Pros Say: Citi, BofA Will Survive — Without Equity
Friday: Bank nationalization is the big topic du jour. Everyone seems to dislike the idea, but more and more analysts are begrudgingly calling nationalization the inevitable next move in the financial crisis. UBS widened its tax probe; a survey showed more U.S. home depreciation; and gold rose over $1,000 on investors' flight to safety. CNBC heard from experts who said the U.S. dollar will emerge as the ultimate safe haven; and Citigroup and Bank of America will indeed survive.
Slumps, Pumps and the Dollar: First, the Bad News
Peter Yastrow of the CME Group believes the economy is entering into a phase never seen before, so prices will drop to unexpectedly low levels. He wouldn't be surprised by a big drop — followed by a big gain.
Bank of New York Mellon's Michael Woolfolk said the dollar remains the safe haven of first choice, as witness the big hit the Japanese yen took this week (the resignation of Japan's finance minister didn't help). Cameron Hanover's Peter Beutel said recession and lower oil demand are no longer yoked, raising optimism on oil prices over the next week.
November Low Test: Market Flunks, But No Soup Lines
Steve Auth of Federated Investors said that if the market hasn't already failed the November low test, it will be failed Friday. The next viable level is S&P 750, where there's "a lot of value." But not being on the gold standard (as the U.S. was between 1929 and 1932) will help prevent a new Depression. The stimulus plan has not been very stimulative, and some don't even feel it's a plan — but at least we're addressing the issues. Bank of America and Citi will survive as entities, but their equity probably won't.
Market Illness: Investor Disappointment & Weak FundamentalsThe U.S. government has thrown everything it has at the financial crisis
, and investors are disappointed, according to Ben Lichtenstein of Traders Audio. No buyers are willing to step up, and there are no bargains out there. Fundamentals remain weak, and the market declines are less a result of mob rule than of snowballing bad news. Lichtenstein stopped short of "darkest just before the dawn" rhetoric, but he believes the market has been handling a slew of bad news relatively well.
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