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Reverse Banking Put



June 16, 2008 – Comments (2)

What is it with these financial institutions that are in huge trouble that get massive share dilutions and the share prices go up?

Barclays is the most recent to have share prices rally on an $8 billion share offering.

Seriously, no one truly knows how profitable financial institutions really are because so much of the data is based on out right fraud.  How much of the "profits" of the last few years were solid, sustainable profits? Three-quarters? A half?  A third? A tenth?  Who can answer this question?  And how much was based on the snake-oil-rob-investors-blind products?

If you look at pricing prior to the Greenspan bubbles, well, BAC in the 80s traded for less than $5/share, Citigroup was in the $2/share range, US Bancorp got into the $3/share range, JPMorgan was in the $8/share range, but dipped as low as the $3 range.  Something about banking made it worth 5 to 10 times the value?  Banks have been paying out dividends pretty much the whole time, so the increases are compounded by the dividends and even at the reduced prices of today some are still trading in the range of 10 times as much as they did in the 80s, even with the declines.

Well, screw that, wages are up maybe 50-100% over the same period.  Financial companies are still in the range of hogging 3-4 times the value relative to wage increases if look back to before the Green idiot put. And now financial companies are getting massive dilutions as the put reverses.


2 Comments – Post Your Own

#1) On June 16, 2008 at 10:32 AM, mandrake66 (72.37) wrote:

I think the sad part of it is that many of the things financial institutions were doing could have been the basis for solid, sustainable earnings. But because they got carried away with greed, even those things will turn unproductive due to rising interest rates, unemployment, rising prices for non-discretionary goods and falling prices for assets. Someone who had taken out a real mortgage a few years ago on a non-bubble priced house would be today a source of sustainable, though perhaps not astronomical profit. Instead that person was pushed into an interest-only loan on an overinflated house and is now deleveraging with everybody else. It's a shame, there were lots of potentially good investments that were either crowded out by speculative garbage or ultimately washed down the sewer hole.

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#2) On June 16, 2008 at 3:19 PM, abitare (29.98) wrote:


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