I am going to do just as the US government is doing… I am not going to care where money comes from – or about having to pay it back… I am going balls to the wall to max out every bit of credit I have and then what??? Well then I am going to pray for hope and change and go with Ben Bernake’s (and Paul’s) blind faith that everything is going to be OK… You guys can’t say why you are so optimistic but who the hell cares I believe you both!!!… I just hope VISA does too 
The stock market is supposed to be efficient. If that were true, most of the time a company’s stock would accurately reflect the book value of the company and a realistic estimate of its long term profitablility. Reality has been dramatically different for years. The run up in prices that lead to the highs of 2008 was unjustified and current stock prices bear no relation to the underlying values. It is all about emotion and short term trading.
This all means that there is great risk and great opportunity in all sectors of the market. Given the current climate I think prudent investors should avoid bank stocks, even if time proven methods for picking stocks show them to be a great value. For all we know next week a combination of bad news and short selling (naked or not) could so damage any one of these comapnies that they may never recover.
Paul, can you write a column about why there’s so much talk about ’saving’ AIG ?
It is not clear at all why they claim to be such a vital cog of the economy. The stock closed at 52c per share today, well into penny stock territory, the land of the dead or forever undead. They certainly won’t recover, and going from 52c down to zero will not hurt investors.
I say close them, chop them up, sell off the pieces, and move on.
Money can be put to much better uses.
What say you ?
For many banks the bottom is ZERO. I just wish our government would realize this and stop throwing good money after bad. Let them go under, pay off the FDIC insured deposits and be done with it. They are going under anyway, with or without taxpayer money.
This is all about Turbo Tax Timmy (Geithner) trying to save his banker buddies. Following the current trajectory, not only will the banks go under, but the entire nation is spiraling towards insolvency. At least give the money to good banks so that they can exapnd their business. Let the most appaling failures die instead of rewarding them with more taxpayer money.
Well, bottom could be zero. Some are almost there already. It would have hurt, but some of these mega banks should have been allowed to go under at the start. Let the small solid regional banks move up the chain. Just a bunch of hubris that they wouldn’t let them fail. They’ll prob. fail anyway with a lot more hurt and pain than was initially necessary.
Assuming Jamie Dimon at Chase is correct (and so far he has been, so there’s no reason to expect he will not be) non credit impaired loan portfolios are about to face another hit due to home equity loans. Add in rising credit card defaults (Citi and BoA have very large credit card portfolios) and increased unemployment (which will lead to a decrease in bank deposits) and banks are likely to face larger loan losses with a shrinking deposit capital base.
I don’t think we’re close to a bottom.
Until the uptick rule comes back, and some teeth get put into naked shorting or failing to deliver on short positions, banks are never out of the woods.
A bank is the lone entity out there that can be profitable, but have capital issues created by causing depositors to make a run on it, simply by the questionable ethics of rumor spreading and slanderous innuendo, and then be gone tomorrow.
No, the bottom is 0 until we figure out how to push shares with a negative price.
Maybe we should get a collection up to give Tim Geithner (tax cheat Tim) a copy of TurboTax so he can figure out the economy and how to calculate a negative worth for bank stocks. However, if banker friend in the Fed has his way, bank stocks will go back up.
The commercial real estate meltdown has not even begun yet. Credit card defaults, auto loan defaults. Entire malls closing. To even entertain the idea that bank stocks are near the bottom shows that you have no understanding of the problem. None. It makes me sad.
Nope, the worst is not nearly over for banks. There is a dirty little secret that banks have not released yet, that being, that they have a lot of houses still on their books that they have not released to foreclosure, hoping against hope that the market will turn or that Obama will raise his benevolent hand and make it all right again.
Not gonna happen, my friend.
Eventually, the banks are going to have to get these bad houses (mortgages off of their books) and then the fecal matter will hit the fan once again. Massive write downs, another wave of foreclosures, etc….more bank stock selling.
The extent of the economic correctionis EQUAL and OPPOSITE to the economic deception that preceded it. The economy was delusional for a very long time. It will take a very long time for it to re-gain it’s senses. We have a long painful road ahead. I’m talking YEARS before the economic ship is righted again, and Captain Obama is the Skipper of the Minnow at this point. He’s selling a 3 hour tour, but we all know how long that tour lasted.
Buckle up, baby.
No. There’s still more bad news to come from bank stocks. Much statistical research indicates that stocks rarely recover from their prices dipping below $10 (then $5, then $2, then $1); for this reason, mutual funds are not allowed to own stocks below $10 or $5, depending on their charters.
It would be difficult to find a bank that has been unfairly punished. You’d have to go somewhere far away from the coasts, maybe deep in the Midwest, to find a bank that didn’t lend against then-bubbling real estate. You might as well go searching for leprechauns.
You don’t need the aggravation of investing in bank stocks. There are better opportunities in other sectors: energy, food, railroads, technology, utilities, etc.
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Hello Paul,
I really enjoy your posts and also the video from 2 days ago. Excellent contrary indicators.
Hey, how about posting on market-to-market, uptick rule or some other rally-rabbit they’ll pull out of the hat.
What do you think about pension funds? I could also use a heads up before the coming money grab there.
Finally! I am waiting for post on gold.
All the best.