Monday, May 11, 2009

Even the Banks Think They're Going Down

You have to be a bit of a cynic to be a good investor. OK, you pretty much have to be a calculating, conniving jerk. I try to be a good investor (cue the snide remarks), and when I see a story like this, it tends to set off the hair-trigger cynic reflex I'm trying to hone:
KeyCorp, which is among 10 major U.S. banks ordered by the government to raise more capital as a buffer against future losses, joined several other banks Monday in announcing public stock offerings. The offerings put pressure on financial shares, but underscore the improving conditions in the capital markets and the increasing demand for bank stocks, which have skyrocketed in the wake of the market's massive two-month rally.
"Improving conditions in the capital markets?" Yeah, maybe... Or maybe the banks know they need to raise money, lots and lots of money, and they are trying to time their new share offerings at the highest prices they think they can get for the foreseeable future. You tell me. The analysts will tell you that this will dilute the claims of present shareholders, which will hurt the stock price in the short term, but that raising money will help the banks recover in the long term, blah, blah, blah. The banking executives have plans for restoring the banks to health, and they are just raising money to do their job for the shareholders whom they loyally serve. Or maybe they are wiley sons-a-bi**es and shareholders and sharebuyers are suckers, and the execs plan to do the same thing that Blackstone did to the Chinese sovereign wealth funds, selling them a huge chunk of the company right at the peak so they can make out like bandits while their investors take it in the teeth. Call me a cynic; I'm going with the latter. Time will tell.

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