just.a.guy

Four Reasons We're Headed Even Higher

When considering the government's "investments" in C, BAC, AIG, et al, you have to include the value of loan guarantees lower in the capital structure that are propping the whole edifice up.

What good is a few billion on the top of the captial structure in equity warrants and dividends when tens and tens of billions just might be leaking out the bottom?

Until the government has FULLY exited these financial positions, and it is made very clear that they won't intervene this way again, then none of the bailed-out financials' valuations (equity or debt) can really be trusted, because they have printing press value built into them.

It astonishes me how many commentators (including the author) miss this fundamental point.

The Stress Test Cliff Notes

The so-called "stress tests" are really a PR exercise to cause enough of a rally in bank shares for them to sell more stock, and give up more ownership without control -- to keep the inmates in charge of the asylum while having the numbers balance (for now).

I'm not sure where they'll find the next set of suckers though, as they've already burned pension funds, hedge funds, sovereign wealth funds from Dubai to Singapore... when will these guys realize their game is over and there aren't any suckers left?

Will BofA Really Buy Countrywide?

kurt, I think that's what could be happening here. BAC has right-of-first-refusal on the assets as part of its $2BB convertible death-spiral financing last year.

I see the current deal on the table as just a call option for BAC, since it will have/has had a serious chilling effect on any other potential bidders.

Why would the deal just be a call option and not binding? Here, I assume that Countrywide's financial position will only continue to deteriorate, that the quality of its portfolio held-for-sale will only decline, and thus a Material Adverse Change to CFC is pretty much inevitable.

BAC will have front row seats, have done their diligence, and be in the driver's seat when this turns into a pre-packaged bankruptcy with BAC walking away with the servicing business.

Just a theory. Not one I believe in strong enough to hold onto my CFC puts, though. I sold those last month.