Thursday afternoon greetings to all; caution is urged with GS and MS right here!
After this wonderful rally in equities, please do not lose focus on the capital structure of your holding that just hiccuped, because a secondary offering may send your shares spiraling down the barrel, again...
You should to do a quick analysis of the capital structure/balance sheet of every company you own. IF you identify the stock(s) that are in greater need of liquidity/cash (which could be said for most companies today), then you need to take profits or else suffer the consequences of being diluted.
When a company needs liquidity, it can issue more shares at a specific price on a specific future date, therefore called a secondary or follow-on offering.
MS and GS and all banks/companies that have TARP funds have a little window of opportunity to dilute shareholders, right here, right now. We recommend either taking profits or buying puts into this "V" S&P bear spike. POTC is convinced the recent bear rally is being exacerbated by what many talking heads blamed on the decline ironically, the ultrashort ETF's, specifically SKF.
7 comments:
I think you are dead on, the panic dumping of SKF is forcing banks too high. Good insights!
AM
Related to your post on secondary offering, you might find this interesting -
http://zerohedge.blogspot.com/2009/04/wall-street-back-to-its-criminal-ways.html
Wall Street is criminal stockwatcher, yet criminals get prosecuted. So where's the problem?
Avi
Avi,
Unfortunately, criminals are not prosecuted. The Kimco/Merrill is an example of the WS greed, which sadly has gone unpunished. Moreover, there are no signs that such actions will be prosecuted in future.
-StockWatcher
See your point Watcher, do you have a background in investment finance if I could be so nosey?
I worked at various firms and understand the skullduggery.
Avi
Not a background in investment finance, but I am graduating with an MBA in about 3 weeks!!
I guess one could argue that buying back debt with newly issued equity could lower the firm's expected cost of financial distress and would therefore be a reason for the Merrill analyst to change his recommendation from sell to buy since the leverage is now more optimum. But the conflict of interest is too obvious.
Incredible call dude.
You guys ate AWESOME!!!!
adam
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