Tuesday, April 26, 2011

1485 : What do they know?

Most banks in US/JP are consistently reducing their leverage ratios. From 30+ pre 2008 crisis, to early 20s in the post crisis.

If we check up today, most of the banks are down to early teens. Except for Credit Suisse which still seems to be at 31, the others are all huddled under 20. Next in line, Morgan and Nomura are possibly the highest at around 17.

Goldman, the survivor, is down to under 12 – and is infact getting generously panned by investors. Stock is down, and yet, the firm resolutely remains unwavering, focussed on (seemingly) further de-risking. Goldman is so under leveraged, it is almost appearing to be  like a retail bank (say JPM or C (Citi)).

That we are the at other extreme, from the 30+, does not seem to be a plausible explanation. If anything at all, we are at a point where slowly the near-death of 2008, is beginning to appear like a distant memory.

Optimism is already back in, at least to a certain degree in all markets.

So, the big QUESTION is, what is causing these big banks, especially Morgan and Goldman to de-leverage so heavily, inspite of investors punishing the stock? And the bigger QUESTION is, what does CS know?

Wonder, if its something to do with 2012 and the world ending Smile. I am going to brace up with a survival kit and some air bags Smile

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