Wells, JP, BOFA, and more GE.

Wells Fargo did what it had to today. They finally cut their dividend by 85%. This will save the bank roughly $5 Billion. I still think the stock is a dud going forward because of the losses at Wachovia. I have stated in the past that Wells needs to raise anywhere from $30 to $35 billion just to make it through the next 6 months.

Far too many analysts are still drinking the Wells Cool Aid. This is no longer Warren Buffetts bank. That ended the day they closed the Wachovia deal. These analysts all say the same thing. The Wachovia deal is potentially a super deal 12 months out. Only question is can Wells make it that far?

The only thing that can save the day for the Wells shareholder are the following:

1- Cash infusion from Berkshire Hathaway - This has not happened yet, may not happen as Berkshire is really stumbling from investment missteps it has taken over the last year or so. Buffett has taken a beating in bad bets in Chevron, BB&T, and other bank and energy holdings. I don't think Berkshire/Buffett is in a position to do anything here.

2- Common Stock Offering- will save the common shareholder but decimate the stock as severe dilution is in store. The stock will lose 50-60% of its current value if they did a dilutive stock offering.

3-More Bailout Funds from the Govt - Again will severely dilute the current shareholder. The stock will most probably go into some sort of Citigroup like Death Spiral if this is done.
Also Wells wants to pay back the $25 billion in Tarp money it has received from the govt.
Its a pipe dream for any of these banks to think they can pay back the govt, they just don't have the cheese to do so.

4-Sovereign Wealth Funds/Private Equity- This is the least likely thing to happen. Look at all of the SWM and PE Money that has gone into the toilet. These guys have been murdered in their investments. Dubai, Singapore, China, and domestic PE firms are not in the mood to invest money into any banks that can be theoretically taken over by the govt over the weekend. This is what happened to WAMU, just before it was handed over to JP Morgan.

None of these options are viable, because of the catastrophic losses at Wachovia. No matter what Wells says about how they have already taken precautions against future losses, no matter what the analysts say about the potential for future profits from this deal. I agree this is a great deal at the price they got Wachovia for. They got huge deposits, a huge retail Brokerage Operation, The entire retail banking network, and the loan processing arm for only $15 Billion...but what they also got was zero government help with regards to the bad mortgages/loans ($50-$60) that Wachovia was carrying on their books. That is why this deal is so cheap for Wells.

This is why the bank in its current form is insolvent. End of Story. Lets move on.

JP Morgan keeps doing its best Tom Petty (Free-Fallen) impersonation. Have investors finally started to turn over a few stones at JP? Its pretty ugly in there I promise. The stock is off another 10% today to 15. Somewhere in here JP is a buy, because after all its already been deemed and anointed by the government as "To Big To Fail". Again I am preparing a very interesting post on JP over the weekend on its sinister dealings in 2008. Bad Karma is the name of the post...watch for it.

The news at Bank Of America unbelievably just gets worse every day. Today's BOFA disaster dujour is that a Merrill Lynch London currency trader gambled away $120 Million on the currency markets, and somehow it was pushed under the rug just before the ludicrous bonuses were handed out by former CEO John Thain. BOFA is now working with regulators on figuring out what happened. After BOFA started its inquiry it also found out that millions in losses were also unaccounted for by many Merrill traders. BOFA only knew about this after the merger was closed. Looks to me that Merrill was in the business of totally raping the company ($3.6 Billion in Bonuses) before handing it over to the boys at BOFA. When the problems were clear, they had to get a second rescue from DC. What gets me is just before the merger was completed, BOFA fired all of its top traders and replaced them with the same incompetent traders that had killed Merrill. Those same Merrill traders are still employed at BOFA. The culture at Bank Of America is so disconnected, so buried with dissension, that barring any type of govt nationalization which is almost a certainty, there is going to be massive pain inflicted on the employees there. We may see BOFA totally exit investment banking and trading. But what remains to be answered for by Ken Lewis is why in the world there was zero due diligence done by BOFA with regards to how Merrill actually was processing/booking/marking trades? There is a systematic breakdown in the entire Merrill Lynch entity that needs to be examined and done so by the regulators. John Thain and his boys should be stripped of every red nickel they gauged from the company and thrown into jail for fraud.

General Electric is up .06 cents today. That is the only good thing to say about that.

Yes...I know the market is down today. Doesn't it go down every day now. The only positive I see is that the main stream print and news media have started leading the news with how bad the market is...That has to be positive? Don't you think?

My faith is still strong...at the end of the day...that's all I have left I am afraid.