New stocks being issued

[Root beer]

If anyone is interested.

The ink on the final stress test results was hardly dry when the appeal to investors began.

Citigroup Inc. said it will expand its public exchange offer by $5.5 billion. Wells Fargo & Co. said it will sell $6 billion in stock. Morgan Stanley hinted that it wants to return the government's bailout cash by issuing a $2 billion stock offering and $3 billion debt offering without Federal Deposit Insurance Corp. guarantees - a condition for exiting the Troubled Asset Relief Program.

The rush to the marketplace begins as banks realize that they have three sources from which to raise the new capital:

The government. The least desirable option considering this would involve certain meddling by lawmakers and a potential ownership stake that dilutes shareholders.

Asset sales. A difficult way to raise money considering the dearth of buyers and the low prices being offered.

Investors. Either big institutions or individuals could take a stake or big issues of common stock to the public. Though dilutive, this is the best option as a bank retains its autonomy - and the power to decide things such as how much to pay their bankers.

Surely all of the 10 banks that need cash prefer the last option, but they also know that the tolerance for bank debt is thin among investors. Yields on this debt will be undoubtedly high, but the market may be able to support the bulk of what in the end turned out to be a very low demand: $74.6 billion.

By spurring a land rush for capital, regulators may be risking more panic. A bank that is forced to pay excessive interest on the new debt may be forced to drop their issues, causing more nervousness in the marketplace.

Watching how these issues perform will bring their own kind of stress in the weeks ahead.

Dow Jones closed at: 8,409.85

[SirSnookalot]

10 trillion sitting on the sidelines now, some of it is now moving into energy and commodities(metals) which means demand is improving.  New claims for unemployment are not easing a bit and companies like Cisco say no layoffs.

News reports are indicating better news in some cases and news not as bad as originally thought in other areas.  Factory orders up and so is purchasing agent orders.  Not that the economy is out of the woods but the signs are trending up.

Investors are licking their chops in anticipation of gaining more ownership in some of these banks.  They are aware higher yields means higher risk, but that's what they are in business for.  Financials for the long term, a good bet.

[roadwarrior]

The Bulls were making the same argument in late December

and January when the DJIA traded over 9000. I think we will

trade down through 7000 and stay there for awhile.

The negatives include shutting down automobile manufacturing

for three or four months; the collapse of commercial real estate;

residential inventory backlogs and a few "surprises". The "technicals"

may look favorable, but the "fundamentals" do not.

p.s. This is a perfect example of the "spin":

Bank America has continued to rally because they ONLY need

$33.9 billion to be "adequately" capitalized. As the definition of

nationalization continues to evolve, BAC remains "independent".

:-?

[nateobot]

I work for one of these banks.  My 401k was just starting to rebound, and now this.

[SirSnookalot]

he negatives include shutting down automobile manufacturing

for three or four months; the collapse of commercial real estate;

residential inventory backlogs and a few "surprises". The "technicals"

may look favorable, but the "fundamentals" do not.

Valid argument.......

but business is starting to pick up already in some areas.

My former business, I still have limited involvement, has always been a leading indicator generally 6 months or so before general economy, and it's improving now.  I could not sell copper since last November, I just sold some last week and the mills are now buying.  Much of it goes to China and auto sales are up 20% there.

I also believe a pullback 10% or so is possible, the market is getting ahead of itself, that would be nothing unusual.

[Root beer]

I"m trying to decide whether or not to pull out of a stock, let it fall when General Motor goes bankrupt, but I do not believe my stock is correlated to GM. However, with all the emotions going around it may end up dropping. I figure to go head take my small profit, see if it falls and then double my share intake when the price does fall. That way, when it goes back up I make twice the profit.

But on other hand, I'm not sure it will fall when GM goes bankrupt, what if it doesn't fall and it keeps rising in price...When Chrysler filed bankrupt, none of my stocks were affected.

Before one of my stock announced 1Q earning, I knew it was going to fall because of lack of goods flowing between countries and I could have sold it off and my portfolio would look like it never sustain a loss, then I could have double my share after the 1Q earning were released. It fell 2.00 after 1Q was released. I cannot believe I didn't go with my gut and missed the perfect opportunity. Never again will I make that mistake.

I feel like I need buy option on this one stock..I'm still skeptical about it going up, but if it does go up, I can still buy it cheap and sell it high.. If not, then I just lose whatever the premium price was...I wish I never learn what option is, it wildly interesting. If I had to be a trader, I work in Chicago on the options exchange.

[SirSnookalot]

Root beer.......I've gone with my gut many times and not many times, it seems to balance out.  The stock market is the easiest place in the world to make money, IN HINDSIGHT!

I did notice your concern over stocks that may be connected to auto biz, if that is the case you may consider diversification ( asset allocation, Harry Markowitz)

[nateobot]

I just don't get it.  The worse the news, the higher our stock seems to go.  We have to get a pullback at some point here.

[Root beer]

Root beer.......I've gone with my gut many times and not many times, it seems to balance out. The stock market is the easiest place in the world to make money, IN HINDSIGHT!

I did notice your concern over stocks that may be connected to auto biz, if that is the case you may consider diversification ( asset allocation, Harry Markowitz)

Well, I do not think my bank or energy stock is related, but the shipping stock MIGHT, because I'm wondering if one of the boats they use to charter out actually ships raw materials to the auto industry....

[SirSnookalot]

Not my field but I do know that raw materials are shipped to companies that produce steel, for example, so freighters may be involved, trains are also fairly low in shipping cost like boats. The finished steel master coils are then "shipped" to the auto companies for stamping out, doors, hood, trunklids etc. Suppliers ship parts for auto assembly to the auto companies, I think most of that is by truck.

About the extent of my knowledge, I'm sure it gets quite involved.