satyr

Bank Dilution Looms for 2010

A few things could use some qualificaiton or clarification here. First off, the current problems in commercial real estate are not so much the result of poor underwriting as the falling value of the assets. I would not blame underwriters for not anticipating that collateral would lose 30% of its value. Second, it should not be assumed that capital levels will be bolstered by stock sales. There are other means for accomplishing this, so until a financial institution announces a stock sale, I would not suppose it. And, third, when a company sells shares, it does not necessarily result in dilution, other than in the very short run. Remember, they get cash in return for the shares, and this is a new asset owned by all shareholders. In turn the cash will be exchanged for other assets that generate income. This should not be characterized as a negative, because if capital is properly deployed, it is actually a benefit to existing shareholders.

Stocks Bounce, But Big-Name Investors Aren't Convinced

There are so many moving parts that it becomes nearly impossible to predict outcomes in the short or mid-term. Psychology plays a more important role than fundamentals, and very little money (as a percentage of the total) is controlled by those who are governed by fundamentals. No doubt, there are exceptions like Zell, Buffett, et cetera. But, anyone who thinks that what they say and what they do are one in the same are likely to get their head handed back to them on a platter. They will load up on what they want, then tell you about it after it has already moved in their favor.... hoping that everyone else then jumps on the bandwagon and boosts their bet even further into the black. Bottom line: think hard and for yourself.

Report from Europe: More Soggy Economic Data but Stocks Don't Care

As always, an informed perspective on what is. Of course, the Ford/Onion vid the end was most appreciated.

Cheap Stocks Aren't Always Bargains - Barron's

The main trouble I have with this line of thinking is that it incorrectly attributes cause and effect. Stocks that go from $10 to $0.50 are not risky because they are under at $0.50. Rather, they dropped to $0.50 because they are risky. Once the price has dropped, the risk has been priced into the stock. In other words, the wise time to sell would have been before the drop, not afterward. So, if you want to buy a speculative stock, it may well be trading under $1. For those who are willing to tolerate higher risk, there is nothing inherently wrong with these because of their price. If you don't want a speculative stock, don't buy one, regardless of price.

I've also seen the analysis that shows how stocks that fall from $10 to $1 often take years to make it back to $10, and many never do. Aroo? Most stocks that are trading at $10 also take years to make it to $100, and many never do. Making a 10x gain in a short period of time is kind of rare - so pointing this out about low priced stocks is close to meaningless.

As for the potential for de-listing, this is a mirage. Aside from the relaxing of the rules, any company that wants to avoid this problem simply does a reverse split. At the push of a button, a $0.50 stock can become a $5 stock, or a $50 stock for that matter. Does that all of the sudden take the risk out of the company and make it investment grade? Honestly, people who use this kind of logic as an indicator have a weak grasp of accounting and securities regulation, in my opinion.

25 Companies That Lost America Nearly $1 Trillion

Quite a lot of distortion here, both in terms of facts and interpretation of them. Enough said, I think.