Research + Forecast USA Corporate Profits, Dow Jones Index

April 8, 2009 Special Situation Note for Premium Subscribers:

I am anticipating a healthy rebound for the USA Banks/Financial Sector and have invested my risk leveraged capital accordingly last week.

There are many factors behind this view. The most recent factor is a relaxation of the “mark to market” rules which will apply to first quarter’s 2009 profits. Major US banks are likely to make a use of the change and revalue their toxic assets portfolios improving substantially their reported results. They are due to report the Q1-2009 earnings this week.

April 17, 2009 Special Situation Note for Premium Subscribers:

The performance of the USA Financial Sector and USA Banks over the last 6 days (April 8 to April 17 2009) was positive due to a much better than expected earnings announced by the major US banks. Shares rose strongly:

STOCKS – Q1 earnings announced date	EPS Estimate	EPS Actual	% above expectations	% Share Price Gain over 6 days (8-17 April 2009):
Wells Fargo - April 9	$0.31	$0.55	+77%	+38%
Goldman Sachs – April 13	$1.64	$3.23	+97%	+6%
JP Morgan – April 16	$0.32	$0.40	+25%	+21%
CitiGroup – April 17	$-0.32	$-0.18	+44%	+36%
Bank of America – April 20	$0.05	? to be announced on Monday 20		+50% by Friday 17
SECTOR PERFORMANCE
Financial Select Sector SPDR (XLF)				+21%
IAT:US iShares Dow Jones US Regional Banks Index				+26%

See graph for all the above symbols (change dates) at:

http://finance.yahoo.com/echarts?s=xlf#chart13:symbol=xlf;range=20090408,20090417;compare=iat+c+bac+jpm+gs+wfc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

The market clearly did not expect such good earnings http://www.nytimes.com/2009/04/17/business/17bank.html_r=1

Using leverage during last week would produce around 200% return.

The US Government is to announce by May 4 results of the banks “stress test” http://www.bloomberg.com/apps/news?pid=20601087&sid=aMAbMEGzRfco&refer=home .

It is uncertain which banks will come out clean without a need to raise further capital. Hence, I expect volatility and uncertainty over the next few weeks – use of leverage would be risky during this time. That is why I took profits and closed my positions in this sector for time being.

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