Bad News Banks

Today, I pulled up Drudge Report and saw this headline:

Bank of America to receive additional $20 billion

The federal government is now the biggest shareholder of Bank of America. I'm sure that I'm not the only person who gets pissed off reading headlines like this.

Here's a way of looking at things to help make sense of corporate behavior.

If you hear a fire alarm going off, it's probably a drill right? No big deal. Everything is probably going to turn out okay. But what if you see smoke pouring out of the windows and people running at top speed away from the building? Chances are that something serious is going down, and things are really bad.

When looking at a company's stock price... What happens if you're walking down a flight of stairs, and you trip and tumble down four or five stairs? You get up, dust yourself off, and you're on your way. What happens if somebody throws you out the window and you fall down four stories and hit the ground. You're not getting up anytime soon, if ever.

Most of us can think of companies where the stock price has taken a four story plunge. Most of us have seen companies where the employees are running for the exits as if from a burning building. When you've got both going on... Trouble is brewed.

That's what is going on with the financial sector. This is a huge problem. It's spilling out into the greater economy.