The Bank Of America Death Spiral
There's no question of a double dip for shares of Bank of America.
After financial crisis lows near $3, BAC traded above $15 for over two years. In the past year, however an accumulation of foreclosure-related costs and concerns about capital requirements erased these gains. Today headlines on both front pushed the stock down to $6.42.
Remember, Bank of America traded above $50 just a few years ago.
The stock was pounded again yesterday in an up market, dropping 8% to $6.42.
One analyst, Layla Peruzzi of Jefferies, thinks that Bank of America needs to raise an eye-popping $40-$50 billion.
Assuming most of this capital-raise came in the form of equity, the dilution would be severe: The bank's market capitalization is now only $65 billion. And the more the stock falls, the worse the dilution will get.
Banks today are more centralized and powerful, than they were before the crisis.