Bookkeeping: Beginning to Rebuild Bank Exposure

Speaking of charts, the financials we own are among the best charts in my watch lists - we basically have 2 charts out there - (a) the broken down but reverted back up to a mean - but now selling off and (b) the over key support levels and now falling back down. Chart (b) has always been our type of company we want to focus on but the choices are so few nowadays. Chart (a) can be found everywhere and indeed probably provided the best "bounce" off the bottom but ONLY if you nailed the bottom within a day or two. And on these selloffs charts (a)s are falling like a rock, while the (b)'s are holding up relatively well.

I am adding to all 3 of our banks here after selling down exposure earlier - not going whole hog because that labor report tomorrow will provide a lot of fireworks (either a big move up on "better than expected nonsense" or the opposite)

1. PNC Financial (PNC) from 0.1% stake to 0.9% - technically we have multiple levels of support in the mid $60s, so we're beginning to rebuild in the $69s
   
2. BB&T (BBT) from 0.9% to 1.8% - technically we are approaching important support in the $31s (200 day moving average)
   
3. Regions Financial (RF) from 0.7% to 1.4% - techinically this trades more like a solar stock than a financial - and has the riskiest chart as the 50 day moving average is below the 200 day. But it's sitting right on its 50 day so we'll take a swipe.

Again I am treating this as a "bank basket" and "1 position" - so we effectively increased our bank exposure from 1.7% to 4.1%. Still small potatoes - in a good market many times 1 position alone would be 4-5% of the portfolio. If the market continues to break down we want to continue buying the (b) type charts as seen by PNC and BBT charts below. (note these are not perfect charts but in *this* market they are in the elite 2-3% category of chart)

In a portfolio management point of view, once again I stress these are smallish buys in a heavily cash & hedged portfolio. We have the lowest long exposure since we started; so I'm beginning to make selective buys... slowly. The commodities which make up the chart (a)'s will be interesting to me to begin adding allocation to for a trade only if we have 1 more day like today (these names have lost 10-20% two days in a row). For "investors" I'd say don't even bother with this market; the time frames for success are too short and the volatility too high. We've now lost nearly 10% in 2 sessions on major indexes (which is half a "bear market" - defined by a 20% loss) - in old times we'd call that "historic" and "a time to buy!" - nowadays, it's just another day at the casino.

As an aside Wells Fargo (WFC) is down 9%ish today on news it will raise $10B in common stock - I still think for a 5 year time horizon this is an excellent choice; first time it's been below the 200 day moving average aside from Oct 10thish - and it took a large equity offering to do so. Once it digests Wachovia this is going to be right up there with JPM.

• Wells Fargo & Co. shares tumbled Thursday after the San Francisco bank announced plans for a $10 billion common stock offering. Wells Fargo had previously said it planned to raise up to $20 billion to maintain a strong capital position as it absorbs the operations of Wachovia Corp., which was on the brink of failure before the deal was struck last month. But the bank declined to comment further on whether it still plans to raise an additional $10 billion.
• "Should the company choose not to complete that remaining $10 billion, earnings-per-share would be helped out, due to less dilution, but the combined company would of course be running on an even thinner tangible common equity base," he wrote in a note to clients Thursday. "Finally, we do not yet know the price at which the $10 billion of new capital will be raised. Therefore, much uncertainty still remains." "The longer-term strategic benefits of (the Wachovia) transaction are compelling and easy to see," he said. "Still, many challenges remain, and those hurdles will likely take time to overcome."

Long all names mentioned in fund ex Wells Fargo; no personal position