Tuesday, February 3, 2009

Step Inside The Casino

In these precarious and financially desolate times, if you happen to have some money lying under the couch cushion or between the car seats - you may want to buy bank stocks rather than that lotto ticket or pull of the slot machine. The hysteria over a possible bank nationalization plan is reaching its fever pitch. The crescendo always hits before the scene change. The idea that the overall market would benefit from the complete dilution of common equity holders in the banking sector is delusional at best - and in many cases, if you look under the hood of the grim messenger relaying these tales - they are only being fashioned to propagate their own positions, either in the market or in the media.

I am willing to wager that the mark-to-market accounting rules will be amended by the end of next week. You will also most likely see some other game changing initiatives to recapitalize the banks and to secure the market. Should these changes take place, that sucking sound we have been hearing for the last six months will be replaced with a sonic boom and a mad rush to buy the stock market. The rally may be fleeting, but then again it may be the start of something else.

I realize our economy and dependency on the markets is vastly different than Japan in the early 90's, but we should at least acknowledge at this point in the crisis that Japan avoided a Depression! Sure it was tough, heck it's still tough for them - but they avoided an even worst scenario. If we strictly stick to dogma things will inevitably get much worse. We need not cut off our noses to spite our face.

1 comment:

robertkudla said...

You may be onto something. I am currently short the financials, but one change to the mark to market takes considerable pressure off of these banks.