Bank of America's book value is about $230B and their market cap is about $68B. Price to book is about 30%.
What does that tell you? It tells me that the folks in the investment community believe this bank is insolvent. The investment community believes that BAC's assets are worth far less than what is being reported on their books. That's not surprising given that they use mark-to-fantasy for their mortgage and derivatives portfolio. If you market them to market, this would immediately throw BAC into under-capitalized status, according to Fed statutes. I'd bet without Fed assistance, they wouldn't be able to re-capitalize either. Their management is so shitty, that no investor in their right minds would invest in this bank without a Federal guarantee. Thus the unbelievably low market cap. To put things in perspective, I read an article a month ago that estimated that with proper accounting, BAC is worth negative $80B. Yes, I said NEGATIVE. INSOLVENT.
So you think the problems with the big banks and our economy have been resolved? I say again that you are living in fantasy land, tejek.
My greatest wish for you is that when all of this blows up again (probably within the next 12 months) that you are not heavily invested in stocks and that you don't lose your shirt. Whatever you do, please separate your politics from your investing philosophy. The two generally don't mix well. At this particular juncture, that warning is especially applicable. Your faith in the Dems and Obama could very well lose you whatever wealth you've managed to accumulate. And yes, I believe the GOP is not any better. They are all in bed with Wall Street, which means none of them will solve this crisis until it blows up and someone replaces them.
Best of luck to you. |
