Cold Cold Chart

Another very red day... My portfolio can't handle this any longer and neither can I. I came thisclose to selling HWD (mainly for capital preservation purposes), but one second earlier, I had just bought some more BCS.

BCS is very undervalued according to moi, the JBQ who missed a major profit by $0.04 on the Finlay junk bonds - sigh, oh, sigh! There is still a slight possibility that a lot of other bondholders would see some sense and vote to reject that reorganisation plan.

So what's my rose-coloured take on BCS and does anyone even care? First, it seems many analysts think the fair value of GBP/USD is at around $1.60 or $1.70. This means in dollar terms, BCS will appreciate on the discrepancy in the exchange rate alone. Secondly, my inner cynic believes that somewhere in this world, there are some liberal elite traders out there making tons of moola off of this QU European Debt Crisis. And I believe this liberal elite trader group not only includes the savvy HSFT out there, but also BCS. They were the ones who acquired Lehman, who was specialised in fixed income / bond trading - more or less. Finally, even without these two preceding points, BCS is trading at a Price/Book ratio of only 0.68 and a Price/Sales ratio of 1.60, which is lower than low in the financial sector.

Price/Book for everyone else

JPM 0.95

C 0.72

BAC 0.73

MS 0.94

GS 1.11

WFC 1.34

Price/Sales for everyone else

JPM 2.06
C 2.5
BAC 2.17
MS 1.23
GS 1.51
WFC 2.18


So with over 1 trillion in cash and a market cap of only 45.82 billion, why isn't BCS undervalued and overlooked? It is according to my standards, but it seems my standards aren't that high.

If things get even more absurd and the sell-off continues to get even more dramatic, we may see BCS get to around $12. I'm looking at a third entry at that point.

For now, I'm sighing that I allowed my portfolio to get to this incredible level of:

-0.94% on the SBA
-1.82% on the Roth IRA

I obviously did not learn this second time around. It feels like Lehman all over again - only this isn't close to a garage sale just yet. Half of me still thinks it's a fakeout, but the other half is starting to get fraidier and fraidier.

From a risk:reward perspective, C of course still looks as tantalising as ever. However, beware of buying too much now, I'd say. Think about when everyone finally has to get out of C... It could get as scary as when the carry trades were unwinding.

Someone should do some more investigative journalism and figure out what Bernanke, Merkel, Trichet, etc. are all buying. EUR/USD perhaps? Or are they waiting for it to get to $0.85 again?