Thursday Thump – For the Dollar!

Well this is now officially bad!

I think I may be the last guy left looking for a bottom here as most analysts are looking for retests of the 1/22 lows and most traders are looking for the exits.  As David Fry points out in this S&P chart, investors were just slammed all day long with a "get me out" finish that literally had people screaming.

Yesterday I really felt like the guy in Animal House who stood in front of the crowd saying: "remain calm, all is well" as the crowd ran him over.  Much like Supreme Court Justice Potter Stewart's comment about pornography, I shall not today attempt further to define the kinds of shenanigans I understand to be occurring in the manipulation of the stock market; and perhaps I could never succeed in intelligibly doing so, but I know it when I see it, and I sure saw a lot of it yesterday.

I said to members yesterday afternoon that I couldn't articulate a bullish position based on these truly AWFUL charts but I also couldn't find anything I wanted to go short on.  If there is nothing to go short on and I don't want to go to cash, then I guess I'm a bull!

Trader Mike paints a dire picture of the financials with this chart:

This does indeed look terrible as does pretty much every other chart out there but let's think, just for a second about the undelying premise here.  BAC, for example, wrote down $3Bn last quarter – BUT, they earned $14.9Bn in 2007, INCLUDING THE WRITE DOWN!  In all of 2003 they made $9Bn and for 2000-2003 BAC made $34.1Bn while in 2004-7 they made $66.5B. 

This is not even comparing apples to oranges, this is comparing apples to bananas!

If you want to sell me BAC for the same price it was trading for in 2003 because it had $3Bn, $6Bn, $12Bn in losses based on an event they have hopefully learned a lesson from – FINE, sign me up!  The same goes for C ($60.6Bn vs. $66.6Bn as a 4 year total AFTER $16Bn in write-downs), GS ($11.4Bn  vs. $30Bn) or pretty much any of the other financial institutions that are under fire.  We don't buy companies based on recent losses, we are supposed to examine companies based on future earnings and the future earnings of almost any of the XLF components is UP from here.

On Page A3  of the very, very negative Wall Street Journal yesterday was an article that mentioned that retail sales, the very sales that started this panic in January, were higher in February than estimated.  What's not mentioned, but is clearly evidenced on this chart, is that big box retailers WMT, COST and TGT had an average gain of 9% in total sales from last year.  Now that may seem to be offset by department stores, who lost an average of 3.5% but NOT when you consider that WMT, COST and TGT had over $39Bn in combined sales while the other department stores had less than $4Bn total. 

The 9% sales gains of the big 3 retailers were greater than the TOTAL sales of the other department stores.  That offsets inflation by a wide margin.  So people may be downshifting their buying habits but they are buying more for less.

I'm not saying this is a market cure-all, I'm just saying this is a story that is being missed with all this doom and gloom forecasting and I'm saying that things just may not be as dire as they seem.