Meredith Whitney, Michael Price Team Up To Snuff Out Rally in Financials

Financial stocks clearly cannot catch a break. Meredith Whitney will not let Dick Bove's negative call on Goldman yesterday go unanswered, and is slashing her earnings estimates on Goldman well below the Street's consensus numbers:

The firm lowered their 3Q08 EPS estimate to $2.15 from $3.54 (consensus $3.64), their FY2008 est to $14.32 from $15.75 (consensus $16.77), and FY2009 est to $14.90 from $16.30 (consensus $19.75). Firm says the primary drivers for these revisions are customer volumes, overall weak global equity markets, and weak advisory and underwriting revenues. They say that as GS revenues are relatively the most equity-linked of its broker peers, the fact that broad global equity market indices are all down double-digits will have a meaningful effect on the co's earnings. Briefing

Dick Bove beat Meredith to the punch yesterday in throwing cold water on Goldman's near-term prospects, and even legendary value investor Michael Price is getting into the act.

Dick Bove Puts a Stop to Goldman’s Intra-Day Rally

Goldman Sachs (GS-NYSE) and mighty Stifel Financial Corp. (SF-NYSE) might be the only Sellside firms left standing, but if Dick Bove has his way, soon there will only be one.

Stifel's thinly traded stock is printing new 52-week highs, which Lloyd Blankfein and his minions can only reminisce about. Mid-day Monday Bove took a hatchet to his Goldman estimates, throwing cold water on a rally in the banks & brokers as the Financial Select Spyder ETF (XLF-AMEX) just as they tried to challenge their recent highs:

Ladenburg Thalmann analyst Richard Bove on Monday reiterated a "sell" rating on Goldman Sachs Group Inc. and cut his full-year profit estimate on the investment bank, citing dwindling revenue sources.

For the fiscal year ending November 30, Bove now expects earnings of $14.16 per share, down from a previous estimate of $15.45 per share.

Analysts polled by Thomson Financial, on average, anticipate earnings of $16.77 per share in 2008.

"Business has dried up," Bove wrote in a note to clients. "Key drivers of revenue such as investment banking, and mergers and acquisitions have simply not been happening enough to stimulate related business." FBN

Yes, mighty Goldman has shrinkage, and the deal calendar is barren. Dried up, indeed. Perhaps cross border M&A activity will pick up if the dollar continues to rally, as foreigner who have been on the fence strike before the dollar strengthens further, if they believe so. Possible, but it would only provide a brief respite.

Painting the Tape, Bear Stearns Style

I might be mentally deranged, but so are the best traders/managers on the Street. And while I don't put myself in that company, I think some of them might agree with my take on the Bear Stearn's options
trade.

Clearly Bear was wounded, but a confluence of events, including an email reportedly sent from Goldman Sachs, were the catalysts that finished off Bear. But with Options Monster and every two-bit trader seizing on unusual put activity in the options market, it is not a stretch to say the person who put on a small out of the money options trade knew it would get an inordinate amount of attention.

The 57,000 puts that traded March 11 at the $30 strike price and the 1,649 that traded at $25 were collectively worth about $1.7 million, Bloomberg data show. Each put is equal to 100 shares of stock. Bloomberg

In my mind, anyone who argues otherwise is missing the point of the trade. It might have been a small trade, but it was worth a shot. It created suspicion, and panic. Was it the work of the Human Piranha? It is no surprise that copycats tried it with Lehman Brothers, but that is another story.

Merrill’s Transformation Into Goldman Is Nearly Complete

Mother Merrill is six-feet under, and it is just about time to shovel dirt on her grave as Merrill completes its evolution into a clone of Wall Street's apex predator:

Merrill Lynch & Co. said David Sobotka, the commodities trader who stepped in to lead the fixed-income division when it was reeling from mortgage losses, will take over a new unit to make bets with the firm's capital.

The Global Proprietary Trading group will consolidate units that trade stocks, bonds, currencies and commodities, New York- based Merrill said today...Bloomberg

Of course, if you are going to adopt Goldman's model you might as well hire their people; a new arrival from 85 Broad will oversee the trading effort:

The group will specialize in ``liquid markets,'' in which trading is frequent and buyers and sellers numerous.

``The group will continue to look to create superior returns from trading equities, fixed-income products, currencies and commodities on a global basis,'' according to the memo, written by Chief Executive Officer John Thain and Tom Montag, who joined Merrill this week as head of sales and trading (from Goldman Sachs).

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