This is shockingly positive!
Bank of America, the US global money center bank that swallowed up the toxic mortgage assets of both Country Wide Credit and Merrill Lynch during the financial crisis of 2007-8 had a positive transit of our last EBV line or EBV-3 on Friday, January 3, 2014.
Who would have thought on a quiet trading day sandwiched between New Year’s and when everybody goes back to work on Monday, January 6th – a stub period of two days trading – that something this historic would have happened. See you never know what can happen in a supposedly dull trading market that nothing of note should have happened. And it did!
Why is this event so notable?
This is the last one!
That’s right. Believe it or not Bank of America is the last financial bank in the S&P 500 that has just had a positive transit of EBV-3. Go ahead, use our ‘Speed Charting’ tool on our Model Price app and click through all the financial companies in the S&P Financial Sector in the S&P 500. They are all trading above EBV-3, including Bank of America. (Only two companies are trading underneath EBV-3 in the Financial Sector of the S&P 500; Genworth – GNW and Hartford – HIG, both insurance companies.)
Will anyone call an official end to the financial crisis of 2008 – mathematically of course? I will. How can I do this? Simple. All the financial institutions listed in the S&P Financial Sector– global lending institutions and investment banking firms – that back in 2007 principally caused the financial crisis and were, in reality, all bankrupt in the middle of 2009 and revived with substantial US federal government support have all had a positive transit of EBV-3. With Bank of America’s positive transit on Friday, the last financial institution to do so, to me marks the end of the 2008 financial crisis.
This is truly an historic moment.
Yes, some major financial institutions didn’t make it. Yes, some of the US global financial institutions are now bigger, in terms of assets, than when they entered 2007 and are certainly “Too Big too Fail” (TBTF). But US federal government policy, principally actions by both the US Treasury Department and the US Federal Reserve, saved the world at large from another Great Depression that certainly would have been larger and more painful than the last recorded depression in the 1930’s.
You want poetic justice. Mr. Ben Bernanke, the chair of the US Federal Reserve Board, during the last eight years, including the financial crisis of 2008, had his ‘swan-song’ speech with one month to go in his tenure at the American Economic Association’s annual meeting in Philadelphia on Friday, January 3rd. Yes, the same day Bank of America had its positive transit. Who said the market does have a sense of humor?
Anyway here is the model price chart of Bank of America as at the close on Friday, January 3rd.
Bank of America with weekly price bars, EBV Lines (colored lines) and model price (dashed line)
For those interested, a daily updated chart of BAC subsequent to this post will be maintained on Facebook, here.
I have also included the long-term model price chart of Bank of America where the company’s share price tried and failed to have the same positive transit back in the latter half of 2009 and beginning in 2010. Clearly this time frame was far too early in the financial crisis for Bank of America to have any such transit.
Bank of America with monthly price bars, EBV Lines (colored lines) and model price (dashed line)
It has been a long 5 plus years. I remember nightly as the financial crisis was unfolding in 2008 that my personal and financial life would be difficult for a period of time. Luckily I was prepared both physically and mentally for the blizzard of turmoil that came after 2008. Doubly, I was fortunate that I had Model Price Theory (MPT) helping me interrupt the financial footsteps of policy makers that lead myself back – along with my clients – to where I was before the financial crisis started its quick and violent decline and long recovery dating back to July 2007.
For some readers of this blog, I’m sure you endured the same thing. Welcome back! Others, unfortunately, didn’t make it financially for one reason or another and I am sure some of you will never be investing in equities again. (I have spoken to many in this group.) Whatever your perspective, Friday marked the end or closing of the book in terms of the financial crisis of 2008 with Bank of America’s positive transit of EBV-3. Let’s all hope lessons have been learned by policy-markers and society-as-a-whole that the next financial crisis is some hundreds of years away.
For those unfamiliar with our unique “Coming Out of the Blue” investment strategy here are some additional links from my blog posts that may help you.
Questions and Answers about “Coming Out of the Blue”!
How Jumbo Gains are Possible Using Model Price – Part 1
How Jumbo Gains are Possible Using Model Price – Part 2
“Do these EBV Lines Work?”
Model Price – Conversations About EBV Lines