Just announced--BOA (I call them BAC, I speak in ticker talk) will pay back tarp by raising capital. The govt has approved them to do this, which is apparenly a large part of the process. If I recall, back when a number of banks repaid TARP few months ago, the ones that did so took action only after being govt approved to repay.
In any case, I'm posting this b/c IMO this is what has dragged on the financials, namely the banks for 1-2 months. Now if BOA is talking about raising 45 billion in capital, and plans to use equity markets to do so, you're looking at roughly 3 billion shares. Unlikely they do this entirely through a common stock offering though, and no word on exactly how that happens just yet.
This willl probably begin the domino effect that I suspected, and will slowly end the poor price action in banks and likely turn them higher once the threat of equity offerings are confirmed or denied, or complete.
I wont be trading this news, for BAC or any bank, but I suggest caution on the short side. Last time banks raised capital the typical dillutive effect was not enough to bring down stock prices or cause a selloff, other than short term drops. Also, I suspect some "pumping" will occur before JPM or GS raise capital, if they indeed proceed with offerings as well.
Semi high-five to Merideth Whitney, Uber Super Duper bear of self-titled analyst firm. She called this around a month ago, come to think of it, pretty close to the time that banks started to weaken as a group.
QUOTE (Jhoe @ Dec 2 2009, 06:13 PM) 
Just announced--BOA (I call them BAC, I speak in ticker talk) will pay back tarp by raising capital. The govt has approved them to do this, which is apparenly a large part of the process. If I recall, back when a number of banks repaid TARP few months ago, the ones that did so took action only after being govt approved to repay.
In any case, I'm posting this b/c IMO this is what has dragged on the financials, namely the banks for 1-2 months. Now if BOA is talking about raising 45 billion in capital, and plans to use equity markets to do so, you're looking at roughly 3 billion shares. Unlikely they do this entirely through a common stock offering though, and no word on exactly how that happens just yet.
This willl probably begin the domino effect that I suspected, and will slowly end the poor price action in banks and likely turn them higher once the threat of equity offerings are confirmed or denied, or complete.
I wont be trading this news, for BAC or any bank, but I suggest caution on the short side. Last time banks raised capital the typical dillutive effect was not enough to bring down stock prices or cause a selloff, other than short term drops. Also, I suspect some "pumping" will occur before JPM or GS raise capital, if they indeed proceed with offerings as well.
Semi high-five to Merideth Whitney, Uber Super Duper bear of self-titled analyst firm. She called this around a month ago, come to think of it, pretty close to the time that banks started to weaken as a group.
In any case, I'm posting this b/c IMO this is what has dragged on the financials, namely the banks for 1-2 months. Now if BOA is talking about raising 45 billion in capital, and plans to use equity markets to do so, you're looking at roughly 3 billion shares. Unlikely they do this entirely through a common stock offering though, and no word on exactly how that happens just yet.
This willl probably begin the domino effect that I suspected, and will slowly end the poor price action in banks and likely turn them higher once the threat of equity offerings are confirmed or denied, or complete.
I wont be trading this news, for BAC or any bank, but I suggest caution on the short side. Last time banks raised capital the typical dillutive effect was not enough to bring down stock prices or cause a selloff, other than short term drops. Also, I suspect some "pumping" will occur before JPM or GS raise capital, if they indeed proceed with offerings as well.
Semi high-five to Merideth Whitney, Uber Super Duper bear of self-titled analyst firm. She called this around a month ago, come to think of it, pretty close to the time that banks started to weaken as a group.
Bye Bye shorts...... Up we gooooooo
QUOTE (Jhoe @ Dec 2 2009, 05:13 PM)
I wont be trading this news, for BAC or any bank, but I suggest caution on the short side. Last time banks raised capital the typical dillutive effect was not enough to bring down stock prices or cause a selloff, other than short term drops. Also, I suspect some "pumping" will occur before JPM or GS raise capital, if they indeed proceed with offerings as well.
Thanks for this info! Last time, when banks were diluting shares, there were tons of bank shorts floating around. However, this time, I dont think there are much short covering demand around. Look at BAC, only 0.78 % short percent of float.
Banks are done for the next 3 years. Who are they kidding?!?
From a pure technical analysis basis, BAC needs to break above 16.50 on massive volume for a reversal. Then there's the gap fill above that.
I have no doubt CNBC will say this is bullish. But there is no way that diluting shareholders is a good thing.
Check this out if you are looking for a sign of an huge top... Although he has some good points too. One thing I am pretty sure of is that one of the biggest property bubbles exists in Hong Kong today. You can buy a condo for $2M and literally you have to sleep standing up... 
http://us.cnn.com/video/?/video/business/2...er.deustche.cnn
http://us.cnn.com/video/?/video/business/2...er.deustche.cnn
QUOTE (Jnavin @ Dec 2 2009, 03:23 PM)
From a pure technical analysis basis, BAC needs to break above 16.50 on massive volume for a reversal. Then there's the gap fill above that.
+1
======
there are no quantifiable news or fundamental related instances that can part of a consistent trading plan.
ie, news and fundamentals can not be part of a consistent trade set-up & signal.
all that matters is price and your predefined plans on how you respond to the movement of price.
Hearing guys like that Spncer guy makes you believe everything's rosy....I want to hear everybody talking like him, the more the merrier.....
GS.
GS.
well that didnt take long. BOA raised to outperform from the already gaudy "market outperform" at FBR cap. mkts. I'd like to shake the hand of the analyst who upgrades a bank with no CEO, a $45 billion debt that needs to be repaid within 2 weeks, and 0 interest rates for the foreseeable future.
The pump is operating at full capacity. All hands on deck. An upgrade the very morning after this news hits. Smell that?
This is exactly why Im staying neutral on the banks til the capital raising is done. If anything, the crazy logical play is probably to buy some January calls, but its really not worth it. Looks like April/May all over again.
Just to be clear-this bs is why I expect the SPX to get near 1200 by year end.....I'm in no way bullish on the American economy at this point. But sometimes realizing the deck is stacked before sitting down matters more than the person or the cards.
The pump is operating at full capacity. All hands on deck. An upgrade the very morning after this news hits. Smell that?
This is exactly why Im staying neutral on the banks til the capital raising is done. If anything, the crazy logical play is probably to buy some January calls, but its really not worth it. Looks like April/May all over again.
Just to be clear-this bs is why I expect the SPX to get near 1200 by year end.....I'm in no way bullish on the American economy at this point. But sometimes realizing the deck is stacked before sitting down matters more than the person or the cards.
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