mikebrah

The Case for Shorting Bank of America

Being backed by the government doesn't make it a good investment. It just means it won't go to 0. But look at FNM and FRE. Those are government backed. Or GM, or C or AIG. That could realistically happen to BAC.

Government sponsorship isn't a business model that INVESTORS will applaud long term. Sure, the top executives, directors, etc. will make out handsomely from the government tit. But that's not exactly strong motivation for rational investors to hold or open new long positions in this stock.

If the Post Office had an IPO tomorrow, would you buy it?

MM

Freedom of Information Act Disclosure Busts Paulson, Geithner, Bair

Too bad the Mafia couldn't print their own money. Their methods of extortion seemed more noble than our government's.

MM

Credit Card Losses Are the New Bad Mortgages

Mark, you sound like you are on the cusp of capitulating. Hang in there a little longer, bro. Eventually nature wins.

MM

Do You Believe Borrowing Leads to Prosperity? (Part 2)

"Personally, I want to be financially secure rather than appear to be financially secure."

Amen.

User353372:
TIME FOR AN INTERVENTION!

MM

BofA's Capital Needs: More Obfuscation by the Media

Karl, while I agree with your general sentiment your math is wrong. The dilution to an existing shareholder is about 35%.

Current market cap is $70B. New shares are $35B. New total market cap is $105B and original shareholders have $70B of that total, meaning they control about 2/3 of what they used to control.

MM

BofA's State of Denial

WTF?! WTF?! WTF?!

Why This Rally Is Unsustainable

Jasper,

"It is the hallmark of irrationality to react badly to reality."

Great sentence!

Betting on the Big Banks

This is one of the more asinine statements I've read...no offense Perry.

But regardless of how any individual feels about any individual financial company's health, the indisputable reality is that there WAS a credit bubble. We are in the midst of the popping, and in the history of bubbles no participant EVER returns to their bubble valuations.

I wholeheartedly agree that over the next 3 or 5 years many financial companies will provide excellent returns. But only to those investors who paid an appropriate price, and whether that is today or in another year I don't know.

Just like in the tech bubble collapse of 2000-2002 there were handsome opportunities for those investors willing and able to differentiate between AMZN and EBAY and the "UsedPetDealer.com's" of the tech world. There will be those same types of opportunities in the current environment.

But the essential element of a bubble is that valuations become based on PROJECTED data that turns out to be very far from reality. The $500B market caps you refer to were a result of projections based on unsound and unsustainable business models.

The result of this credit bubble will be a general reduction in credit, and without a rapidly expanding level of credit these banks' growth will be retarded. The winners (those with minimal participation in the bubble) will swoop in and pick up good assets on the cheap and the losers will cease to exist.

MM


On Apr 22 09:30 AM Perry1961 wrote:

> B of A and Merrill had a combined market cap north of $500B before
> the recession. Is there any reason BAC can't surpass that once the
> recession ends? Fed funds have never been this low. With 10% of the
> country's bank deposits,and Americans saving more than they have
> in decades,BAC is going to make a fortune next year. When loan loss
> provisions go into reverse,BAC will head to $80+.

Three Card Monte and the Feigned Outrage Against AIG

Furthermore, if AIG had just been allowed to fail then by the nature of bankruptcy I think a lot of these debt obligations would have been altered.

The whole reason the taxpayer is paying these exorbitant amounts is because the government stepped in and declared we would. That is the government's fault, not AIG's counterparties'. The byproduct of the "too big to fail" ideology is that taxpayers pay the bill.

Three Card Monte and the Feigned Outrage Against AIG

Re: kb

'Without the contrarians who were buying these speculative CDS' the bubble would just perpetuate into an even more destructive event.' - by what transmission system did a CDS contract slow or stop the bubble?

I'm not saying it slowed the formation, but that it popped it much faster than would have occurred without its existence. Instead of having a building slowly rot due to lack of upkeep, the CDS market (combined, unfortunately, with naked short selling) acted like a demolition squad. While violent and destructive on the surface this is actually a much healthier situation and I think could prevent a decade of stagnation. I am a firm believer in the "liquidation" model.



'The CDS market is actually quite beneficial and thus far has operated quite smoothly despite all the bad press and hyperbole.' - how is hundred of billions of tax payer money being sent to counterparties quite beneficial and smoothly operating?

This was a bad business model on AIG's part. What their intentions were is debatable, but I just have a hard time blaming policy holders for an insolvent insurance company. Sort of like Floridians demanding "reasonable" insurance even though they live in a hurricane zone, only to find when one eventually strikes their insurance company no longer exists.
Also, I was never in favor of the way AIG was handled from the get-go. I readily concede a lot of sh*t has happened, I just don't think the brunt of it should fall on CDS speculators. By their very nature, speculators are reactionary. They are the trend-followers, the chartists, technicians, etc. As the giant stumbled, they simply bet he would fall.

Just my $.02 and I welcome dissent. Thoughts?

Three Card Monte and the Feigned Outrage Against AIG

This sounds a bit like a witch hunt to me.

What did you expect AIG to do with the money? The whole reason they received taxpayer money was because they were insolvent. This means they could not pay out the obligations they VOLUNTARILY entered. An insurance company can't meet its claims, and you blame the policy holders? Nice.

Basically you are arguing they should renege on their contracts on all instances where you, or some ordained oversight committee, deem the counterparty's actions as immoral. This is just another argument to obstruct capital flows under the tireless guise of egalitarianism.

Without the contrarians who were buying these speculative CDS' the bubble would just perpetuate into an even more destructive event.

But to argue that ONLY parties in need of risk mitigation should be allowed to operate in the CDS market is foolish. Plus, this would lead to unintended consequences such as greatly reduced liquidity, which in turn might decrease the effectiveness of the market for those trying to use it for its "correct" intentions.

Naked short selling is already illegal and what should be much more scrutinized. I believe naked short selling to be a violation of property rights and the most effective way to obliterate a company's reputation and share price.

The CDS market is actually quite beneficial and thus far has operated quite smoothly despite all the bad press and hyperbole.

The Great Bank Rush of 2008: What's the Money For?

Considering the magnitude of this rule change, I am shocked more hasn't been made of it. This is the first I have heard anyone speak about it, and it is downright scary.

This really is frightening, especially considering that (like a gambler) even if this bailout works, there is great likelihood that it will be followed by a series of high-risk maneuvers.

This really feels like someone being down to their last few chips at a blackjack table and putting them all on the table. Even if it works, you still aren't anywhere near where you started and will likely repeat the move several times.