, the legislation even makes federally subsidized school lunches less healthy by allowing companies that provide them to include fewer whole grains. This boosts their profits because junk food is less

And they get to write off over 1/2 of it too.

While the market continues to digest yesterdays' comments from new Fed Chairwoman Janice Yellen that rates will begin to rise possibly as early as six months after tapering is complete (mid-2015 rather than late 2015), banks are definitely yelling pahtay with big gains across the financial sector today.

Even $C (who I normally detest) is attempting to breakout of a beautiful double bottom pattern. 

Like it or not, banks will be more willing to lend in a rising rate environment and let's face it; it's tough to make a buck when you're lending at 3%.  I would imagine this will be good for broker/dealers as well although not shown here.  Now if only we could get Congress to do away with that pesky transaction tax debate.  Life would be wonderful.

Full disclosure; I'm long JPM and loving today's action.

Anyone who knows me, knows I built a career mortgage services...........and that I now detest mortgage bankers.  It's not that they don't offer an invaluable service.  I cannot tell you the countless stories of homeowners who actually wept when informed of their loan's approval, brought me homemade cakes and mailed cards, even at Christmas.  Many returned to me years later when they "moved up" to a larger home or referred their family members directly to me which I felt was an enormous compliment; that they trusted their own son/daughter in my care.  It wasn't the lender they trusted.  It wasn't because we had the lowest rates in town.  It was my ability to package even the most complicated of circumstances, anticipate and document what would be required and steer them through the process with personal service and empathy they deserved.  I rarely made a sales call on a Realtor; maybe twice a year.  My flow was 95% referral and business was good; a fact I am to this day proud of.   It w

I'm asked in chat a lot about this bank or that bank and what my analysis is of them.  My answer is always the same.  I can't analyze, on a fundamental basis, any of the big banks.  I've tried, believe me, I've tried.  Hell, I downloaded the annual report of BAC for 2010, grabbed some irish whiskey, a rosetta stone, and locked myself in a room by myself for the weekend.  I emerged at the end of the weekend bruised, hung over, and with empty bottle in hand.  The bruises were from banging my head against the wall.  The hang over? From trying to wrap my head around the riddle inside a conundrum wrapped up in an enigma that is the financials of Bank of America. 

I have no idea how they make any money. In fact, this is why rumors work so well to take the stock down; nobody understands the balance sheet, so they figure the rumor has a possibilty of truth to it.  As much as I respect some of the "value" guys that are in the name, Bruce Berkowitz to name one, I can tell you that they probably d