MC.no.spin

The next bank to fall appears to be Wachovia. It has dropped 33 % today and there may be more (watch their stock at 3:30 Eastern).

Their balance sheet is an interesting comparison to B of A.

WB: Balance Sheet for WACHOVIA CP - Yahoo! Finance

Their acid test ratio is worse than B of A, at about 22% current assets to current liabilities (ie. for every $5 they owe this year, they have $1 for it in current (this year) assets.) B of A is at about 26 %, but have access to much more long term assets than Wachovia to raise cash.

Wachovia has the third highest amount of the market share of these CDOs (mortgage backed securities.) B of A is 8th, but also note they are a giant corporation compared to Wachovia, and able to sustain major investment mistakes much easier. Wachovia grossly over-extended themselves, taking on much risk.

In summary, Wachovia is a wounded bird about to go down. B of A is a tank in comparison. Their stock price could still go down over time, however, unless Paulson's proposal goes through and is effective.

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DeeJayH

buy Puts on BofA because it will probably go down with the sector
than exercise puts at a significant lower price than repurchase alot more shares at a much lower price for the same amount of money

problem = oppurtunity

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talloulou

That's what I'm hoping.

MC.no.spin

The only caveat is that financials are likely to rally on Monday, assuming that Congress passes the proposal. Buying puts once that share price increases on the confidence boost of the Paulson proposal might be a better play. The puts will be cheaper for the same strike price.

__________________
"The guy’s a phony. He has no experience, he has no record; he’s not nearly ready to be commander in chief."
Bill Clinton on Obama (from the book Game Change)

talloulou

I don't really understand put options. I don't get into all that. I just hope the stock I have goes way up.

MC.no.spin

I'd say you're in a solid company with B of A and to just ride it out.

An interesting aspect to me of the bank collapses is that it will increase business for the bigger banks like B of A once this crisis is past us.

__________________
"The guy’s a phony. He has no experience, he has no record; he’s not nearly ready to be commander in chief."
Bill Clinton on Obama (from the book Game Change)

DeeJayH

correct me if i am wrong, but...

puts are something you buy, like insurance
it gives you the right to 'put your stocks' (sell) to teh person who sold you the put, for a guaranteed specific price. (he is betting the stock will stay flat or keep going up and he will just keep your insurance premium)
if you own 1 share of stock at $100
you buy 1 put for $5 (fictitious numbers) giving you the right to sell that person your share of stock at $100
if the stock keeps going up, or stays flat, you lose what you spent on the put, $5 (insurance)
if the stock falls below $95 you are able to protect your investment by 'putting it' to the person you bought the put from

thus if you think, you own a solid company, like BofA, but think it may get hurt by an overall decline in the financial sector due to panic selling, you are buying insurance to cover your investment, than you can put it to the other person, for $100 and than buy 2 for $50
stock rebounds later on because you bought a solid company and now you own 2 shares at $100 each

yes it is complicated, but that is the jist of it, and it also has to be done on margin, i believe

should also be using STOP-LOSS orders
automatically sells your stock if it falls by a predetermined amount

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DeeJayH

that is the simple correct answer

like a self fulfilling prophecy
banks are too big to fail so they are bought by other banks making them too big to fail.......... aaaaarrrrrrggggggghhhhhh

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jujuman13

Wachovia will very probably be next to go, already it's stock is tanking.

RightinNYC

The biggest problem with BoA's finances (and pretty much everyone elses) isn't that their liabilities are bigger than their assets, it's that their short term liabilities are MUCH bigger than their short term assets.

BoA's total assets are 1.716 v. 1.554 in total liabilities. Not so bad.

BoA's short term assets are 321 v. 1.254 in short term liabilities. Very bad.

Hence, the "credit crunch."

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