Karl Denninger notes that the big banks are presently trading at less than half book value:
The very acts that led to the crash of 2008 are back in play, and they’re doing the same thing to market volatility. Banks are still hiding derivative exposure, claiming that they need these “customized” products for customers (and refusing to exchange-trade all of them.) Banks are still holding assets on their balance sheets at what the market judges to be a fantasy value – not only is their stock price half of book value or less in many cases, but we know there’s nobody with actual money who believes the claimed valuations on the balance sheet are real, as if they did they’d buy up all the stock and get the assets at half price – an instant 100% (or more) capital gain.
Who wouldn’t do that, if they believed the banks? Every one of these institutions with deeply-underwater balance sheets – Bank of America and Citibank in particular – would be bought out tomorrow. The fact is that nobody believes these marks are real. Nobody. It would only take one “somebody” with money who would pounce on such an opportunity – if it was real. And there are lots of people with money.
I repeat: There is not one entity with funds that believes these banks are honestly reporting asset values. NOT ONE.
And here I was telling that nice Canadian anchorwoman just last week that based on the FDIC seizure reports, I estimated around $3 trillion of $7.6 trillion in reported big bank assets were completely nonexistent. Mea culpa. It would appear I was too optimistic by at least $800 billion.
Ah well, that’s close enough for biology, anyway.