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Reverse Bank Panic



March 10, 2008 – Comments (2)

I thought this was a priceless way of looking at things...

This is about how leverage is unwinding and banks are concerned and trying to raise interest rates and increase security demands, or essentially, they are reducing the level of margin they are allowing. 

"He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won't get their money back. "

So, instead of consumers being involved in a bank run, it is like the banks are involved in a bank run on their clients.

Given that when I was thinking about how this thing was going to unwind I figured the banks were toast and on the hook for loans that couldn't be repaid, it is amazing that it has taken them this long to figure it out.

I am so glad I was telling all my friend to dump their bank stocks last year and that most listened. 

2 Comments – Post Your Own

#1) On March 10, 2008 at 9:18 PM, XMFSinchiruna (26.52) wrote:

My Aunt wouldn't listen.  :(  She is retired and lives off the income from her Bank of America shares.  ugh!  Near $50 I begged her to sell shares... at $40 when she agreed it had been rough going I was clear that this was just the beginning, and made it clear whe could buy in at $30 within a year... but still no action.  When BAC went on that Fool's rally a few weeks back up to $43, I told her she had received a gift from the heavens... but she insisted it was a sign of the bank's resillience.  Ugh!  Some people just don't want to wrap their heads around what's happening!

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#2) On March 10, 2008 at 9:45 PM, dwot (28.88) wrote:

I have one friend who took my advice and sold most, maybe 75%.  The ones she kept were down 15% six months later and I told her I thought it would get worse before better.  She sold the rest, and it has gotten worse.

But, look how much better off she is.  In Canada you can't deduct mortgage interest and mortgages are about 6%.  So, she's maintained 6% by not paying that interest on her mortgage. 

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