ItsJustMe

3 Reasons To Be Bullish on the Investment Banks

Before his investment in Wells Fargo, Warren Buffet always advised investors to stay away from banks because it was too easy for them to hide their true liabilities. As a CPA, I can tell you that is especially true of the non-regulated investment banks.

I would hope that people finding out that 80 billion dollars in "pretend" book value didn't actually exist last weekend would have taught some lessons, but apparently not. When the Chase auditors spent the weekend looking over BSC's books, they found more scary liabilities than assets.

Not only did the other 2 institutions looking at their books that weekend not bid on BSC, but Chase finally had to be bribed by the Fed to buy the firm for a fraction of the worth of their valid REAL ESTATE assets.

Quite frankly, I suspect that all the investment banks and quite a few commercial banks are just as insolvent. That doesn't mean they'll all go under however. If the Fed continues to keep them liquid as they are apparently trying to do, then it is possible that over the next several years, the large investment banks (those that are too big to fail) can slowly deleverage and get solvent again.

However, Chase established their true market value last weekend. When their stock prices begin to get closer to that level - and I suspect they will over the coming year as reality sinks in - I'll consider catching them on the bounce since they'll be under new banking regulations by that point...