Bac = wtf???

[Maurice]

I can easily envision the government requiring more upside than they have to date, the question is whether they wipe out existing shareholders (any more than they already have been, that is - not everyone bought at the levels I did).

I think even Ms. Pelosi doesn't think they will:

“I’m not talking about total ownership,” she quickly cautioned...

And I doubt the relevant voices in the Administration are to the left of her.

FWIW, the market reaction to the Sunday comments seems to be on my side. BAC is up over 8%, Citi up over 4, while the S&P is up only 1.75%

Having said all that, I may well be wrong. If you're confident that I am, you could always take the other side of the bet.

 

[haha]

I can easily envision the government requiring more upside than they have to date, the question is whether they wipe out existing shareholders (any more than they already have been, that is - not everyone bought at the levels I did).

I think even Ms. Pelosi doesn't think they will:



And I doubt the relevant voices in the Administration are to the left of her.

FWIW, the market reaction to the Sunday comments seems to be on my side. BAC is up over 8%, Citi up over 4, while the S&P is up only 1.75%

Having said all that, I may well be wrong. If you're confident that I am, you could always take the other side of the bet.

I tend to think that you are right. That it is a speculation on the government, and that they won't let you down. But I couldn't begin to put probabilities on the various possible outcomes so I don't feel like playing.

From my POV there are other less uncertain plays that may have similar possible gain. But I definitely see your position here. I certainly would not want to take the other side.

Ha

 

[ChrisC]

I can easily envision the government requiring more upside than they have to date, the question is whether they wipe out existing shareholders (any more than they already have been, that is - not everyone bought at the levels I did).

I think even Ms. Pelosi doesn't think they will:



And I doubt the relevant voices in the Administration are to the left of her.

FWIW, the market reaction to the Sunday comments seems to be on my side. BAC is up over 8%, Citi up over 4, while the S&P is up only 1.75%

Having said all that, I may well be wrong. If you're confident that I am, you could always take the other side of the bet.

Actually, I'm on the other side of the bet already and contemplating dumping the C shares I've held for quite a long time now. (I've been snake-biten with holding and riding too many stocks down to zero, in the past, such as K-Mart, WCOM, NT, and CC.)

The question is not whether they wipe out existing shareholders, as they will, in some fashion or another be seriously diluted, but how will the Government structure its equity piece (whether in preferred stock or warrants) in such a manner to attract new private equity. You might still stand after Government intervention, but you might find you're on the bad side of a 10-1 reverse split too.

 

[OAG]

Hedge your bet on some Political response? You have a lot more faith than I do (at least on something these people would say).

 

[Maurice]

Re nationalization:

House Financial Services Chairman Barney Frank said yesterday “the government should not take over all the banks.”

 

[ChrisC]

Keep telling yourself that and perhaps the fear might go away. The operative word in Mr. Frank's statement is "all." Do I think the Government will nationalize some banks? Well, is past, prologue? Is the President, Black? Is the Pope, German?

 

[Maurice]

Its possible that is the way he meant it, but I have trouble imagining them nationalizing just one bank. It would put the non-nationalized banks at a disadvantage. Whom would you rather buy a CDS from - BAC or the US Treasury?

 

[ChrisC]

Why do you have trouble with the image? It's been done before. Technically, we've already had one major, though not mega, bank nationalized in this mess, namely IndyMac, which was operating under FDIC conservatorship for almost 6 months. And mind you, if one of the mega-banks was actually "insolvent" or "unsafe or unsound," the regulators have little choice but to close the bank under applicable law -- that's precisely one of the reasons you have capital injections going into these banks from Uncle Sam, i.e. to avoid the closure and activating systemic risk protocols, which right now are under the sole purview of the FDIC for insured banks.

I'm afraid, Maurice, that your "bet" is just a bet, nothing more, nothing less. But if you want to wager in an informed manner, I do believe there's more than meets the eye in statements made by Pelosi or Frank. Remember, the politicians can also get their foots in their mouths over these issues, like Senator Schumer did with IndyMac.

We do have an aversion to "nationalizing" anything, but let's face it, when all the other alternatives stink and something really bad happens to a mega-bank, like panic silent runs, overnight borrowing freezes or counterparty recalcitrance, you be surprised how quickly that sentiment can be dislodged in favor of pragmagtism.

Again, good luck on the wager. I do hope you're right by the way.

 

[Maurice]

Of course its just a bet. I've not tried to represent it as anything else.

Re IndyMac, I think nationalizing a retail bank is different than nationalizing an IB. I think to do the latter with just one or two banks would be problematic for OTC markets.

Anyway I don't think they'll do it.

 

[harley]

Keep telling yourself that and perhaps the fear might go away. The operative word in Mr. Frank's statement is "all." Do I think the Government will nationalize some banks? Well, is past, prologue? Is the President, Black? Is the Pope, German?

Do I understand how to use, commas?

 

[Maurice]

Geithner yesterday:

“We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” he said.

Translation: We want to cover Maurice's bet.

 

[ChrisC]

Nationalization gains as an option | Philadelphia Inquirer | 02/18/2009

Translation: Maurice's bet is going down the tubes.

 

[Maurice]

Chris - lol - I just saw this.

Anyway, it could happen, though Geithner seems determined not to wipe out the common. (thinking of last nights gift to Citi shareholders)

I think they've deeply analyzed nationalization and realize how problematic it would be - they clearly want to avoid it at all costs. Its true at some point their hand could be forced, but it seems apparent that if they can possibly avoid it they will.

 

[Maurice]

BAC is recovering nicely. Up 300% since my previous post in this thread.


Even Citi is showing some life.

 

[Snidely Whiplash]

Maurice,

Its funny you posted this as just yesterday I was looking at the price of BAC and wondering about VaCollector. If he has held on to his shares he is probably made back about half of his capital losses. None of the income though.

 

[Maurice]

I thought this was interesting.

John Paulson Goes Long Bank of America In A Big Way (BAC)