Let ignorance steer you to profits
Today's Financial News - Posted April 15, 2009
Sometimes the things we hear out of so-called businessmen are downright hilarious. Is Donald Trump pumping some new reality show or is he really that economically ignorant?
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Sometimes the ignorance of the masses is jaw dropping. It is no wonder the markets have no direction; the folks that control their prices have no idea what they want.
Today’s question: Do we want healthy banks or do we want free-flowing loans? We can’t have both.
I could not help but laugh when I heard Donald Trump complaining this morning that banks were “virtually laughing” at anybody asking for a loan.
No, Mr. Trump. They are laughing at you, a man that has had more bankruptcies than Nancy Pelosi has had facelifts.
What in the world makes Donald Trump think he deserves a loan, especially after the spanking Washington and most of America gave banks for inciting a “subprime riot?” In one breath, we want the nation’s lenders to be tight and only make the least-risky loans, but in the next, we want them to hand the money out like free samples at a grocery store.
It’s one or the other, folks.
Where’s the money?
Maybe I was showing my ignorance of the American public’s true financial knowledge when I assumed most people believed the banks would use billions in TARP funds to patch up their debt-ridden balance sheets. Never did I expect Bank of America (NYSE:BAC) or Citigroup (NYSE:C) to instantly turn that money around and put it back in the hands of the defaulters that got us in this situation.
But apparently, I was in the minority. Too many Americans thought the Treasury was using Wall Street banks as a loan-origination middleman. Now that the banks are “hoarding” the funds, or even worse, paying their obligations, many Americans are downright pissed.
That’s what happens when we act now and think later.
This hate-the-banker, love-the-bailout phenomenon does not make sense and probably never will. But one thing is for sure, it has created plenty of wealth-generating volatility. The so-called bank stress tests are just the latest example.
Washington has already freely admitted it is not going to give us the information we want. Instead, it will tell us all banks “passed” the test, but won’t tell us the criteria. Word on the Street has it, current economic conditions are already worse than the government’s scenarios.
It doesn’t matter, as we will never know.
I expect huge levels of volatility out of companies like Bank of America, Citigroup and even Goldman Sachs (NYSE:GS) over the next week or so. It is a fantastic opportunity for options traders to leverage the action and put some triple-digit gains back in their portfolio.
If you are like me, you are looking at puts. The news is not going to be pretty and Wall Street hates uncertainty. After the run of the last few weeks, the only direction to head is down.
Take a look at what you see and invest away. While everybody else is complaining, you can be profiting.
Next Article: General Growth’s failure will not be the last
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