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发表于 2009-4-15 09:30 PM
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Agree with most of your high level points, but would like to discuss a few points with you
1) Repaying debt is not an issue for WFC. Paying back debt does not materially affect earnings. These big banks now do not have liquidity or cash flow issues. They can repay debt through loan maturity, gathering more deposits, or simply refinancing through FDIC-guaranteed bonds
2) Repaying TARP is a much bigger challenge for WFC. Banks can not repay TARP through debt issuance since debt is not capital. The main constraint for banks are capital ratios. After WFC acquired WB, their capital ratio has come down significantly (asset more than doubled, equity only increased by small amount after taking a big write-down in purchase accounting). There are speculations that WFC pre-announced so that they could do a secondary offering. However, in today's market, being bullish at $20/sh is one thing, putting up $20B of real money to buy 1B shares is a different story.
Behavior of Citi's common stock is critical for bears. The exchange offer to cram down preferreds to common is a 4X dilution for existing shareholders, hence the $4 in C ~ $16/sh in the past. However, the exchange offer has not started and the big short squeeze in relative value trade (long preferreds short common) plus retail guys buying pushed C's price to a ridiculous level. This has to stop and bring C's price to reality, and bring sentiment back to reality. |
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