Today the S&P Bank index had its' biggest percentage decline ever. As Barack Obama celebrates tonight, his economic advisers are trying to figure a way out of this depression in Bank stocks. The bank stocks are now worth less than 10% of the S&P 500 for the first time since 1991. Banks like Citi and Bank of America are selling at under $6 per share. JPM and Wells Fargo are getting close to $15 a share. Is this the end of bank equities? Will the major banks be nationalized with all of their equity wiped out? My suggestion is to create a 'RTC' for the bad bank debt that is paralyzing the markets. The major banks would then be able to lend money and start over again. The bad bank debt would be sold off to willing investors. The result would probably be recapitalization with 'new stock' issued. Current shareholders will be diluted and conceivably wiped out. This fix has to occur THIS WEEK.
Random thoughts.....President Obama has a few months to change the psychology of the American people...if not, we are in a depression that will be merciless....dividends you can count on....Altria was up today as the market believes smoking will still be in demand in 2009...look for reduced industrial dividends or a return to stock dividends....cash is very much KING today..
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I do sense that everyone 'I see' is choosing NOT TO SPEND and RAISE CASH.
I imagine the 'clean slate idea' of the US BANKS is inevitable. It's like erasing the chalkboard...starting over is probably the only way to clean it all up. What a 'chocolate' mess.
"Momma always said 'LIFE was like a box of chocolates. You never know what you're gonna get."
-Forrest Gump
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