Friday, February 27, 2009

BOFA is Next.

Bank Of America is progressively getting weaker as the day moves on. The stock is currently down 20% to $4.22. With Citibank's stock collapsing today, the next likely target is BOFA.

It looks like the pattern is to totally kill the preferred and equity shareholder to stabilize the banking system. Lots of people think that BOFA is to big to fail...I agree with them, since they were nudged to buy both Countrywide and Merrill Lynch.

Most analysts believe they need anywhere from $50-100 Billion in new capital immediately. Why such a wide range? Because BOFA is not coming clean with regards to reserves and marks, investors have to speculate what their exposure is.

The government has already backstopped $15 or so Billion in capital on top of guaranteeing almost close to $120 Billion in losses at BOFA. But since Merrill is in the business of losing billions of dollars instead of actually running a business it doesn't surprise me in the least the figure is going to be closer to $100 Billion. Why risk anymore capital, when the government can just convert the preferred to common...and kill the stock? Thats the trade...short the common.

BOFA is awfully quiet today, the only thing they have come out with is the cancellation of the NY Yankee Marketing Deal.

Every time the market tries a rally attempt...sellers quickly come in. Looks to me sellers are lurking at higher levels. The buyers have to make a stand here mid day or the fear of being run over is highly likely.

BTW....Yes I do see the Irony...of the Bank Of America Google Banner Add to the right.
BOFA is a great consumer bank, but a rotten stock. There is the difference.

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