Wednesday, May 16, 2012

Bill Fleckenstein On Bank Balance Sheets

I live in the Charlotte area so Bank of America is a common conversation topic. I often hear people talking who do not work in the financial industry about trading Bank of America shares. They talk about buying it at 8 and "riding" it up to 10. Then they wait for it to fall so they can re-buy and purchase it again.

During the conversation they will ask me what I think Bank of America shares are worth or where I think they are going. I tell them zero. They laugh and we move on to talking about another topic like sports.

I listen to some of  the most intelligent bank analysts in the world, people like Chris Whalen, and I consistently hear them say that they have no idea what the bank shares are actually worth. They will then say that the CEO's of these companies have no idea what the companies are worth. There is so much happening on their balance sheets with hidden derivatives, accounting gimmicks, and government backstops that it is impossible to determine.

Purchasing a large bank stock is the truest form of gambling.

Bill Fleckenstein took some time to speak with Bloomberg this week regarding this very topic, the general market, and the value he sees in gold mining shares.

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