Saturday, January 17, 2009

Chart of the Week: Bank of America Teeters

It has been a tough week for the banks, but particularly for Bank of America (BAC), where the company’s recent struggles have earned it a stint in the spotlight as this week’s chart of the week.

During the week it was revealed that as a result of an ill-conceived acquisition of Merrill Lynch and other questionable moves, BAC extorted received secretive Treasury funding of $20 billion in addition to guarantees of up to $118 billion for toxic assets.

Bear Stearns and Lehman Brothers had their turn as the poster child for investor indignation, but now Ken Lewis and Bank of America are in danger of trumping some of the excesses of their ancestral whipping boys.

Either U.S. banks are about to reach a bottom…or we are witnessing the fall of the last few banks whose survival as independent entities might be able to prevent the wholesale nationalization of the banking system.

The monthly chart below shows not only the magnitude of the recent declines, but makes the case that in some respects, January has been the worst month yet, at least for Bank of America.

[source: StockCharts]

12 comments:

  1. I have to give Ken Lewis credit. I think taking this kind of risk is more palatable than being one of the sheep who caused this whole mess. If this is a bottom, then Ken Lewis will look like a genius.
    On the other hand, I think this is a great example of why you should not try to catch a falling knife. I believe he admitted to a long-time obsession with acquiring Merrill. I liken his obsession with Merrill to a Baseball GM who falls in love with an aging player and is willing to overpay for them.
    BTW, supposedly Countrywide is doing OK due to refi volumes, just hearsay.

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