Bank of America Collapses
Feb 5, 2009
Posted by Jody Eisenman | Filed under Uncategorized
Bank of America (BAC) today dove to a close of $4.70, its’ lowest level since November of 1991. It seems like ages ago, but the stock actually traded up as high as $38.50 in late September, less than four and a half months ago. Although there was no real news today to account for the 11% drop today, the stock has been steadily declining. However, this move could be significant, as many institutions are prohibited from owning stocks under $5. This could lead to an extended decline. For example, Citi ( C ) closed below 5 on January 14. Four trading days later, it hit $2.80 (It has since recovered somewhat to close at $3.46 today). It could be that nationalization of these bank stocks is in the cards. It is very difficult for me to see buying most of these stocks at any price in this environment.
The DJIA started higher, then closed down 121 points, giving back most of yesterdays’ gains. Economic news remains poor. Layoffs continue across the country and consumers are tightening their belts in order to avoid spending money on most non-essential items. Consumer staple stocks have been reporting mostly disappointing earnings, most recently from Kraft, Disney and Time Warner. It is difficult to find people who are bullish here. Even the most optimistic analysts seem to think the economy will not bottom at least until mid year. Of course, some analysts (like Nouriel Roubini and Meredith Whitney) still think we are going lower.
Finally, Harry Markopolos, the investigator of Bernie Madoff, testified today. For a fascinating look at his submission paper, please click here: http://online.wsj.com/public/resources/documents/MarkopolosTestimony20090203.pdf
