Saturday, April 4, 2026

May 5, 2009

Officially Leaked - BAC needs $34 Billion

The S&P 500 traded in a narrow 10 point range today. The pit was very quiet. As previously chronicled here, the big money has been ominously quiet during this equity run up.

The bond has been trading in a narrow range of late. However, it is trading at the high end of that range as I write.

ZN_F 120 Minute Chart

ZN_F 120 Minute Chart



The much talked about news this evening is the fact that Bank of America $BAC needs $34 billion in capital

Given this news, The bond is higher and equity futures are lower. What was already abundantly clear has now been officially leaked and a spokesperson from $BAC has declined comment. $BAC sealed their fate when they bought Merrill. Once Gambler’s ruin has ensued, there is no escape. The mathematics of leverage prevent it.

Peace


Categories: Bailout, Banks, Ten Year Bond, US Bonds, equity market, trading, treasury note

5 Comments »

  • Leverage is so simple yet so misunderstood.

    I hypothesize that Gambler’s Ruin sets in whenever L > 61.803399%,

    where

    L = D / A

    D = True Debt (including growth or decay for any period of time, t)

    A - True Assets (including growth or decay for any period of time, t)

    Do you think anyone has written about this yet? I just came up with it and I’m pretty sure it’s correct.

    I know it can be made prettier with exponentials and other math stuff.

    Comment by Richard — May 5, 2009 @ 10:08 pm

  • Btw, this formula does not and cannot (by nature) account for the only way to escape from Gambler’s Ruin after it has set in… Windfall.

    In most cases Windfall cannot be predicted and, therefore, cannot be accounted for by the formula.

    Comment by Richard — May 5, 2009 @ 10:13 pm

  • why did BAC go up then if they need an additional $34 billion?

    Comment by jason — May 6, 2009 @ 7:52 am

  • why was TARP money ever needed in the first place when they now show that they can convert Preferred to Common and not need to raise equity.

    Comment by jason — May 6, 2009 @ 8:59 am

  • should be bullish for gold and silver. silver seems to want to go higher of late.

    Comment by matthew herrick — May 6, 2009 @ 6:21 pm

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