Genworth Financial, Genuinely A Mistake

This may have been a strategic move on Genworth Financial's part to not become a bank holding company due to all the restrictions being imposed by the government...but I think I will note that they may be strategic idiots for missing a very big opportunity to become a holding company as a savings and loans institution. This would have given them access to the Federal Reserve free flowing, cheap capital!! What else can we add to the list of things to take away from this strategic company. How about the ability to be eligible for the Treasury's purchase program and now they can't complete the acquisition of Interbank. So I won't pile anything else on this company, because all this news just broke and I take a calculated gamble here and say that this stock will get punished for its...how should I say strategically dumb move. SHORT GNW

I imagine that news will create a negative morning for GNW which will give us some time to determine what is a good exit point by researching whether this move has ANY possible upside for this company.

Banks Rally on Wells Fargo...Don't Believe It

My response is don't believe the hype of the banks! I know in my last post I told you to take advantage of the banks and buy FAS which is a fund that gives you 3x the normal returns of owning a basket full of bank stocks. This has worked out perfectly as FAS was recommended on April 2nd and if we use the price at the close of the stock market, you would have purchased them around 6.42. My recommendation is to sell FAS today and pocket a big gains in only a matter of seven days. I hope you enjoyed the ride up, the stock closed @ 8.74!!!

Play Defense!!! Here are my reasons why you should stay cautious of the banking sector.

First, the entire sectored rallied on just Wells Fargo (WFC) and let me remind you that every bank isn't built the exact same way WFC is!!!!

- One of biggest reasons why WFC is doing well and the other banks may not is WFC does not have an extensive consumer credit loan portfolio!!! Yep WFC doesn't have to worry about the risks associated with battered consumers who can't pay off their plastic.

- Second, just listen to the CFO, Howard Atkins who openly mention the huge profits can directly be attributed to large writedowns on Wachovia's bad loans. Wells Fargo is probably an exception that every other bank may not be able to replicate. A huge write-down do to their acquisition of Wachovia and a first quarter provision isn't in the cards (no pun intended) for most of the other banks.

So how to play the Fake Bank Rally:

- Start with the bad apples like Capital One (COF) They just got the big smack down by Moody's and Fitch Ratings who downgraded the stock due to the expectation of rising credit costs.

- How about American Express (AXP) and the fact that their default rate was leading the industry. WOW, now I would be slower here to pull the trigger because two firms just upgraded their shares...from basically Don't Touch to Think about it...Maybe

- Finally I am not a believer in Citigroup as their are being propped up by the government

Where Did Your Toxic Assets Go, Mr. Bank...

That's the question for an accounting group that sets up standards for companies reporting financial information. They have a standard that determines how to account for assets on companies books. Well today they decided to give companies more room when valuing these assets, and this could give a big lift to those banks we have grown to hate.

The group is called the Financial Accounting Standards Board and they are supposed to be independent when establishing these rules. But it appears they may have caved to the pressures of Congress and Wall Street when it came to political pressure around the somewhat unpopular rule.

The rule, called mark-to-market, is supposed to increase transparency for investors because we can see what these assets are valued by today's standards. But the problem some critics say is what happens when the market tanks (like it has been) and their is NO VALUE. Well, what happens is the financial statements of the banks become horrible.

My Opinion - Keep the rule because it provides transparency and uncovers assets that are beginning to decline in value. But as the rule has been adjusted I won't cry I will just buy and that is the BANKS for a short period of time. The assets are still bad on the banks books the difference is now they don't have to tell is they are!!!!


BUY: Direxion Shares Financial Bull 3x Ticker: (FAS) - This gives you 3x the returns for the banks going up. But just buy a little cause it will take you for a crazy ride!