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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

December 20, 2011 at 9:54 AM

Rally to Bank of America: 15 cents, don’t spend it all in one place

Today’s market narrative is that the Dow is soaring because of a bullish housing report. This is almost certainly not true, and with all the flash trading and other dodgy tricks we know less about the real market movers than ever. One real driver is rebalancing portfolios as the end of the year draws close. As to the housing report, the surge in permits is mostly multifamily, with the apartment sector almost certainly headed for overbuilding soon. It does not mean the old housing bubble, upon which all those business plans are based, is coming back. Ask Santa for something else.

Amid the Wall Street ho-ho-ho-ing, Bank of America gained 15 cents. The stock of what was until recently the nation’s largest bank is trading for little more than five bucks. Five years ago it was above $50.

In addition to the troubles from its acquisition of subprime death star Countrywide Financial, BofA faces multitudes of legal trouble from its attempt to hang with the Wall Street Playerz. Then there’s Europe. How much exposure does it, and other Too Big To Exist banks, face from the crisis across the pond. In a few months, the Democratic National Convention will be held in Charlotte, BofA’s hometown. Awkward.

The reality is that the banking sector, with the possible exception of JPMorgan Chase, remains dangerous and fragile. Growth isn’t coming in the United States. Now even the “trading,” M&A and other non-productive games are drying up. The Fed is suspiciously quiet. Wonder what a real stress test would expose? We may find out sooner than later as the EU continues to drift.

And Don’t Miss: ‘Workampers’ flock to temp jobs at Amazon.com || Wall Street Journal

Today’s Econ Haiku:

Employment’s better

Or so they say. Then again,

‘They’ have decent jobs

Comments | More in Banking, Stock market

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