Renewed E*TRADE Buyout Call & Financial Rally Call (ETFC, BMO, STI, JPM)

Market pundit Doug Kass is calling for a shocker in 2012.. make that two shockers, or three.  His interview was given on CNBC over the phone.  The first shocker is that Kass is calling for financials to lead the market higher to challenge all-time highs.  All-time highs?  Really?  And the other big shock is a bidding war buyout of E*TRADE Financial Corporation (NASDAQ: ETFC).

As many readers know, E*TRADE has been considered buyout bait for longer than most would care to remember.  Betting that a buyout would come along has killed many portfolios as the stock’s 52-week high is $18.13 and the shares are now south of $8.00. The risk here in looking at calls like this is that some predictions can end up becoming rumors.

Kass’ full article shows all of his wild (and tame) 2012 predictions, and goes on to recommend a strategy of owning J.P. Morgan Chase & Co. (NYSE: JPM) and showing that SunTrust Banks, Inc. (NYSE: STI) could be another bank gobbled up in a buyout from a Canadian bank.

It was just in recent weeks that E*TRADE killed its own buyout speculation.  The online brokerage firm announced that the end of its strategic review was not likely to fetch any high-premium acquisitions.  The final internal verdict from the board of directors was that E*TRADE should keep on its own path on its own turnaround.  In short, it likely had no real super-premium buyers interested at all.

Doug Cass named the Bank of Montreal (NYSE: BMO) and other bank would be in the bidding war for E*TRADE.  BMO has been speculated before, and its solid credit ratings and its $35 billion market value make this at least possible. 

Anything in the world of M&A can be possible.  Any deal or hope of any deal can also fall apart.  E*TRADE shares are down 1.2% at $7.85 on the day and that indicates that traders and investors have more doubt rather than conviction about any such buyout.

The full 2012 predictions from Doug Kass can be found here.

JON C. OGG