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View Diary: Senator Elizabeth Warren Strikes Nerve, Terrified Bankers Howl In Protest (186 comments)

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  •  The other question (6+ / 0-)
    Recommended by:
    kurt, MichaelNY, elwior, ChemBob, elginblt, eXtina

    Senator Warren had two questions.  The first was about taking banks to trial.  She was so sweet and nice.  The regulators had nothing.  It was pretty shameful.

    I thought her second question about the book value of banks was really interesting.  Bank of America's book value (Assets-liabilities/outstanding shares) is about 21.  Their share price is 12.  Apples book value is 127 and their share price is 460.  And Apple is undervalued.  The fair price is probably more like 600 or 700.

    So why the difference?  Why is it that Bank of America stock is so far under book value and Apple is so far over book value?

    Senator Warren offered two possible explanations: that no one believes the valuation of the bank's assets; that the banks are so large they are unmanageable and that discounts the stock price.

    Is it possible that the banking model of making money through the manipulation of capital--obtaining deposits and making loans--lends itself to a very high book value when compared to earnings.  I think most investors look to earnings before they look at book value.

    I honestly don't know the answer to Senator Warren's question and would love to hear from others about this.

    •  she is someone who doesn't get disrespectful (2+ / 0-)
      Recommended by:
      eXtina, MichaelNY

      even to Scott Brown during the debates, he'd get personal and she'd deflect it even if asked directly by a moderator.

      She was always, for lack of better words, sweet and nice. Basically, Elizabeth Warren is a nice person. It's who she is.  Her obvious integrity --exposed during the debates--I think made Brown's charges of dishonestly/lack of integrity (around using her Native American heritage and some other thing) not stick. It was clear it was not her.

    •  Thanks for that point. (2+ / 0-)
      Recommended by:
      eXtina, MichaelNY

      I heard the second question but wasn't sure how that worked.  I have read that was the point the Banks found most problematic.  Go Elizabeth! " Is it possible that the banking model of making money through the manipulation of capital--obtaining deposits and making loans--lends itself to a very high book value when compared to earnings.  I think most investors look to earnings before they look at book value."This is a little above my pay grade I think but I get the idea
      .

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