Thursday, June 24, 2010

Regulatory update-Brokers – number cuts (Bernstein + Citi) + regulatory uncertainty are weighing on MS and GS (off ~2.3% and 1.2%, respectively) $GS

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· Regulatory update – looks like we have received resolution on a few items today.  On Collins, sounds like banks w/$15B or less in assets will be exempt from the TruPS ruling while other banks will have 7 years to comply (the 7yrs a bit longer than some feared, so a mild positive).  The Fannie/Freddie issue (whereby banks could be subject to a levy in the future to pay for the wind down of Fannie/Freddie) was rejected by the Senate, although its not clear what the fate of this matter will be (i.e. will the House drop the request or come back w/a counter proposal).  We are still waiting on Lincoln + Volcker. 

· Numbers – on top of all the regulatory overhangs, a bunch of firms have come out in the last week and taken numbers down on all the brokers & large capital markets banks (so GS, MS, C, BoA, and others).  There were a bunch out this morning alone. 

· Brokers – number cuts (Bernstein + Citi) + regulatory uncertainty are weighing on MS and GS (off ~2.3% and 1.2%, respectively).  Smaller brokers act better – JEF still giving back some of Tues’ rally, but PJC and SF are both in the green (smaller brokers are seen as less exposed to the regulatory overhaul process). 

· Asset managers – the group dips across the board; AMG off 4% (Citi trimmed ests today); AB, BLK, EB, BEN, JNS, LM, TROW are all off 2% or more today. 

· Banks – the BKX is off 1.8% on the day; the large money centers are for sale across the board (BoA, C, WFC all off 2%+).  Regionals are weak too, although CYN, MI, and TCB are in the green.  MTB is off 3% after Deutsche made a call that a deal w/Santander won’t happen. 

· Some of the mortgage stocks act well as agency MBS prices have surged – NLY, ANH, MFA, CIM, etc, all outperforming. 

· Cards – DFS climbs 3.6% on the day after strong earnings; not helping AXP or COF too much (each off 1%). 

· Best performing sp500 financials: DFS, MI, CB, AON, PGR, TRV, VNO, BRK

· Weakest performing: GNW, PLD, MTB, HIG, JNS, STI, IVZ, MS

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