Donald Johnson

Nobody Knows What Bank Stocks Are Really Worth

What makes banks stocks volatile and risky?
First, politicians are messing with the money and banking markets as never before, and predicting what they will do to and demand from banks is like reading Barney Frank’s mind. Impossible.
Second, it’s almost impossible to predict spending trends for consumers or businesses. As a result, only 23% of the companies that have reported earnings for the first quarter have provided guidance on the sales and earnings for the rest of the year. If banks’ customers can’t predict their futures, how can banks?
Third, the critical housing market remains in decline and probably will for a long time. We just don’t know how bad the toxic assets on the big banks’ balance sheets are and we probably won’t even after the government gives a peek at its stress tests. Results of the stress tests, or at least some of them, are due on May 4.
Fourth, the world continues to have the ability to cause turmoil, and we don’t know when some dictator will decide to turn on the heat on the U.S. and the West in an effort to take his people’s eyes off their domestic problems. I own USB, and I have sold covered calls against the stock.

TARP: Bailout or Money Pit?

I think propublica.org has little credibility as an objective source of information. It's apparently backed by lefties.

When you make big moves you risk big mistakes. Paulson took big risks and made some big mistakes. Whether his efforts have been beneficials will be discussed by academics for years. I don't see easy answers to the Paulson question or to the crisis that still is evolving.

I wonder if there are smaller, less risky things that can be tried? I have no confidence in the Obama team and little confidence in the wisdom of those leading our major institutions.