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Today's Top News1. Bank of America scores another analyst win
I've noted the undercurrent of bullishness about Bank of America in the analyst ranks as of late, as more seem willing to recommend the stock. Stifel Nicolaus analyst Christopher Mutascio has jumped on the wagon, upgrading the shares to buy. He expects EPS could jump 30 percent in 2014, versus 5 percent expected growth for peers, as noted by Barron's. The big driver apparently is Project New BAC, an aggressive cost-cutting program. Mutascio also expects the company to receive permission from the Fed to raise its dividend in 2013. He expects the stock to rise to $11 per share, using a PE multiple nine times his 2014 EPS estimate of $1.20. "Some may view the 9 times multiple as a bit rich given BAC's issues. But, at $11 the shares would trade at just 70% of our 2014 tangible book value per share estimate of $15.68. That represents no expansion from the shares' current P/TBV discounted valuation despite our expectations that the company's profitability measures will improve significantly." The issue here is that the bank is still getting by on its ability to manage expenses, which it seems to be doing adroitly. Longer-term, however, you still have to wonder where the next big revenue spurt will come from. It may come from a pickup in its staid business lines. But if the bank is to ever again become a growth stock, it will have to find rich new sources of revenue to make up for the loss of debit-card related revenue from the Durbin Amendment. In any case, the short-term bullishness is a welcome development for shareholders and executives, though you can't rely on cost-cutting forever. For more: Related article: Read more about: Bank of America, analysts
2. Financial advisor a great job to have
"Financial advisor" has been judged the sixth best job to have in 2012, according to CNNMoney's annual list of Best Jobs in America. "What makes it great? Advisers help clients achieve financial success, which feels pretty warm and fuzzy. And they can hang a shingle for themselves, work as part of a larger firm or even work virtually if their clients are comfortable with it. What's the catch? In an up market, financial advisers can be heroes. In a down market, they can be scapegoats. Handling someone else's life savings can be daunting, especially when things are headed south," the article noted. The median pay is $90,200, and you can make a lot more than that if you excel. I'm not willing to go out on a limb and declare financial advisors heroes right, but it's fair to say that there is a tremendous amount of opportunity whenever financial uncertainty reigns, as it does now. I've suggested before that people are worried and confused about their financial futures. Many have pulled out of the market for stocks. Advice is a valuable thing at a time like this, as long as it comes from a trusted source. People will be willing to pay for it. All that said, the real payoff in this job comes after a career of careful client cultivation. No one gets rich quick in this business. For more:
Read more about: jobs, Financial Advisors 3. Moving up dividends to avoid the fiscal cliff
More people apparently think that the fiscal cliff will be avoided. The markets are less panicked, and the rhetoric emanating from Washington has been encouraging. My sense is that a cliff-avoidance deal will be inked soon, if only temporarily. More companies, however, are hedging their bets a bit by shifting their dividend dates up a little bit, which would allow their shareholders to avoid higher taxes should we go off the cliff. Reuters notes that Walmart became the biggest corporation yet to move its planned dividend into late December from early January. The shift by the world's largest retailer will give shareholders a payout of $1.34 billion at the current rate. Fiscal years for retailers typically end in January, so their dividend payments often are timed differently than other companies, many of which were scheduled to pay in December anyway. Under fiscal cliff rules, the tax rates on dividends will grow from 15 percent for most people to the ordinary income tax rates, the highest of which is 39.6 percent. Other investments are also affected. Master limited partnership ETFs, for example, have predictably been caught in the swirl, given their dependence on dividends. "The MLP ETF segment seems to have been on the wrong side of this fear induced correction as the ETFs in this space are among the biggest losers in this post-election sell off. Although it must be said that this slice of the market had been enjoying a decent run this year, at least until the election results were out," notes Dow Jones. For more: Related articles:
Read more about: Dividends, Fiscal Cliff 4. Still time to flip Martoma?
The industry has been operating under the assumption that Mathew Martoma, who was arrested and charged with running what has been called the most profitable insider trading ring ever, was the target of big effort to get him to flip. Indeed, the WSJ says the effort reach back as far as a year ago, when the FBI showed up on his doorstep in Boca Raton. Prosecutors were no doubt salivating at the thought of having an insider acting as a star witness against the biggest fish in the hedge fund sea. The arrest, the press coverage, and the charges all seemed to be signs that Martoma had refused, and thus would face the full wrath of prosecution. But is there still a chance, he might turn states evidence? DealBook reports that, "It appears, for now, that Mr. Martoma will fight the charges. But the crucial question, as it relates to Mr. Cohen, is whether at some point Mr. Martoma will reverse course, admit to insider trading and agree to help the government build a case against his former boss. Without Mr. Martoma's cooperation, it is unlikely that the prosecutors have enough evidence to charge Mr. Cohen." It's unclear what would make Martoma flip now when he hasn't done so previously. The calculus for him may boil down to what kind of witness his doctor-tipper, an 80-year old neurologist, will make. The whole case will likely boil down to his testimony. It does not appear as though any wiretap evidence will be used. Cohen is no doubt hoping that Martoma will be vindicated at trial, if it comes to that. For more: Related articles: Read more about: insider trading, SAC Capital 5. CFPB, FTC examine mortgage ads
Are mortgage ads returning to pre-crisis form now that the mortgage crisis has eased and the economy is picking back up? That's a fair question, and a consortium of regulators, led by the Consumer Financial Protection Bureau and the FTC, has opened an investigation into the mortgage ad practices of 19 companies, including some ads that have appeared on Facebook. The CFPB and the FTC also announced they had sent letters to 32 companies saying that they may be violating the Mortgage Acts and Practices Advertising Rule, which went into effect in August 2011. Many of these potentially misleading practices seem to be directed at older Americans and service members or veterans, according to the two agencies. Examples of dubious ads that might be misleading include those with official-looking seals or logos that imply some kind of government status, for example making you think they come from the VA or HUD; promises of amazingly low rates; false promises for reverse mortgages; statements that recipients are "pre-approved." Mortgage ads are very much like used-car lot ads. People tend to laugh at the marketing gimmickry involved. That said, such ads air for a reason -- they tend to work in terms of bringing in unsuspecting customers for dubious mortgages, often these customers are least able to afford them. For more:
Read more about: fraud, Enforcement Action Also Noted
SPOTLIGHT ON... Bankers hardly the life of the party "If you go to a party these days, you're asked what you do and you say you're a banker, people go all quiet. We're still the subject of anger," according to Anshu Jain, co-CEO of Deutsche Bank. It really depends what kind of company you are in, but it's perhaps a good sign that the industry is aware that it still need to mend fences with the public at large. Bloomberg notes that an Ernst & Young study of more than 28,500 retail bank customers in 35 countries that found 40 percent of those questioned had lost trust in banks over the past year while 22 percent had more trust. Article
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Monday, November 26, 2012
| 11.26.12 | Bank of America scores another analyst win
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