Managing Wealth With UBS Investment Bank

Jan.24.11 | About: UBS Group (UBS)

This week I’m taking a chance on the short side with a short sell on UBS Investment Bank (NYSE:UBS). The broad market looks to still be in bull mode in general, although somewhat choppy and toppy in my opinion, but if I get lucky here there might be a selloff and this trade just might work out. I’m betting I’m going to get a lot of comments on this, saying I’m crazy to be shorting UBS for whatever reason. All I can say is I'm looking to implement stop-loss in case it keeps heading higher.

UBS 52-Week Price Breakout?

With UBS’s 52-week stock price near the high of its range of 12.26 to 18.48, I don’t believe in a new breakout right now, but instead in a low-risk/high-reward short sale on it. Again, I could be totally wrong here, so just stick to the stop-loss I’ve set -- or even tighten it up to just above the 18.48 52 week high if you’re going to take the position.

UBS Balance Sheet and European Sovereign Debt Problems

UBS’s current balance sheet is terrible, with almost 100% debt to equity from my analysis. With the European sovereign debt problems, the European banks are selling at significant discounts that some might say possibly make them great buying opportunities. I’m suggesting that the European debt crisis and collateral damage potential is not over yet, and the buying opportunity for at least UBS is not here yet.

UBS, Lehman Notes, Lehman Brothers Unsecured Debt, and the U.S. Taxpayers List

UBS has a tarnished reputation it’s trying to fix from its subprime loan crisis involvement; subsequent collateral damage aftermath from representing selling Lehman Notes; and having to give up its list of U.S. taxpayer bank accounts to the IRS. UBS represented the Lehman Notes as safe, no-risk investments, and maintained that investors would receive 100% of their investment in the Lehman Notes after they reached maturity.

UBS did not inform its customers of the real risks associated with the Lehman Notes, including the credit risk of the borrower, Lehman Brothers. The reality is that the Lehman Notes were only unsecured Lehman Brothers debt. UBS was representing the Lehman Notes as safe, and securities arbitration claims against UBS on this issue are still ongoing. The Lehman Notes are now worthless.

UBS Earnings Statement

On February 8, UBS will report fourth quarter 2010 earnings, and reportedly will make an announcement on its proposed 15-25% bonuses for staff and wealth managers. The bonuses are rumored to total 4 billion Swiss francs.

The UBS Lifestyle Guide

UBS issued a style standards guide for employees on how to look, act and eat when reporting for work, which has raised some controversy and laughs from some quarters. It has now revised this style guide with more general guidelines than in the previous guide. I don’t know if this incident affects its forward stock price or not, but it indicates possible uncertainty in management's view, suggesting a lack of confidence in its employees and possibly in the overall social environment at UBS right now. I would suggest that what beliefs are in the minds of management and employees at UBS, whether good or bad, will manifest in time.

UBS Short Short-Term

UBS is a great bank and company, I believe, in the long term. In the short term, I’m betting on possible market odds and probabilities that there is low-risk/high-reward discounting to be had on UBS. If not, take stop-loss or move on.

Sell UBS

Sell Entry: 17.93 to 16.99.

Stop-Loss: 19.05.

Take Profit Areas: 15.29 to 14.96, 14.65 to 14.35, 13.15 to 12.85.

UBS Investment Bank Company Profile

UBS AG, a financial services firm, provides wealth management, asset management, and investment banking services to private, corporate, and institutional clients worldwide. The company also is involved in retail and commercial banking in Switzerland. Its Wealth Management & Swiss Bank division's wealth management business caters to high net worth individuals worldwide (except the Americas) whether they are investing internationally or in their home country. This division offers these clients a range of tailored advice and investment services. Its Swiss Bank business provides a set of banking services for Swiss individual and corporate clients. The company's Wealth Management Americas division offers products and services specifically designed to address the needs of high net worth and ultra-high net worth individuals and families. It includes Wealth Management U.S., domestic Canada, and the international business booked in the United States. UBS AG's Global Asset Management division provides investment solutions to financial intermediaries and institutional clients worldwide. It offers investment capabilities across various traditional and alternative asset classes, including equity, fixed income, currency, hedge fund, real estate, infrastructure, and private equity investment capabilities that could also be combined in multi-asset strategies. The company's Investment Bank division provides securities products and research in equities, fixed income, rates, foreign exchange, and metals. It also offers advisory services, as well as access to the world's capital markets for corporate, institutional, intermediary, and alternative asset management clients. UBS AG operates in approximately 50 countries. The company was founded in 1862 and is based in Zurich, Switzerland.

Click the UBS Investment Bank stock chart below for a larger view.
UBS Investment Bank Stock Chart
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in UBS over the next 72 hours.