J. D. Swampfox

AmEx Shares Could Double - Barron's

Another joins the chorus singing "investors are fools to be selling banks." Without the government, AmEx would have no liquidity. Its charge-offs are rising, but that's not important because AmEx relies on fees, not interest on those charged off loans...something just doesn't sound right with that analysis...

What Else Are the Banks Hiding?

Simon Johnson has a great article in the The Altantic about how the bankers oligopoly have staged a "quiet coup", bringing the US government under their thumb since World War II and the urgent need to put them in their proper place before we spin off into depression. see: www.swampreport.com/po.../

Is It Finally the End of the Bear Market?

The writer says, "we can now admit that the Fed actions the past few months have been a success and that it clears the sky a bit." a success? - I don't accept that at all... Bank bondholders have to take a haircut... but if they are forced to, all the CDS's written on the banks bonds will be triggered and payable, leading to another meltdown. The TALF and so-called Public/private partnership is just another re-arrangement of the deck chairs on the Titanic...see Mike Whitney's article in the Market Oracle here: www.marketoracle.co.uk...

We certainly may see a little more upside, but deeming the FED's actions a success? -the sky is not clear at all

Bailoutspotting: Zombie Bank System Needs to Detox from Federal Rescues

Good post. I'm trying to summarize the unintended consequences:
1. a sell off in the secondary market of TLGP issues - this means to me lowered values for this part of banks' debts.
2. in April, spreads will be driven wider by the dramatic drop in TLGP swapping activity - this means to me that longer term bank debt will fall in value more than short term debt.
3. LIBOR is likely to spike and short spreads to widen - this means to me that more tight liquidity and more reliance on government provision
4. other unforeseen consequences...in particular from Dodd's DPA 2009 bill with $500B more of bank methadone - this means the amount of Dodd's bill is intended to be drawn down. It's all most under the radar of the press because it's "aimed at small banks" and big banks have their own separate programs.

The Bounce in Financials: Will it Last?

David Darst at FTN Midwest Securities Corp. says that the current prices of the bonds of BAC and C indicate the "companies' equity is worthless, the government's investment is worthless and subordinated debt holders will lose some of their investment". Buying their bonds, much less their stock, really takes some "out of the box" thinking to justify...

See www.bloomberg.com/apps...

Confidence in Banks and Government While Fools Reign Supreme

It will take the government at least 10 years to get out its equity positions in the banks (if it ever does). Betting on a socialist government to efficiently run the country's banks without using them for social engineering?... now that's foolish.

Stress Tests: Banks vs. Bond Insurers

Yup, great post. If a writer of CDS's like MBIA is able to make good on its obligations, maybe not all CDS's are created equal. Hmmm, I guess it would be nice if all those CDS's that are not on JPMorgan's balance sheet (but should be) were obligations of MBIA...

The End of the Credit Crisis

The shares in the banks that the government owns are newly issued shares, not purchased from the existing supply in the market. Further, IF the banks take "write-ups" from the scenario you lay out, the value of them to existing private shareholders will have been diluted by the percentage controlled by the government. In the case of Citi, as of today, this is currently about 40%, but it looks increasingly like it will soon be 80% a la RBC in the UK. Skyrocket from write-ups? Sounds tenuous, at best...