Wednesday, February 4, 2009

We searched in vain for news that might have explained why Bank of America shares collapsed 15% from their highs yesterday. After a head-fake on the opening, the stock fell 67 cents to 4.68, bringing it that much closer to the vanishing point. We are predicting BAC will fall even lower in the days ahead, to at least 3.93. That would represent a decline of 90% since the stock was added to the Dow Industrial Average a year ago. As B of A was plummeting, the shares of another former banking star, Goldman Sachs, were soaring, rising more than $7 at one point during the session. GS settled at 87.50, up 4.69 and miles from the $29 target we have predicted for it. (A hula number, by the way. We have pledged to don a grass skirt and dance the hula in Times Square in the middle of winter if the stock does not eventually collapse to the target within the next year or two.) Considering how B of A was getting demolished, we were surprised to see Goldman explode with glee and the Dow down a mere 121 points at the close. Our hunch is that even if all the bank stocks are eventually going under $1.00, as seems possible, this would be no great shakes as far as Wall Street is concerned. Investors appear to have discounted the prospect that all of the banks – not just here, but in Europe – will be nationalized at some point in the not-so-distant future. In the meantime, investors who hold bank shares, including institutions who will have to dump them if the shares remain below $5, have probably written them off. Stock in some of the biggest financial institutions in the world have become lottery tickets – most like worthless,