The Market is digesting the sub prime mess with the banks. This mess is what caused the market to bottom in August . Now the banks are starting to write off the loan mess and it is starting to work itself out iin the market. This will take more time a small Santa Claus rally will try to move the market upward but the inflatiion factor will keep a lid on it. Do not get suckered in thinking this is the bootom.
Now in special situations we may trade ( versus invest) a bounce of the banking sector. Since the whole banking sector is being dumped due to the big banks getting to deep into the sub prime mess there are potential buys out there for good trades. One of these situations is WB.
The Bullish Percent Index is a great means of gauging whether a sector is overbought or oversold. Historically, anytime this indicator nears 35 for a given sector, it's oversold and ready to rally.
The S&P Financial Sector is under extreme selling pressure at the moment. In the past, anytime the Bullish Percent Index has neared these levels, finance has rallied strongly soon after.
Now is the time to bet on a rally in finance. We've seen several CEOs step down, major analyst downgrades, and billions in write-offs. The worst-case scenario is already discounted into these stocks: The sector is so oversold that even bad news is not pushing it any further. In Bank of America's case, the stock even rallied on terrible news.

Top 5 Insider Buys:
1.Wachovia (NYSE: WB)
2.Priceline (Nasdaq: PCLN)
3.Inventiv Health (Nasdaq: VTIV)
4.American International Group (NYSE: AIG)
5.American Express (NYSE: AXP)

Top 5 Insider Sells:
1.Intel (Nasdaq: INTC)
2.Hologic (Nasdaq: HOLX)
3.CME Group (NYSE: CME)
4.Hess (NYSE: HES)
5.Oracle (Nasdaq: ORCL)

This bank has already disclosed the full damage it took on the mortgage meltdown: $2.7 billion and an additional $500 million to $600 million related to bad loans in its mortgage loan portfolio. To be clear, this total amount is smaller than what Bank of America and Citigroup recently marked down in the last quarter alone.
Like the other major banks, this company's shares have bottomed out: The day it disclosed the full losses – November 9 – shares didn't budge. In fact, they rallied almost 10% in the next two days.
Everyone's already discounted the worst in this bank's stock. It's received six analyst downgrades in the last month and a half.
It's the cheapest of the major banks. At current prices, you've got the once-in-a-decade opportunity to safely lock in a 6.4% yield.
And it's the only major bank with insider buying. In the last week, insiders have bought $9.8 billion worth of stock.
On November 13, independent director Lanty Smith bought $3.8 million worth of stock. Lanty's been with the company since 1987. He bought on the cheap – the exact day shares hit a four-year low. That same day, the bank's chief risk officer Donald Truslow bought $542,000 worth of stock.
Two days later, Smith was back buying another $1.5 million worth of stock. In two purchases, Smith bought more stock than he had in the preceding three years.
On Monday of this past week, CEO and board chairman Ken Thompson bought $3.9 million worth of stock.
Among these three, you've got a combined 78 years worth of experience at the company buying nearly $10 million in stock in one week. These guys know this business. And they're loading up big time.
I'm talking about Wachovia Corp. (NYSE: WB).
I'm sure you're familiar with Wachovia's business. The bank engages in everything you associate with big banks: lending, deposits, etc. Rather than going into all of these business segments, I want to focus on the roles of two of the insiders who bought Wachovia's stock. Each of them and their respective purchases present a particular insight to Wachovia's situation.
The Least Subprime Exposure of Any Major Bank
Don Truslow's been with Wachovia since 1980. He's been chief risk officer since 2001. The means that Truslow's head should roll given Wachovia's involvement in the subprime debacle… or should it?
At 0.19%, Wachovia's net charge-off ratio – the percentage of loans that have been written off as bad debt in relation to total loans – is the lowest of the big five U.S. banks.
BankNet Charge-Off Ratio
Wachovia 0.19%
Bank of America 0.80%
Wells Fargo 1.01%
JPMorgan 1.07%
Citigroup 1.36%

And except for Bank of America, Wachovia has the least amount of nonperforming assets as a percent of total loans. "Nonperforming assets" is a technical term Wall Street uses to say that an asset is doubtful and likely to need writing off. You can think of nonperforming assets as "potential junk." The fact that Wachovia has little of these relative to its total loan portfolio says essentially, "We don't own much junk."
All of this adds up to one thing: Wachovia is a bank that minimized its risk regarding bad loans and mortgages. This aversion to risk is explicit in the bank's adjustable-rate mortgage (ARM) lending segment, the business segment that has come back to haunt mortgage lenders the most.
Wachovia is the only major bank to do all of its ARM underwriting in house. When the bank made an ARM mortgage, collateral was always involved. In other words, Wachovia avoided the no-income no-asset verification (NINA) loans that lend borrowers money without requiring collateral. With NINA loans, banks didn't even have to verify the income or net worth of borrowers. For these reasons, NINA loans are commonly called "liar loans."
Wachovia avoided the risk that many other banks took on by staying away from NINA loans entirely.
And the loan-to-value ratio – basically the percent of the mortgage that is covered by the bank – is 71%. Put another way, Wachovia's ARM borrowers put a 29% down payment on their mortgages. This beats Citigroup's average loan to value of 79% (its borrowers only own 21%).
Finally, Wachovia has the smallest subprime-related exposure of the big banks. As of October 31, the bank had $2.7 billion in net exposure to the subprime mess. Add in $763 million in exposure to other portions of the credit market, and you've got a total potential write-down of $3.4 billion. This is nothing to celebrate, but it's drastically smaller than Citigroup's $15 billion and Bank of America's $11 billion. Wachovia's subprime exposure relative to market cap is 4%. Bank of America's is 5%. Citigroup's is 10%.
Wachovia is the least at risk of the big banks. So it's not surprising that its chief risk officer, Don Truslow, has put $542,000 of his own money into Wachovia's stock.
The Biggest Dividends of Any Major U.S. Bank
Like Truslow, Wachovia CEO Ken Thompson has been with the company a long time, 31 years to be exact. He's been CEO since 2000. He oversaw Wachovia's merger with First Union bank. That move established Wachovia as one of the largest banks in the U.S., with 13 million households and businesses as customers.
Thompson took over as CEO in 2000. The American Customer Satisfaction Index has ranked Wachovia No. 1 in customer satisfaction among banks every year since 2001. Under Thompson's watch, Wachovia has more than doubled its revenues. More significantly, the bank has undergone a massive increase in profitability. Earnings have grown nearly fivefold. Both operating and net margins have doubled.
Of course, 2000-2007 were great years for finance stocks in general. Banks make money on the spread between the interest they pay on deposits and the interest they make on loans. Easy money flowed from the Federal Reserve's spigot starting in 2001. Banks were paying out low interest rates… and making a killing.

George Soros is betting on a recovery in distressed mortgage lender Countrywide Financial (NYSE: CFC). Soros established a new position worth $44 million in the company last quarter. Soros joins Arnold Schneider, Tom Gayner, Richard Pzena, and Wally Weitz – a veritable who's who of investing – in establishing a position in CFC.

However, Wachovia grew at a spectacular rate, even in the context of the largest financial boom of the last 15 years. From 2001-2007, Wachovia increased its number of household customers at an annual rate of 350,000 per year. It's also seen the highest amount of deposits per new branch per month of the major banks: $1,493. Bank of America – the second best – pulls in $1,267.
Much of these profits have been returned to shareholders via Wachovia's massive dividends. From 2001-2007, the bank's dividend has increased 167%. And unlike Citigroup, there are no rumors of Wachovia lowering its dividend. In fact, Wachovia raised its dividend 14% in August. It maintained this payout in October.
Currently, Wachovia yields 6.4%. And Ken Thompson is buying big. On November 17, he bought 100,000 shares of Wachovia's stock valued at $3.9 million. The purchase represents an 11% increase in Thompson's holdings.
Besides Truslow and Thompson, Wachovia's lead independent director, Lanty Smith, has bought $5.3 million worth of Wachovia's stock in the last two weeks. Smith has served on Wachovia's board since 1987. Like Thompson and Truslow, he's a career executive at the bank. And he's bought more Wachovia stock in the last two weeks than he has in the last three years.
Wachovia currently trades at eight times earnings. It's the cheapest of the major banks. It also has the least exposure to subprime risk. And it's the only major bank with insider buying.
Best of all, the worst-case scenario is already discounted into its stock. The recent write-downs didn't even phase Wachovia shares. If we buy Wachovia now, I expect we'll see a quick 10%-15% pop in share price in the next month and a half. Again, the entire finance sector is way oversold. The Bullish Percent Index is at historic lows – a sign that has preceded strong rallies in the past.
Action to take: Buy Wachovia Corp. (NYSE: WB)
Action to take: Buy the WB December 42.5 calls (WBLV)