Billionaire investor George Soros said yesterday (Monday) that the U.S. recovery would be a slow one because of all the “basically bankrupt” financial companies impeding it.
Like bank stocks one year ago, REITs look cheap on paper…but very expensive on pavement. Out in the real world of plummeting demand for commercial space and constricting access to credit, commercial real estate is facing a very tough time. And that means the seemingly inexpensive shares of many REITs are not cheap at all.
Banks aren’t getting out of the TARP as easy as they got in. According to Bloomberg, the feds have demanded that banks “raise specific amounts of new capital before repaying taxpayer funds, applying a more stringent assessment than the stress tests in May.”
Didn’t a “stress test” used to be something you saw your doctor about when life became overwhelming? Today, this buzz-phrase is more often used as a measure of American banks’ financial strength (or lack thereof). On the surface, you might think it’s good news that several banks fared quite well and “passed” the government’s recent stress test. But dig a little deeper and you’ll find that the banks being tested actually helped set the rules. This could be a dangerous situation for those simply following the crowd into buying banks stocks, but unaware of the real story…
Boy, the government is smart. We bet even the great illusionist David Copperfield couldn’t have pulled of a trick quite as intricate, quite as convincing.
The backdoor funnels of taxpayers’ money used to bolster banks’ share prices allowed Goldman Sachs to issue $5 billion in equity last month at what a cynic might call “artificially high valuations.” You have to hand it to Government Sachs (a moniker we believe fits like a glove given the almost seamless blending of the bank and the feds). This double-teaming is a great way to run up a stock.
On April 21, Treasury Secretary Timothy Geithner said the “vast majority” of U.S. banks have more capital than needed. Geithner’s remarks come on the heels of a surge in reported quarterly profits by the big banks.
Why wait for Tim Geithner’s rigged stress test results for banks when the underground can help you separate the winners from the losers? Thanks to research carried out by Money Morning’s Martin Hutchinson, we can pre-empt the Treasury Department and reveal which are the strongest banks are which are most poisonous.
One of the most accurate forecasters of the global economic crisis, Nouriel Roubini, said last week that last September’s spree of bank takeovers deepened the crisis because it made the already-too-big banks even bigger.
At 53 years of age, John A. Paulson manages about $30 billion in his hedge funds. Over 2007 and 2008, he pocketed $10 billion in profits after he correctly bet that the subprime-mortgage market would crash. His Credit Opportunities Fund earned nearly 500% gains in that year.