Whatever credibility Dick Bove of Rochdale Securities has left can now be thrown out the window. It won’t matter at CNBC or Fox Business though, because for some reason he’s considered a guru analyst in the financial sector. Following Wells Fargo’s (WFC) earnings yesterday morning, he was on CNBC with the following comments before the market opened:
At the beginning of the segment he said Wells Fargo “has its loan losses under control” and that they “should be able to grow revenues by increasing loan volumes”. At the 1:20 mark he said Wells Fargo was one of the three financial companies that “should do well in the market today and lift all financial stocks.” To close out his thoughts on the financials, he called Wells Fargo a “standout” with those earnings numbers.
Now fast forward a few hours later to about 30 minutes before the market close yesterday. Bove issues a surprising Sell rating on Wells Fargo, downgrading the stock from Neutral. This morning he was on Fox Business explaining his Sell rating. Here are the highlights from his comments about Wells Fargo:
- not expanding its loan book
- margins on loans being sold going to come down
- big increase in loan losses through the beginning of next yeare
- unsustainable gains in their hedging portfolio
- will take about a year to get its position back where it should be
In response to the flip flop, Bove defended himself by saying he didn’t have all the results when he went on the air. Then why are you making an analysis?! Why not just say give me a few more minutes until I have all the facts. It’s irresponsible and reckless behavior at best.
In an article today, the WSJ lays out the inner workings of the Bank of America (BAC) deal with Merrill Lynch (MER), which claims BofA CEO Ken Lewis was forced into the deal by the Fed. Lewis agreed to buy Merrill in September, but discovered over the next few months that Merrill losses were much greater than originally thought and tried to back out of the deal. Not so fast says the government.
A Fed official warned that if Lewis backed out and needed government money down the road, he may be out of luck and that regulators would consider ousting executives and directors. The end result was a deal with the government that would provide BofA with $20 billion in aide and protection against losses on $118 billion in trouble assets. Asked by an analyst about his decision to go ahead with the Merrill deal, Mr. Lewis responded: “We did think we were doing the right thing for the country.”
While traders continue to hammer BofA stock believing it will soon be nationalized, Ken Lewis and other insiders are busy buying up shares. Lewis bought up another 200K shares on Feb 4th but keep in mind he also bought about a couple million worth of shares back when the share price was $23. One thing is certain. The chances of making money on BofA down here are much better than a lotto ticket.