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Bank Talks: Fear of Nationalization?

After a hellish week in the stock market, a pop in the coming week is expected and inevitable. Even though BAC and C went down a lot this week, I believe that they will come back up. As soon as rumours of nationalization get cleared, they will no doubt turn around. I may be wrong, but as I mention earlier, they can't and will not go bankrupt because they are pretty much the foundation of the US banking system. I believe everyone is overreacting on everything and so only the savvy investors will gain from this.

Out of all the four biggest US banks, JP Morgan is the most well-managed and stable bank due to its wide diversity of investments. They are truly an intelligent bunch by buying valuable companies at dirt cheap prices when the economy goes south, as they have the money and ability to do so. Two recent examples are Bear Stearns and Washington Mutual. They attempt to create fear first to make them look like they are going bankrupt, but in the same time, secretly buy them at extremely low prices.

Same goes with Bank of America, it has a better chance of survival than Citigroup or Wells Fargo because it is similar to JP Morgan in many ways. They acquired Countrywide Financial and Merrill Lynch, when their stocks drop to all-time lows. Overreaction and fear of nationalization caused this stock to go downhill, but I strongly believe the stock is such a bargain right now. As soon as the economy begins to recover, BAC will benefit from their recent acquisitions. Housing will start to boom and people will have more confidence in the stock market by then.

IMO, there might still have some room for the stock market to go lower. No one knows where the bottom is and when the economy will start picking up, but the news are old and tiring already. The upside potential is much greater than the downside (at least in the long term). For the short term, just play the news. In this bear market, buy on any potential "hope" (of another stimulus plan) and short after the "hope" diminishes unless it is defined in stone.