Did not have time to visit a casino? Try a BAC trade today

By: ispeculatornew
Date posted: 02.09.2009 (4:00 am) | Write a Comment  (7 Comments)

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Today is a prime example of why I cannot imagine being involved in the bank stocks right now, especially US or American banks. Try all you want to do any type of analysis of their stock , it is simply not worth it right now. Why? Because whatever their situation, with government being as involved as it is right now in the economy and in the financial sector, we really do not know how it will be done. The government might save one bank (Citibank) and let another one fail (Lehman), why? It’s difficult to say really.

And even if you knew somehow that the government will not a particular bank fail, you would still not know if buying its stock would be a good idea. It’s actually very simple. There are countless ways that the government can help banks right now. Initially the banks was looking at giving liquidity to banks, perhaps through loans or buying some illiquid assets or bad loans. Such an intervention would probably be positive for the stock and make the value increase. But many are also considering the possibility of the government taking equity in the banks (and perhaps even taking the banks off the market). Chances are strong that if that happened, stock would be almost worthless. So with the Timothy Geithner supposed to give details of the latest government intervention later today, it is almost like playing Russian Roulette now to invest in the more troubled US banks such as Citigroup and Bank of America.

The big problem of course for the major US banks is the amount of capital on their books. Given their level of leverage, banks must raise a lot of assets every time they declare losses and right now it is safe to say that investors are not lining up to give money to the banks. A few exceptions such as Warren Buffet have cash ready under the right conditions but even those are coming at an expensive price (ask Goldman Sachs).

The best opportunities right now lay in day trading on these stocks but to me even that looks way too risky. You might think a stock that is down 20% over an hour is about to rebound, and it might. It could also go down by another 20%. I guess it depends on the person, but personally, when I invest, I like to have some sense of what I’m buying and I think I’d probably take a shot at the casino if all I was looking for was a roll of a dice. But that is just me of course.

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7 Comments

  1. Comment by admin — February 9, 2009 @ 6:23 am

    Looks like the announcements by Geithner will only be made tomorrow..so 2 days to play the roulette..!

  2. Comment by Dave — February 10, 2009 @ 9:15 pm

    The only difference between BAC, JPM, WFC and the casino is that when you loose money at the casino its gone. You don’t always loose everything with speculation, and sometimes it pays BIG.

  3. Comment by PennySeeds.com — February 11, 2009 @ 4:14 am

    It may not be wise to put your life savings into Citibank, but there will be some banks left. If you’re that scared of ALL the banks you’d best go back to hiding your cash under your mattress.

    I still think it’s way funny when creditors are going bankrupt by the way! I guess I just have a sick sense of humor like that. : p

  4. […] wrote last week about how playing Bank of America was almost like going to the casino and indeed this week that is pretty much what it turned into with giant swings. Just today, Bank of […]

  5. Comment by Poker — February 26, 2009 @ 4:18 am

    The first game I want to talk about is actually a charged up version of a player favorite – Mega Moolah. One of the most popular and largest progressive jackpot slots to be found at any online casino, Mega Moolah has paid out millions of dollars to players the world over (I can’t believe I just said “the world over”…man I ‘m getting old and know it. I suppose that’s better than getting older and not knowing it).

  6. […] want to brag but do you remember when I discussed how investing in Bank of America was like investing in a casino? Of course it’s ironic to see that the stock is up about 200% since that point as well, as […]

  7. […] credit crisis and was very much involved in the Lehman Brothers and Bear Sterns fiasco. We even called BAC a casino play at one point as the stock dripped from a high of $45.03 in February 2008 to a low of $3.14 about 12 months […]

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