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  • Stocks lower but for no good reason..give BAC its bailout! [Edit or Delete]1 comment
    Jul 18, 2011 3:24 PM
    Stocks lower but for no good reason
    Here is the major headline of the day: Bank Of America Is Tanking Again, As Firm May Need $50 Billion In Fresh Capital

    In the second quarter alone, "expenses tied to soured home loans may total $20.4 billion... pulling the bank further from capital ratios demanded under new international standards," Bloomberg reported. "The gap may equal 2.75 percent of risk-weighted assets starting in 2013 -- at about $18 billion for each percentage point -- crimping Moynihan’s ability to raise dividends and repurchase shares."

    So BAC needs $50 billion. We're talking small numbers here compared to the hundred of billions of dollars in 2008. Whatever the banks need the fed should provide. When borrowing is so cheap there's no reason why important financial institutions should be allowed to fail. The 'blank check' bailout policy worked great the first time; stocks are up nearly 100% from their March 2009 lows equating to trillions of dollars in wealth creation. Multinationals like Caterpillar, McDonald's, Disney Nike,, Google and Apple keep crushing estimates. Not bad for a $700 billion bank bailout that helped set this current economic boom in motion.
    Oh and by the way treasury yields keep on falling making the borrowing costs or these bailouts essentially non-existent. As you can see treasuries are till only slightly off their highs despite the overhyped Italy situation and Bank of America. 
    Ratings agencies don't matter anymore. If the debt were an issue it would be reflected real-time in the bond market. Why are PIG yields so high? Because thier economies are weak and unable to withstand the same per capita debt load as the USA.
    That's why the debt binge is still sustainable, it's why stocks always go up, why rich will get richer, why debt default is not a big deal, why wall st.  doesn't care about Moodys, why we're still in the greatest global economic and stock market boom in human history. Foreigners already own a significant portion of US debt so this just another step to foreign ownership of the country. Raising taxes is not necessary ...nothing wrong with national parks, landmarks, or universities being sold off in exchange for economic stability, cheaper foreign goods, and a higher standard of living.

    Here is chart of a poll of potential economic threats. It's nice to see earnings, deflation at the lower end of the spectrum. The biggest fear, governmental policy, is one of the least important ones. The bond and stock market is signalling that it's virtually impossible for policy makers to screw up, mostly because the global economy is entirely out of their hands. Multinationals are autonomous. Additionally, policy makers don't want to see the economy to fail, and as in the case of TARP are willing to set aside their partisan differences in extrigent circumstances. 
    In case you haven't noticed I'm obsessed with facebook. If i'm not writing this blog or getting 'computer quotes' with my 17 inch monitor I'm on facebook all the time. I got dozens of accounts for spamming etc. Facebook worth $100-300 billion according to some estimates. Still not a bubble though according to early Facebook investor and economic analyst, Howard, who recently attended a Businessweek economic summit as covered in more detail here:
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  • Wrong. PIG yields are so high because they are not fully sovereign, and cannot print their own currency. The USA can print as many dollars as it wants to, just as Japan can print as much Yen as it needs to.

    "Why are PIG yields so high? Because thier economies are weak and unable to withstand the same per capita debt load as the USA."
    18 Jul 2011, 10:22 PM Reply Like
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