Wells Fargo, like it or not, is representative of ...

2009-04-15T18:41:00.000-07:00

Wells Fargo, like it or not, is representative of banks in the current environment, which is practically unprecedented in the history of the country.

In a nutshell, banks are--
--too big to fail (or not)
--receiving TARP money (or not)
--participating in the PPIP "toxic asset" program (or not)
--undergoing Geithner's "stress test" (or not)
--undercapitalized (or not)
--receiving second-level credit-default-swap money from AIG (or not), which of course is money provided by US taxpayers
--etc.

In the case of Wells Fargo, it is pretty clear that they are considered too big to fail, a survivor bank (thus the government-encouraged acquisition of Wachovia), butnevertheless teetering on the edge of sufficient capitalization.

Given all this, it was probably right and prudent for WFC to slash its dividend and preserve cash. That said, it will survive; it is pretty clear that the government will not let it fail.

Banks such as Wells Fargo have changed their "type" over the last few months: From Type D (reliable dividend-paying companies) to Type A (growth and speculative companies).

It is still quite unclear how the market will value such companies. They may be ten-baggers waiting to happen, courtesy (in part) of taxpayer money. Or they might be consigned to languish for years in a sort of zombie state, barely surviving, propped up by the government directly (TARP, PPIP, and other programs) or indirectly (receiving taxpayer money from AIG, the FDIC, or others).

One thing is clear: They are no longer reliable dividend stocks. They have entered a different world. It may be years before they become the reliable dividend-payers and raisers they once were. They may never return to that former status, as the whole US banking industry may undergo a massive paradigm shift into something we have never seen before.

With changes in how assets are reported and close ...

2009-04-15T10:44:00.000-07:00

With changes in how assets are reported and close to non existent interest rates, I'm not surprised they did make such a big unexpected profit.

I think most of the banks will be profitable or not as bad as what analysts expect.

I don't see why another surging rally wont be coming when financials report.

Comments on Dividend Growth Investor: Wells Fargo (WFC) – show me the money

Wells Fargo, like it or not, is representative of ...

With changes in how assets are reported and close ...