BAC, The Bank That Stank And Sank The Whole Market
What will the market do if the US
Government must nationalize (buy out a majority
of the stock in) BAC? Socialism for the non-rich scares Wall Street to its
core. But
what will the market do if the Government just allows BAC to go out of business?
Also very bad. Today the DJI dropped below 8000. Perhaps, it will
recover from 7500
like it did 7 weeks ago. But what if it does not? There's very little support below 7500
until the DJI is down to 6000. Obama may wish he had lost the Election!
Bank of America
(BAC) has an estimated 24.6 million on-line customers. The
next biggest bank, measured this way, is Chase/Morgan/Wamu with 21.4 million.
Wells Fargo/Wachovia with 17 million is next. Only the government can
save
BAC. No other entity is big enough.
As losses mount at CitiGroup and Bank of America, it becomes more and
more mathematically impossible to inject enough capital into these banks without
taking a majority stake. Obama has said he wants the banks to not pay dividends
and give executives big bonuses. He has said he wants the banks to start making
loans with the money they are given. For the Government simply to buy all
the worthless and defaulting mortgages does not hold the banks accountable
for their misguided, bad loans. It will be a lot easier to accomplish these
goals
if the government runs these banks directly. At least, then it will start to
understand
the ways banks have concealed their worthless loans and wasted millions on
executive perks. Ownership bestows managerial control. That is the only way
way the government can start taking steps to advance credit again, something
which the biggest banks are unwilling to do and can get the banks to stop paying
unworthy executives ridiculous and wasteful sums for imprudent decisions.
The Stock Market and The Economy
Must Not Be Dependent on Banks Like BAC and CitGroup
Bank of America's stock has led the US
Stock market down. It's price
breakdown last May began the long 2008-2009 slide in equities in the US and
around the world. The company is too big to have this power. And it is too
badly run to be allowed to exist under its present management. Its CEO
has almost single-handedly destroyed a company that had previously withstood the
the turmoil of the 1970s, the Crash of 1987, the Bush bear market of 2001-2003...
Insiders at BAC have been dumping the stock since early 2007. They still are.
Should Obama bail out a bank whose stock is being heavily sold by its own
Board of Directors? BAC, as presently run, is a public menace. Its
overpaid
CEO, Ken Lewis, has made one terrible decision after another. BAC now poses a clear
and present danger to the global market and certainly the US economy. What will
Obama do about its impending insolvency?
News - 1/21/2008 - BAC Board fo Directors heard this
criticism. Today it is
reported that they bought 200,000 shares. We will report the facts here as
they emerge. That's a start! But just one director, John Thain, sold
93,374
on 1/9/2009 for 13.56. Thain has just resigned in scandal form BAC.
He spent
more
than a million in the last month decorating his Merrill Lynch office and
quickly
dishing out millions in bonuses (for what?) in the days right before
BAC
took over. Conveniently, BAC's CEO, Ken Lewis, looked the other way,
making
American taxpayers pick up the tab. Lewis clearly worked in connivance
with
John Thain! Sources: (1)
(2)
Bank of America will be the first test for the new Obama administration. Waffling
and lofty words will not solve the problem it poses.
BAC and DJIA - 2007-2008
BANK OF AMERICA'S COLLAPSE ACCELERATES
BAC closed at 5.10 today, down 2.08 and 29% in just one day!
"Effectively
Insolvent"
NYU Professor, Nouriel Roubini, said today that "I’ve found that
credit losses
could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and
broker dealers..
If that’s true, it means the U.S. banking system is effectively insolvent because it
starts with a capital
of $1.4 trillion. This is a systemic banking crisis.” At least another trillion
dollars more in public
funds will be needed to shore up the banks." (Source.) Roubini has had a remarkably
accurate crystal ball since late 2006 when he warned the IMF that a financial meltdown
would follow the burting of the housing bubble.
FDIC's Sheila Blair's Rejects Robini's Fears.
"Banks have some real challenges," Bair said during a CNBC
interview. "But I think it needs
to be emphasized and re-emphasized these banks are solvent, they're well-capitalized
overwhelmingly,
and that really is what creditors and depositors seem to be focusing on right now."
Though she did
acknowledge problems. She said 98 percent of all banks are well-capitalized, representing
99 percent
of all assets. My sense is
that she has a static view. She is assuming that
housing turns around immediately and does not keep falling. Unfortunately,
housing prices are still falling and confidence is still worsening. That will
make the "troubled assets", i.e. bad mortgage loans increase and worsen.
Home Builder Sentiment
Continues to Erode
"The National Association of Home Builders said its preliminary
NAHB/Wells Fargo Housing
Market Index was 8 in January, down from 9 in December. That is the lowest level on record
since
the gauge was launched in January 1985. Readings
below 50 indicate more builders view market
conditions as poor than favorable. The January index was below expectations of 9, based on
a
Reuters survey of economists... " See also - http://www.iasreo.com/ias360update.html
Google your community and housing prices. Here is what I found for San Diego.
Home prices down
26.7% from year ago
A TARP BY ANY NAME IS STILL A
BANK BAILOUT!
Blair is a proponent of the idea wherein a US government Aggregate Bank would
"buy the (delinquent or foreclosed mortgage, which - my question)) assets at fair
value. Some are
concerned that you’d have to mark the assets down to purchase them, but I think it
could help
provide some rational pricing, actually, for the market in some of these assets because we
don’t have
really any rational pricing right now for some of these asset categories...
"The idea would be to set up a facility, it could be structured as a bank, to
capitalize it with
some portion of the TARP funds. Financial institutions that wanted to sell assets into the
bank
could also perhaps take part of their payment as an equity interest in the aggregator bank
to
provide an additional cushion. If you sold $1 of assets into the bank, you would get 80
cents in
cash and you would get 20 cents in an equity interest in the bank. So that would be an
additional
cushion against loss."
(Source)
My reaction to this idea is very negative. It takes banks off the hook for
their bad decisions. It lets them sell their worst loans to the taxpayer. Many
of these mortgage loans are worthless. Why is no one looking at how other
countries have dealt with bad banks? Because nationalziation smacks of
socialism for the non-rich! A national bank, like Andrew Jackson wanted,
would make loans now and not pay ridiculously high salaries to the arrogant
idiots who got us in this mess!
The Massive Insider Selling Suggests Roubini Is Correct
Nothing in the TigerSoft charts of Bank America show a bottom now,
unless you believe that trading volume has risen to panic levels and the new Obama
Administration will protect it with $80 billion more in taxpayer handouts. That's
probably what it will take to bring its cash levels up to the levels needed to
permit it to keep operating as a bank.
Will Obama see that Bank of America is too big? It now has 243,000
employees. Its vastly over-paid executives have a long history of truly
terrible decisions, from "zero-down" home loans for anyone willing to lie about
their incomes, to buying mortgage-giant Country Wide exactly at the worst possible
time and then buying Merrill Lynch also at the worst possible time. Its executives
are not prudent bankers. They are reckless gamblers, rolling dice with shareholders'
and now tax-payers' money.
Can BAC's CEO be trusted? Paulson thought he had a deal and that
US banks would start lending the $300 billion the Government gave them last year.
They did not. Recently, BAC bought out Merrill Lynch. BAC's CEO
Ken Lewis
"knew of (Merrill's) massive losses before the deal closed and
declined to
inform Bank of America shareholders. Merrill recorded an operating loss of $21.5 billion
in the Q4 2008, requiring an additional $20 billion cash infusion from the U.S.
government,
bringing the government's total investment to $45 billion."
Clearly BAC's CEO did not dilligently
examine Merrill's books in the weekend of Sept.
13-14, 2008 when the BAC-MER deal was made or in the following 3 months before
BAC shareholders voted to accept Lewis's deal on December 5. (Source.)
Leadership like Ken Lewis has shown is dangerously reckless. But BAC's
Board of Directors fawn all over him and paid him about $43 million in 2006 and 2007.
An honorable man would resign. He may be certifiable. Insiders close to BAC's
bossman write: "Senior management is arrogant. Ken Lewis runs
this place as if it were his personal
empire instead of a shareholder-owned company that is successful because of its employees
and not his
"leadership". Many of us own stock in the company, and his personal hunger for
Merrill-Lynch caused him
to pay far too much for it. That has hurt our stock...Ken Lewis should resign...More often
than not, people
get to those positions more through the "good ole boy" method than by talent and
hard work. There are a
lot of people out there who could do Ken Lewis' job for far less money and do it more
effectively". (Source.)
Ken Lewis, of course, is not the only
CEO in America who runs his company
like a medeival fiefdoms, where the king owns everything and everybody and can
do no wrong. His predecessor at Country Wide. Angelo Mozilo took $470 million in
"compensation" from that company while ruining it. "His
compensation also includes payment
of his annual country club dues at Sherwood Country Club in Thousand Oaks, CA, The Quarry
at La Quinta
golf club in La Quinta, CA and Robert Trent Jones Golf Club in Gainesville, VA... Shortly
after (the)
University of San Diego (a private Catholic school) invited Mozilo to be the keynote
speaker at a conference
for "a sustainable real estate" DisinviteMozilo.com was created in
protest on January 10, 2008. Mozilo pulled
out six days later. Shortly after that, Congress invited Mozilo to (justify)... his
compensation....Over many years,
Mozilo sold hundreds of millions of dollars in stock personally, even while publicly
touting the stock and
using shareholder funds to buy back stock to support the share price."
UNBRIDLED GREED AT BAC
Despite BAC's getting $25 billion in taxpayer
bailout, Bank of America would
not lend Republic Windows and Doors the money it need to continue. That caused
the Chicago company to halt operations and terminate its 250 workers with only
three days. That spawned a successful workers' in Chicago, a lot of bad publicity
and even Obama intruded on the side of the workers. BAC eventually relented.
( Source.
)
"Over the past couple of months I missed a couple of payments on my Bank of America card.
I was out of town for some of the time and just forgot to make a payment. They put my
interest rate at
10 times what it had been before. I pointed out that I had sent them 600.00 all of my fees
and penalties
but informed them that i would not be able to pay the higher interest rate which is now
30%. They refused
and closed my credit card hurting my credit but keeping the new 30% interest fee intact. Bank of America
has little mercy or patience for their customers and they are burying people like me and
at the same time
getting massive government welfare. Obviously Bank of America is a dark
enterprise whose ambition
for money and power has created a significant negative influence on the lives hundreds of
thousands
of people. I do not know what can be done about them But I do wish that something is done
change
this company into something much worthy of its name. "
( http://baselinescenario.com/2009/01/16/bank-of-america-gets-quite-a-deal/
_
 Obama's Speech at his inauguration gave few
clues what he will do.
"Our economy is badly weakened, a
consequence of greed and irresponsibility on the part of
some, but also our collective failure to make hard choices and prepare the nation for a
new age.
Homes have been lost; jobs shed; businesses shuttered."
HEAVY INSIDER SELLING AT BAC CONTINUES
The Yahoo table below shows that official insiders at BAC sold 4.5 times
more shares than they bought in the last six months, despite the much lower
stock prices. TigerSoft charts show that their friends at institutions continue to
sell
heavily. This raises a question of confidence. Why should the taxpayer
bailout
a company run by executives who themseves show no confidence?
| NET SHARE PURCHASE ACTIVITY |
| Insider Purchases - Last 6 Months |
|
Shares |
Trans |
| Purchases |
6,728 |
3 |
| Sales |
31,629 |
2 |
Net Shares Purchased
(Sold) |
(24,901) |
5 |
| Total Insider Shares Held |
28.05M |
N/A |
% Net Shares Purchased
(Sold) |
(0.1%) |
N/A |
|
( http://finance.yahoo.com/q/it?s=BAC )
Traders are betting there will be no bailout for Bank of America to save shareholders.
BAC remains on a TigerSoft Sell. These automatic trading signals have been
nearly
perfect except when a Buy arrow flashes right after the price breakdowns April and
and November. (In this technical situation, we have long advised not using the
Buy arrows.
The Blue TigerSoft Closing Power is declining steeply. The magenta OBV Line has
bearishly made a confirming new lows. The green relative strength line is also
confirming the new lows. The COP indicators is in bearish red territory and its
black ma is in a free fall.
|
