The Bank of America Surprise
A smart friend made an interesting point to me today. If you had been trading on insider information on the stress tests, you would have gotten your shirt handed to you. Learning a week in advance that Bank of America would need $35 billion would probably have left you thinking they were pretty deep in the hole. Worse than that, in fact. $35 billion? They'd be a ward of the state.
But that's not what happened at all, as you can see in the graph of Bank of America's stock price up top. Shares shot up after the stress tests (which came out on the sixth and seventh). The stock resettled at a point far higher than its previous trough. Investors bought $13.5 billion worth of shares in the company. They've sold off billions in other holdings. It's been a pretty surprising performance. And the lesson, my friend said, is simple. "A lot of what we're seeing," he sighed, "are things that we simply didn't predict."
Posted by: PatrickEarnest | May 22, 2009 6:08 PM | Report abuse
Posted by: Bloix | May 23, 2009 2:14 PM | Report abuse
Posted by: DemosthenesofPaeania | May 23, 2009 6:31 PM | Report abuse
Posted by: MisterSavannah | May 26, 2009 3:21 PM | Report abuse
The comments to this entry are closed.