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1. Watch the Small Banks Next Week
By Tim Melvin
3:41 p.m. EST
Next week should be interesting. We have Bank of America(BAC Quote), Citigroup(C Quote) and Goldman Sachs(GS Quote), among others, reporting earnings. A lot of the smaller banks begin to report as well. As interesting as the big bank reports may be, I suspect they will all look a lot like JP Morgan’s(JPM Quote) this morning, with credit losses and trading gains of outsized proportions. It is in the banks without large trading operations where I suspect there may be some real damage from loan losses. I am hoping the carnage among small banks this earnings season is sufficient to push the whole group lower, thus setting up the trade of the decade. If we can get the market to throw the baby out with the bathwater, we will be able to start buying banks with strong balance sheets and excess capital well below tangible book value, with an eye on owning them for a decade, or until they are acquired.
Enjoy the three day weekend and the predicted-here-first Baltimore Ravens win over the Colts.
Position: Long a Baltimore upset of Indy
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