Contrarian Stock Market Investing News - Featuring Bargain Stocks » Visa Inc

Obama Pushes Credit Card Issuers on Fees, Rates

Don Miller — Mon, 27 Apr 2009 18:03:28 +0000

Executives from credit card issuers, including Bank of America Corp. (BAC) and American Express Co. (AXP), met with President Barack Obama last Thursday to make their case against new limits on transfer fees and higher interest rates.

But their pleas fell on unsympathetic ears as Obama pressed forward with plans for enhanced consumer protection laws that go beyond credit card restrictions approved by a U.S. House committee Wednesday.

The credit card executives requested the White House meeting as they face outcries of anger from beleaguered cardholders and Congress. Representatives from a “who’s who” of industry leaders attended, including Citigroup Inc. (C), Wells Fargo & Co (WFC), JPMorgan Chase & Co. (JPM), Capital One Financial Corp. (COF), Visa Inc (V) and MasterCard Inc (MA).

“They’re saying that the economic recovery will take longer if Obama takes punitive action against lenders, but the Obama folks…need more of an explanation,” Linda Sherry, director of national priorities at Consumer Action, a watchdog group that tracks credit-card practices, told Bloomberg News.

As unemployment and credit card delinquencies rise, card issuers are on the hot seat for imposing large late fees and slamming delinquent customers with huge interest rate increases.

Delinquencies are soaring throughout the industry in concert with unemployment, which reached a 25-year high of 8.5% in March. Charge-offs, which are loans that banks have given up on, increased to an average of 8.02% in February from 4.53% a year earlier, Bloomberg reported.

Capital One reported a $111.9 million first-quarter loss on higher reserves for soured loans on Wednesday. Bank of America reported a $1.8 billion first-quarter loss in its credit-card services unit.

Lenders have tried to protect themselves with late fees, tightening credit limits and closing accounts, angering both lawmakers and consumers.

The meeting came a day after a bill to curb credit card fees and limit penalties cleared a key panel in the House of Representatives

The legislation – called the Credit Cardholders’ Bill of Rights – stops credit card issuers from imposing arbitrary interest rate increases and penalties and halts onerous billing practices. A separate version of the bill is under review in the Senate.

Legislators have expressed outrage that many card issuers have received government bailout money under the Treasury’s Troubled Asset Relief Program, essentially paid for by the U.S. taxpayers who use the cards and are saddled with the high fees.

President Obama’s economic adviser, Lawrence Summers, last weekend accused the companies of enticing consumers with aggressive marketing campaigns and deceptive interest-rate terms, encouraging them to become “addicted” to credit.

The White House specifically wants any legislation to limit issuers’ ability to charge fees when customers exceed their credit limits. Obama’s chief of staff, Rahm Emanuel, recently told House Financial Services Chairman Barney Frank that Obama also wants card issuers to offer longer terms for introductory, low teaser rates.
The administration also wants card companies to apply excess payments first to balances with the highest interest rates, and to tell customers how long it will take to pay off their balances if they only make minimum payments.

The banks are saying the proposed regulations will make matters worse by raising costs, restricting credit, and ultimately hurting borrowers more.

“If the government keeps changing rules, it may make it harder for consumers to get credit,” Ken Clayton senior vice president of card policy at the American Bankers Association in Washington, told Bloomberg.

“It means less credit available to vast numbers of Americans at the very wrong time,” he said.

Why pass up guaranteed money when it’s just sitting there waiting to be collected? That’s what we thought when analyst Martin Hutchinson pointed this out to us: On May 28, investors can collect $3,177 in guaranteed cash from just one stock. And by June 4, you can increase that amount to $4,201. Martin’s written a report on how to collect this money yourself. And you can hear him talk about it in his special video report attached. As he explains, just take a few simple steps by April 26 and you’ll pocket some nice income. The deadline is firm… and the companies guarantee this money. This is something worth taking a look at.Just Go Here.

Source: Obama Pushes Credit Card Issuers on Fees, Rates

New-Look Bank Bailout Plan Set to Debut this Week

William Patalon III — Mon, 09 Feb 2009 18:22:52 +0000

As the worst financial crisis since the Great Depression continues to worsen, decades of deregulation and the growing independence at the state level are being reversed as a deteriorating national economy forces the federal government to increasingly take on responsibilities that no other institution has the power or resources to handle.

This dismantling of the so-called “New Federalism” will be readily apparent again this week as the federal government is once again at the forefront of the most-closely watched crisis-fighting initiatives at hand: With Congress pushing forward on an $827 billion stimulus plan and the Treasury Department planning to unveil its new banking bailout blueprint on Tuesday, economists and other experts say the federal government is taking its biggest role in the economy in a generation.

States that once pushed away from the federal government as part of the New Federalism are now essentially begging it for financial support, banks and Big Business that once viewed near-total deregulation as Corporate America’s Holy Grail are now seeking federal financial aid and new regulatory protections (and in many cases are becoming actual business partners with the government), and individuals are asking for tax relief.

Alan Viard, a Bush administration economist now at the American Enterprise Institute, may well epitomize this reversal of thought: He’s one of the economists who initially rejected the need for a fiscal stimulus, stating that the right size for a government spending bill was “probably zero,” believing that federal interest rate cuts and existing unemployment benefits would be enough to do the trick. But he now sees the package as necessary.

“Things have gotten so bad so quickly,” Viard told The Washington Post. “We have now lost 3.6 million jobs, a stunning loss. But what’s more horrifying is that half that loss has occurred in the last three months. This is a severe recession.”

The exact shape and size of the package matters less than the timing, and any delay will be very damaging, economists say.

“Most of the things in the package, the big dollar amounts, are things that are pretty quick stimulus and need to be done,” Alice Rivlin, who was former president Bill Clinton’s budget director and a critic of aspects of the proposed stimulus, told The Post. “Is it a perfect package? Of course not. But we’re past that. Let’s just do it.”

Signs of the Stimulus

The U.S. Senate late Friday reached agreement on the estimated $827 billion stimulus bill, setting the stage for what’s expected to be some tough negotiations with the House of Representatives over tens of billions of dollars in aid to states and local governments, tax provisions, and programs focusing on education, health and renewable energy.

Congress is pushing hard to complete the legislation this week. But that figures to be a challenge. The House bill was passed without any Republican support, while the Senate version passed Friday night between Democrats and three moderate Republicans.

During a rare floor session on Saturday, Republican opponents continued to criticize the entire stimulus proposal – even though they clearly don’t have the votes to stop it. The bill is expected to be passed in the next few days.

The price tag for the Senate plan is only slightly more than the $820 billion measure adopted by the House late last month. Both plans seek to resuscitate the U.S. economy with similar one-two punch strategies:

Fast-acting tax cuts designed to jump-start consumer and business spending.
And longer-term – albeit slower-acting – spending on public works programs and other projects that are projected to create more than 3 million jobs.

Despite these seemingly similar philosophies, the two plans rely on approaches that are very different. The higher-priced House bill emphasizes help to states and municipalities that would otherwise be facing major cuts in services and layoffs of public employees, while the Senate slashed $40 billion of that kind of funding from its version of the bill.

The Senate plan focuses more on tax cuts, lowers a proposed increase in food stamps and provides health-care subsidies for the unemployed that are much less generous than the House version. The Senate plan also creates $30 billion in tax incentives to encourage Americans to buy homes and cars within the next year.

House Speaker Nancy Pelosi, D-Calif., said the emerging Senate cuts to the stimulus program “very damaging” and that she was “very much opposed to them.” But after the Senate reached a deal, Pelosi expressed resolve to complete the legislation in the days ahead.

U.S. President Barack Obama has made the economic recovery effort the centerpiece of his agenda since even before he officially took office. But President Obama now intends to get much more involved, and much more aggressive: He will conduct a “town-hall-style” meeting in Indiana today (Monday), followed by a formal “prime time” White House news conference – the first of his term – tonight.

The president will then pitch the plan again in Florida tomorrow (Tuesday) and again in Virginia on Wednesday.

Senate Majority Leader Harry Reid, D-Nev., said final passage of the Senate bill is expected Thursday, after which congressional leaders say they will hurry to get the House and Senate versions into conference with the hope that a passed bill can be sent to the White House by the end of week, the San Francisco Chronicle reported.

Banking Plan Overhaul Unveiling Tomorrow (Tuesday)

Busy new U.S. Treasury Secretary Timothy F. Geithner last week promised that the Obama administration would unveil its new blueprint for rescuing the U.S. banking system today. Over the weekend, however, the administration said the rollout would be delayed until Tuesday, so that the focus could remain on passage of the stimulus package, Bloomberg News reported.

But that doesn’t mean the banking bailout plan isn’t key.

According to a recent analysis, the Obama administration has a multi-pronged strategy for quelling the financial crisis, including:

A program to insure banks against extreme losses on mortgages and other loans.
A new round of investments in banks.
Help for homeowners facing possible foreclosure.
The broadening of a U.S. Federal Reserve program to ramp up lending.
The Treasury Department could also look at purchasing toxic assets from banks – possibly with the aid of private-sector financing.

This would represent an overhaul of the $700 billion Troubled Assets Relief Program (TARP) initiated by the Bush administration. As the name implies, TARP was initially concerned with buying troubled assets – but it quickly evolved into a direct-government investment into the banks.

This new Obama plan reflects Geithner’s personally held view of how governments should respond to financial crises. Geithner believes all available financial tools should be used – and used aggressively. Any such effort would include direct efforts to deal with the financial sector’s massive losses, since that would help renew public confidence in the financial system.

Too small a government response during a crisis poses more risk than too much response, he said during his confirmation hearing.

Many of the details of what Geithner will announce remained in flux, although the broad outlines were becoming clear, published reports state. But one thing is certain: Even the ideas that are continuations of the initiatives started by former Treasury Secretary Henry M. “Hank” Paulson Jr. will have a unique Geithner twist.

One example: The government will almost certainly continue to invest in banks. But past investments consisted of a form of “preferred stock” that granted the federal government no say in how the bank was run, or how the money would be used.

As a Money Morning investigation revealed, that lack of control allowed banks to use taxpayer-provided TARP money as financing for buyouts. And then the banks refused to detail how they spent the money – and why not? They weren’t required to.

Under the new plan, there will still likely be new government investments in banks. But Geithner will likely call for those new investments to be convertible into common stock after some fixed period of time, perhaps seven years. If the banks are unable to raise private capital in that span, government control would escalate.

Banks receiving money also will probably have to report to the government and to the public, and the government is likely to insist that the new capital be used to expand lending.

Geithner has also been looking for a way to bring back the original TARP concept, which Congress passed on Oct. 3. Paulson pitched the plan to Congress as a program to buy troubled assets off of banks’ books, then shifted the plan and opted to invest directly into the banks instead.

Paulson’s chief worry – and the reason that he changed direction – was that asset purchases would involve too many technical complications, meaning it would take too long to enact. And that delay could be costly to a system where banks were teetering on the precipice of failure.

After struggling with those same issues, Geithner and his team appear to have settled on an approach that amounts to financial triage, meant to give investors confidence that banks will not encounter vast new losses so that they are willing to invest private money, The Post reported.

In addition to buying bad assets, the Fed and Treasury in the next few weeks are expected to expand a program that should jump-start lending outside the banking system. In November, the agencies launched a program – the “Term Asset-Backed Securities Loan Facility” – that would devote $200 billion for credit card, auto, student and small-business loans.

That program will be extended to include residential real-estate mortgages and into the commercial real estate sector. Geithner may also announce an initiative that would inject government money into companies known as mono-line insurers. These firms are key players for states and municipalities when it comes time for those state and local government bodies to borrow money. With the implosion of the housing bubble, and the subsequent implosion of the commercial real estate business, mortgage-related losses by the insurers have made it harder for states to issue the municipal bonds that would help them ride out the recession without aggressive tax increases or budget cuts.

Geithner is likely to roll out a plan, worth $50 billion to $100 billion, to encourage the modification of mortgages for homeowners who would otherwise likely face foreclosure. It could be based loosely on a strategy for foreclosure relief engineered by Federal Deposit Insurance Corp. (FDIC) Chairman Sheila C. Bair, when the FDIC took control of the failed bank IndyMac Bancorp Inc. (IDMCQ) last year.

Market Matters

On the corporate front, United Parcel Service Inc. (UPS) posted a profit (though revenue declined) and then announced new cost-cutting measures. Motorola Inc. (MOT), The Walt Disney Co. (DIS), Time Warner Inc. (TWX), and Costco Wholesale Corp. (COST) reported disappointing results. Visa Inc’s (V) earnings jumped by 35%, though management warned of tougher times ahead.

Bailout plan recipients have tried to cut back excessive spending (and the associated bad PR) as Goldman Sachs Group Inc. (GS) (Miami) and Well Fargo & Co. (WFC) (Las Vegas) canceled huge boondoggles. Bank of America Corp. (BAC) is selling off corporate jets, and Citigroup Inc. (C) may be attempting to get out of the $400 million marketing deal with the New York Mets.

C-SPAN must be enjoying stellar ratings as investors seem obsessed with the inner-workings of Congress and their debates on the stimulus and bailout. The markets disregarded much of the dire earnings and economic data (terrible unemployment report…see below) and focused on the newfound optimism that politicos can work together to get the country moving in the right direction.

Market/ Index	Year Close (2008)	Qtr Close (12/31/08)	Previous Week (01/30/09)	Current Week (02/06/09)	YTD Change
Dow Jones Industrial	8,776.39	8,776.39	8,000.86	8,280.59	-5.65%
NASDAQ	1,577.03	1,577.03	1,476.42	1,591.71	+0.93%
S&P 500	903.25	903.25	825.88	868.60	-3.84%
Russell 2000	499.45	499.45	443.53	470.70	-5.76%
Fed Funds	0.25%	0.25%	0.25%	0.25%	0 bps
10 yr Treasury (Yield)	2.24%	2.24%	2.84%	2.98%	+74 bps

Economically Speaking

Just how long until a stimulus package starts creating jobs? That answer can’t come soon enough for the almost 600,000 people who moved to the unemployment line in January, the most devastating month for job losses since 1974. The unemployment rate climbed to 7.6%, forcing many economists to (upwardly) revise their projections for the rest of the year (and beyond).

Since the recession “officially” began in December 2007, the country has lost more than 3.6 million jobs, with most of the losses coming in the past three months. The rest of the data released during the week did little to contradict the lousy unemployment picture. Factory orders fell for the fifth straight month and the ISM index revealed that purchasing managers still look for contraction in the manufacturing sector. Though the services sector showed a slight rebound in its ISM survey, the index reported a fourth consecutive month of declining activity. Residential construction spending experienced its worst annual decline ever recorded (since 1993), though optimists are hopeful that a stimulus package that focuses on infrastructure growth will prompt a renewal in non-residential building.

With the Fed stuck looking for creative ways to get involved (now that the benchmark Federal Fund rate stands at about 0%), its international counterparts took action (or inaction) of their own. The Bank of England (BOE) cuts its primary lending rate to a record low 1.0%, while the European Central Bank chose to leave its rate unchanged (for now) at 2.0%.

Weekly Economic Calendar

Date	Release	Comments
February 2	Personal Income/Spending (12/08)	Most savings since May as income fell 3rd straight month
	Construction Spending (12/08)	Largest yearly decline in activity on record (1993)
	ISM – Manu (01/09)	Recovered slightly from 28-year low in December
February 4	ISM – Services (01/09)	Better than expected reading on services sector
February 5	Initial Jobless Claims (01/31/09)	Highest claims’ level since October 1982
	Factory Orders (12/08)	5th consecutive monthly decline
February 6	Unemployment Rate (01/09)	Surged to a higher than expected 7.6%
	Nonfarm Payroll (01/09)	Most job losses since late 1974
	Consumer Credit (12/08)	3rd straight month of decreased borrowing activity
The Week Ahead
February 11	Balance of Trade (12/08)
February 12	Initial Jobless Claims (02/07/09)
	Retail Sales (01/09)

Source: As Stimulus-Package Debate Continues in Congress, New-Look Bank Bailout Plan is Set to Debut This Week

Global Investing Roundups Wednesday, October 15th, 2008

William Patalon III — Wed, 15 Oct 2008 14:58:36 +0000

Visa and MasterCard Settle Up; Daimler’s Plant Closures; Apple’s Christmas Bargain; Johnson Controls’ Weak Outlook; Gas Prices Down 23% From July; U.S. Budget Deficit the Highest Ever; Pepsi Fizzles

Visa Inc. (V) and MasterCard Inc. (MA) have settled an antitrust suit with Discover Financial Services Inc. (DFS) rather than go to trial, sending Discover shares up almost 13% yesterday (Tuesday). Discover had filed a lawsuit against the two credit card processors seeking $6 billion in damages. The suit alleged that MasterCard and Visa prevented member banks from issuing Discover cards, Reuters reported.

Daimler AG (DAI) yesterday (Tuesday) announced it would cut 3,500 jobs and close two North American plants in response to declining sales growth. The German automaker also plans to discontinue its Sterling-brand truck line, MarketWatch reported. The plant closures will affect Daimler’s St. Thomas, Ontario and Portland, Oregon plants.

Apple Inc. (AAPL) will for the first time sell a MacBook for less than $1,000 during the coming holiday season, Chief Executive Officer Steve Jobs announced yesterday (Tuesday). “Demand is going to be good,” Jobs said of the MacBooks, Bloomberg News reported. “We’re making a lot of them.”

Johnson Controls Inc. (JCI) yesterday (Tuesday) projected a 16% decline in earnings over the next fiscal year. The Milwaukee-based company manufactures car batteries and seats and has suffered as auto sales declined in the United States and abroad. “While we believe recent economic weakness was clearly partly priced in, our sense from management is that automotive on both sides of the Atlantic is proving much tougher than expected,” JPMorgan Chase & Co. (JPM) analyst Himanshu Patel said in a research note Tuesday, The Wall Street Journal reported.

Light, sweet crude for November delivery yesterday (Tuesday) fell $2.56 to settle at $78.63 on the New York Mercantile Exchange, amid signs of dwindling world energy demand. Gasoline prices have followed oil’s precipitous decline, falling 23% from the record average of $4.14 a gallon reached July 17 to $3.163, according to auto club AAA.

The Bush administration said yesterday (Tuesday) that the deficit for the budget year ended Sept. 30 was $454.8 billion – more than double the $161.5 billion recorded in 2007. It surpassed the previous record of $413 billion set in 2004. Some analysts believe that next year’s deficit could easily top $700 billion, according to The Associated Press.

PepsiCo Inc. (PEP) said yesterday (Tuesday) that it would eliminate 3,300 jobs and close down six plants in an effort to save $1.2 billion over the next three years, The Associated Press reported. The announcement came as the company reported a 9.5% drop in third-quarter profit. The job cuts equate to roughly 1.8% of Pepsi’s global work force of about 185,000 employees.

SOurce: Global Investing Roundups Wednesday, October 15th, 2008

Two Ways to Profit From the Looming Credit Card Squeeze

Robert Williams — Wed, 09 Apr 2008 15:09:37 +0000

Late credit card payments and outright defaults have soared in recent weeks. The most recent data says that “dead” balances written-off as uncollectible by banks have jumped 24% from a year ago. Late payments are up 16%. Can this be linked to the subprime mortgage meltdown? Our research says it is.

Nor is it much of a surprise: Since the subprime crisis broke last year, we’ve repeatedly predicted the fallout would spread to such other markets as credit cards and even auto loans.

Citigroup Inc. (C), the third largest lender to Visa Inc. (V) and MasterCard Inc. (MA), said that the states hit hardest by the subprime fiasco – Arizona, California, Florida, Illinois and Michigan – experienced mushrooming levels of credit card delinquencies and defaults in the fourth quarter. In fact, those states accounted for two-thirds of the nation’s total credit card losses.

Evidence suggests that as adjustable rate mortgages (ARMs) reset to higher interest rates, consumers in these regions – and across the country – are relying more on their credit cards to finance such day-to-day living expenses as groceries and gasoline.

That’s not good.

If you don’t believe us, just ask the U.S. Federal Reserve. On the news that credit-card debt rose by $5.5 billion, or 7.1%, in January to $947.4 billion – dwarfing the 2.9% gain in December – the central bank announced that it’s conducting a formal review of the industry so that it can “better assess the current state of the credit card market.”

Like the subprime mess, as lending standards loosened on the heels of the 2001 mini-recession, consumer credit was extended beyond its viable limits. Credit-card issuers teased would-be clients – with marginal credit histories – with bargain-basement introductory interest rates, only to sock them with a much higher rate a few months later.

And now that the higher rates have kicked-in – and on nice, fat balances, too – people are struggling to keep up with their bills under the strain of an economic downturn.
Analysts widely expect the situation will get worse before it gets better. And they’re likely right. But this credit-card fiasco probably won’t have the cataclysmic, far-reaching effects that defined the subprime debacle. As a result, there are opportunities to profit.

Maxing Out on Credit

The credit crunch was, of course, sparked by high levels of defaults on subprime mortgages extended to people with shaky credit histories. And because banks pool mortgages together and sell them as investment vehicles – called mortgage-backed securities (MBS) – investors were left holding worthless paper (and massive losses) when the mortgages went belly up.

Consequently, the credit markets dried up as financial institutions – reluctant to take on any more mortgage-backed securities – became leery of lending to one another.

The carnage is already well documented, highlighted by the fall of the venerable Wall Street giant The Bear Stearns Cos. Inc. (BSC). Banks already have been forced to write off billions in losses. Now they’re scrambling to bulk up their cash reserves to protect against credit card-related losses.

As of December, Americans had $944 billion in total revolving debt, most of it on credit cards, an annualized increase of 2.7% on a seasonally adjusted basis, The Wall Street Journal reported. That rate was 13.7% in November and 11.1% in October.

The bottom line: Americans have dramatically curtailed their credit card spending.

Now you could blame the consumers’ reluctance to pull out the plastic on the slowdown of the U.S. economy, and you’d be right. But just partly. The other, more ominous reason is the likelihood that many consumers are simply maxed-out on credit.

In December, an average of 7.6% of credit-card loans were either at least 60 days delinquent or had gone into default altogether, according to research by the RiskMetrics Group.

The slowdown in consumer credit could well run through the rest of the year. But let’s not go and sound the alarm bells just yet. Although the lower numbers will have some effect on the bottom lines of both regional banks and Wall Street behemoths, like Citigroup and Bank of America Corp. (BAC), shares have already been pummeled and investor sentiment has likely bottomed out.

What’s more, a key difference exists between mortgage debt and credit card debt that will, in effect, cap the amount of damage credit card defaults can do.

Subprime All Over Again? Not Likely

According to the Fed, credit-card delinquency rates are now up by more than a full percentage point since bottoming out in the fourth quarter of 2005, marking the abrupt slowdown in consumers’ credit-card spending habits.

But the silver lining is that credit card debt is not securitized – pooled – and then sold off by banks as investment securities on any kind of scale that rivals mortgages. And that fact undermines any notion that banks may have subprime-like write-downs in their futures.

Remember, it wasn’t just the loose lending of mortgages by banks that got us into the subprime mess. It was every bit as much the over-speculation on mortgage-related investment securities, too. The latter can’t happen with credit card debt.

In a note to clients, CIBC World Markets Inc. (CM) Economist Meny Grauman wrote that “the good news in all of this is that both corporate and consumer loans are typically not securitized to anywhere near the degree that mortgages are. This means that even though losses on these assets still have the potential to weigh on financial sector earnings, they will not create the same broad systematic risks created by recent troubles in the asset-backed securities market.”

What’s more, a recent report published by the Federal Deposit Insurance Corp. (FDIC) said that 99% of insured institutions were currently well-capitalized at the end of 2007 and close to 90% of those were also profitable, despite the fact that profits at banks - thanks to the subprime meltdown – fell to 16-year lows in the fourth quarter last year.

Taking it to the Banks

The recent data from the FDIC clearly demonstrates how well capitalized U.S. banks are and indicates these financial institutions should be able to ride out any approaching storm. Accordingly, we’re reiterating our bullish view on the financial sector.

In an interview with MarketWatch, Andrew Gray, a representative for the FDIC, said that with only 76 banks on the FDIC’s “watch list,” problem banks are at historically low levels, despite the chaos of the last several months.

“Our problem bank list has 76 institutions, low by historical standards,” Gray said. “In 1990, there were close to 1,500 on the list.”

Five banks have failed in the last 12 months: Metropolitan Savings in Pittsburgh; Douglass National Bank in Kansas City, Mo., Miami Valley Bank in Lakeview, Ohio; NetBank in Alpharetta, Ga.; and Hume Bank in Hume, Mo. That’s a low number when you consider that over 800 banks failed during the savings-and-loan (S&L) crisis that occurred between 1990 and 1992.

“The industry as a whole is coming off a golden period of record profits,” FDIC Chairwoman Sheila C. Bair said in the agency’s Quarterly Banking Profile. “Because of this financial strength, the overwhelming majority of banks and thrifts remain well-capitalized and profitable.”

Consequently, many of the big banks are great plays at the current valuations. But rather than locking in on one target, it makes more sense – considering the prevailing market jitters – to buy shares of the Financial Select Sector SPDR (XLF). In this one ETF, you get exposure to the entire financial sector, which protects your investment against the potential for any blow-ups at individual financial institutions.

But if you insist on trying to “catch lightning in a bottle” with a single pick from the group, Goldman Sachs Group Inc. (GS) is a stellar option. Goldman is well run, well capitalized and is very liquid. The company’s return on equity (ROE) in the fourth quarter remained a stout 40%. And in a recent report to analysts, the firm said that its pool of liquidity was $80 billion, compared with an average of $60 billion during the fourth quarter. And one cannot underestimate the value of cash when investing during such an unnerving time.

After all, as the old Wall Street adage holds: “Cash is king.”

[Editor’s Note: Robert Williams, a veteran commodities trader, is the Editorial Director for The Oxford Club, and is a regular contributor to Money Morning. He last wrote about alternative energy investments. For information on an Oxford membership, please click here.]