Tuesday, July 13, 2010

2nd Chance

My biggest investment regret of last year was not putting everything I owned along into stress test bank calls. This was a foreshadowed gift that could only have ended up one way. While the gains on Citi and 5th Third (by far the best performer) recommended here made a year's worth of returns, I can honestly say that I didn't go all in. The Euro stress tests I don't think afford the same kind of opportunity given we are miles from the bottom and we have already been made aware of the Greek tragedy.

However, these tests may pale in comparison to ours in how bogus they are, and afford the larger banks an excuse to raise capital just as ours were. The best of the bunch, Santander and HSBC, are likely to benefit. As one analyst pointed out today, Santander survived a Spanish and European test when it troughed at $9. HSBC is just 15% off of its yearly low, and has been distancing itself from subprime for 3 years. Good news after the test results on 7/23 could also come in the form of a watered down Basel III, which probably won't force banks to raise capital rations until 2012. Given these factors, I think it's time to roll the dice again.

As another side bet, the first Apple hiccup in a few years may put a shine on its competitors in the short term. If Microsoft can produce and possibly throw in a dividend, it looks promising.