Banks – Toxic or what?

Look around at the dramatic up tick in the US stock market last week – If you take the time to ask why it is quite simple: Investors got some good news and everyone concerned, brokers and advisers led, piled in on the good news.

A toxic company like Citigroup’s CEO Vikram Pandit declaring that they are profitable (!Caveat! – Before taxes and special items) created the momentum in the upward direction. Ken Lewis of Bank of America, owner of the quick flip Merrill Lynch, declared the same (!Caveat! Before taxes and provisions). So the first two months has seen profitability on core business.

The good news – they cannot lend any more means they cannot create more CDO and the like and hence they cant create more toxic assets – first two months were good.

The bad news – they still hold toxic assets (both on and off balance sheet) – that will see more provisions (and write offs) over the next few months. Sceptical me very doubtful of this being the end of it. I hope I am wrong but I suspect not.

Here is the alternative view – Blogging Stocks post on Portfolio Killers.


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