A remarkable story
I happened to find this remarkable story on SeekingAlpha.com. And let me tell you, he brings up some very good – and valid – points.
His argument is that the stocks have been slammed hard by (greedy) hedge funds, and that most of the negative momentum is fed by that. With share prices falling, people believe the bank system is failing.
He continues onto the genius of Obama’s administration. By getting banks to drop the amount owed on mortgages, they solve many problems. A) The mark to market value of the mortgage actually increases, freeing up capital to lend, B) the bank gets to make a write-up (as opposed to write-down) and gets a tax deductible loss, C) opens back the market for purchasing the mortgage backed securities, and D) the homeowners are happy and the public thinks the banks were punished.
He also continues on with the governments move to going into common shares. He says by doing so they reduce the leverage of the hedge funds since the short sellers will have fewer buyers. The idea is shaky, since the government’s shares would be diluting the mix. So they total number of shares themselves that could be traded would be the same (for the nongovernment shares), although they would be a smaller percentage of the actual company.
The story doesn’t perfectly explain everything, but it does hit home on a number of things I stand behind. Such as that the banks are not in as bad of shape as the public thinks. Some may be – take a look at Citigroup – but I don’t think the big ones are in such dire straights as the media leads us to believe. Remember, don’t believe anything you see on TV or read in the newspaper. Same goes with blogs and experts. Hell, you need to question my opinions. And that’s my point, we need to start thinking, and then we can actually move forward.
