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As Bank of America Goes, So Does the USA

 
As GM goes, so does the nation?  That was true for almost a century when GM dominated nation’s economy and was an icon for the American manufacturing industry. Now, the GM has fallen into the rear-view mirror and its glory will stay only in the good memory. After government rescue, GM seems to revive quickly using its advantage of huge size. Its recent huge success of IPO was more or less an indication that GM maybe prosper again. However, behind all the IPO buzzes, the true story is far away China story, since all of the GM profits were actually from China, not the deep loss from USA market. At the bottom of the financial crisis, GM could easily shut down the entire North America production if there were no huge resistance from Unions and a pro-union US government. The world would not notice that and even the US market would not notice that, since GM could have produced all its cars from China and other countries.
 
If GM is no longer irrelevant, you’d better not say “As GM goes, so does the nation” anymore. What shall you say then?
 
As Bank of America goes, so does the USA!
 
First, size does matter. In terms of the employment, banking industry is hiring a lot more people than the auto industry is. The Big-Five Banks employ almost double number of employees, i.e., 880,000, than the Big-Three Autos do, i.e., 450,000. In addition, considering the major portions of the Big-Three Autos operations are actually outside of the US, the actual US employee numbers maybe only little more half of the total employees. For banks, more than 90% of their operations are completely US based.
 
 
 
 
Employment
GM
209,000
Ford
198,000
Chrysler
50,000
Big-Three Auto
457,000
 
 
BOA
284,000
Citibank
258,000
JPMorgan
236,000
Goldman Sachs
39,000
Morgan Stanley
63,000
Big-Five Bank
880,000
 
 
In terms of the corporation values, the combined market cap of all Big Three Autos is about $100 billion and that of the Big-Five Banks is a much bigger $500 billion.
 
Second, the Americans today can live a normal life without driving a single American car. There are plenty of more reliable, more fuel efficient cars from Germany, Japan, and Korea to choose from. In fact, the US Auto industries market shares have been dropping steadily in the past 20-30 years, from almost 100% to less than 50% today. Besides, less than half of GM cars actually built outside of the USA. In comparison, the banking industry is completely domestic. The American moneys are deposited into the American banks and the banks are lending the money to American business and real estates, etc. The nation will go paralyzed instantly if the Big-Five Banks go out the business. Bank of America has a total deposit of more than $1 trillion dollars or 15% of national total deposits. Whereas GM is dispensable from the US economy, the American Banks are absolutely not.
 
Moreover, the American Banks are controlling the financial lending of the American big or small businesses, providing the fresh blood to power the US economy every day. If the lending stopped, the entire US economy would be put to a halt. Can you imagine what it looks when the American economy halts and collapse? No one wants to see that happen.
 
Now, you can this again.
 
As Bank of America goes, so does the USA!
 
 


Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in C over the next 72 hours.