The Market Is About To Plunge (Day 9, Vol.8)
Um, uh, anyone here own Bank of the American Government? (BAC) Honestly, I don't mean to be mean, but are you out of your mind? The shares are trading over $13 yet I see this on the newswire:
"B. of A. prices stock offering at $8.79 a share
09:27 a.m. 05/08/2009 By John Spence
BOSTON (MarketWatch) -- Bank of America Corp. (BAC) on Friday said it plans to offer 1.25 billion shares of common stock at a proposed maximum offering price of $8.79 a share. The government has told Bank of America (BAC) it needs to raise about $34 billion to make up for a capital shortfall. The stock, which closed at $13.51 on Thursday, was up 9% in premarket action. "
You do know that shares shouldn't be worth even a smidge over $9 if they're selling more of them at $8.79, right? From this, it is clear that BAC is ~35% overvalued. Once it corrects to reality, XLF and the financials will go tumbling pulling JPM and GS down with them and thus taking the market down. WFC and others raising capital will also get pummeled when reality returns.
Speaking of reality, investors are shorting reality today:
The reality index (gmXmkttiming's score) is down 343.03 points to 1,368.65. After a strong surge yesterday, it appears that investors are rotating capital out of the truth sector and using the proceeds to strongly bid up the fantasy, illusion and fraud sectors of the economy.