Not Out Of The Woods Yet

1.    Warren Buffett’s $5bn vote of confidence in BoA is aggressively priced and demonstrates that for all the denials, there was a problem lurking at BoA, as we were informing you in the last few weeks;

2.    The $5bn may be a good start but the total amount of funds needed may be an order of magnitude greater;

3.    BoA could still become the poster child of the next phase of the global financial crisis depending on market uncertainties and ongoing liabilities; or

4.    Another faltering European financial institution could trigger the next phase of the financial crisis if it does not find a Buffett equivalent quickly in Paris, Milan or Madrid;

5.    Our computer models and scenario analyses suggest that the universal model of Large Cap Financial Institutions is on its last legs;

6.    Big bank profits will be below par for years to come because of excessive new regulation, need to build capital reserves, toxic assets and rising liabilities;

7.    Financial evolution suggests that “Small is beautiful”: time is ripe to encourage innovation via new private banks without any toxic legacies that are disallowed from taking on big risks and offer utility services;

8.    The German mini-flash crash in the aftermath of the Buffett deal suggests that the markets are still very fragile and walking on glass courtesy of High Frequency Trading;

9.    The epicentre of this phase of the financial crisis, which began four years ago on August 9th 2007, now appears to be in the Eurozone; and

10.    Inactions of Eurozone powers are not engendering much needed confidence, the financial crisis is brewing stronger day by day, spawning many unknown unknowns with unintended consequences.