The stock market surged out of the gate this morning as investors celebrated the further dilution of Bank of America. The Bank of America share offering also confirmed that Ken Lewis is the world’s worst liar for claiming to be “well capitalize” and in no need of further capital raises. Clearly, having a CEO who can lie his *ss off is a huge positive for stocks. The stock finished the day with a 4.4% gain, but the money flows tell a very different story. While short sellers were in a full blown panic to buy back shares at higher prices the sellers were heavy. VERY HEAVY. BAC made up 17% of all volume on the NYSE today and the up tick: down tick ratio was 1:2.7 – an unusually high ratio for a stock that closed up so much.
While the price action on the surface of the bank shares might appear positive the money flows tell a very different story….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
TPC, Excellent analysis. I do not understand how these CEO’s can say ‘they are well capitalized, no need for further dilution…’ causing the market rally and then come back and raise money at higher prices. I mean are investors dumb enough to not compare statements made a few months ago. They could have bought these shares at 4 to 5 fold lower prices. I don’t understand how this works 🙁
Anyway, I think I am going to sell most of my holdings in the next few days and only hold on to some SRS that I can afford to lose. I can’t predict anymore when the market will go lower. It does seem ripe for a push to lower levels but its been that way for more than a month now.
I’m bemused that the apparent best stock performance has been put in by GS which issued that “conviction buy” on BAC and others. Now with BAC not breaking out to upside, GS itself rose to a resistance level, so its stock bears watching too now.
And in any kind of just world Lewis should be up on some kind of SEC charges for outright lying, pumping his stock up for the secondary offerings. But alas we live in a financial oligarchy and these guys are untouchable. Extortionists that are continuing to suck the life out of us.
After all these dilutions ( secondary share offerings, govt exercising the warrants, converting preferred to common etc etc), Ken Lewis would do a reverse stock spilt ( 3 to 1) and bring the stock price to 35 and outstanding shares same as that exactly 1 year before. The great wealth redistribution.
Was wondering if GE will be doing a share offering coz I am sure they need capital also, no?
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