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, but who knows?
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Edward,
Yes, I remember the movie….
Well put and nice analysis………who knows…between Russell and Will Smith ( Legend) it may all come true
Rick,
The info you provide about Dow Industrial Average choosing BAC one year ago, only to see a 90% drop in price, may seem like a minor point in this environment – but geez, that’s got to be an embarrassment to the Dow. Another reason for the world financial headquarters to be relocated to Singapore, Hong Kong and Dubai.
What will NY become? Maybe Kurt Russel’s 1981 film will come true: Escape From New York. Directed by John Carpenter. Carpenter may end up being the most prescient futurist that ever lived. Remember that one? ha ha ha Maybe NY will become a port of exit for US emigration. “Ellis Island, Gateway to the World. We send you our tired, our poor and hungry, to get them off our back.”
The banks will get nationalized that is for sure. I don’t know why the gov’ does not buy all the banks NOW, instead of doling out trillions to the “crook'” and “Rats” who got us into this debacle. They should all be shot….China style…go back till and get all the guys who took hundreds and billions as salary running these public companies…pay with blood.
The dow is going to 6,500-5,500 area and then 3,000 and eventually 1980 lows or highs…it will happen 2011/2013/2015???
The US banking system is broke, insolvent, the cities and states are broke the pensions funds…..they are no more…they lost all thier money investing in “Blue Chips” like Citi, BAC, Lehman etc……
When this party is done…people will not believe it…and Bush should then apologize to Chavez…because we will be worse than Venuzuela….like Zimbabwe.
Who says Fascism left with Mussolini…it was just disguised and here all along.
Money is in shorting and commodities I believe.
Macdonalds, IBM, anything that has not dropped drastically will after April 09 in my opinion.
Will MSFT get to $3??? I think it will by 2011 or before.
Then you will get the Amero as your new currency.
BAC now positive today after hitting all-time low this AM of $3.77.
Having worked for Merrill, may have bias.
Between Countrywide, Merrill, S&P Ratings, few new loans and rising long Treasury rates, writeoffs may wipe out earnings longer than most anticipated, burning up considerably higher cash and tangible book per share.
However, the combo of BAC, CW, MER has the largest financial services footprint of all and, despite rumours of nationalization, may be the financial force to reckon with. Note insiders bought all the way down from 82.875.
It is tempting to buy the BAC lottery ticket >3.77 or FAS>7.21 for a long trade here….