Harry Rady Online – San Diego, CA

Harry Rady, Chief Executive officer of Rady Asset Management commented on the stock market downturn despite Bank of America’s reported increase by triple of its earnings for the first quarter of 2009.

“The bank’s earnings so far just seem to be smoke and mirrors and the other companies aren’t reporting quality earnings. It’s just reducing expenses and dipping into reserves,” said Mr. Rady.

Go to the full article for more in-depth discussion: “U.S. Stocks Lower As Banking Concerns Lead to Broad Sell-Off.”

Speculation that the Obama administration is considering converting some of the preferred stock which it has obtained as a result of recent bank bailouts into common stock has added to investors already overburdened accumulation of worries.

The conversion of preferred shares to common stocks will give the administration more freedom to further aid the stressed banking sector without stressing the government’s financial situation, i.e., there would be no need to allocate additional funds. However this move would simultaneously dilute the value of already existing shareholder’s common stock, thus adding to the market downturn.

Read more on this issue in the full article: “U.S. Stocks Lower As Banking Concerns Lead to Broad Sell-Off.”

Frustrating a six-week Wall Street rally, the stock market suffered a 3.5% loss last Monday, April 20, 2009. The recent decline in the Dow Jones Industrial Average on Monday will be the worst one day decline since the beginning of March when the Average reached its lowest point in 12 years.

Adding to the downturn was a 23% drop in Bank of America. Despite announcing a net income increase in the first quarter of more than triple, including the purchase of Merril Lynch recently adding more than 3 billion dollars to its bottom line, B of A still experienced a net loss due to a rise in “charge-offs” and huge losses in its credit-card business.

For more complete discussion of this issue you may follow the link to: ‘U.S. Stocks Lower as Banking Concerns Lead to Broad Sell-Off.’

Harry Rady, CEO of Rady Asset Management, says that the investment approach used by long/short managers must change. “The days of the highly levered, hyper-trading, black box models are over.”

Rady says that often fund managers see a stock trading near its 52-week high, and then they jump in, instead of waiting for it to come down and even be undervalued.

Read more in EuroMoney’s article here.