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Paper Banking

  • Category :
  • business and economics
  • November 13th, 2007

    Bank of America reported that it will take a $16bn profit in the 4th quarter as a result of a unrealized gain from its stake in China Construction Bank. This is interesting because this will become increasing common as banks who helped price Chinese IPOs will likely have positions as a part of the deal. As sub prime losses mount, that’s a quick way to make up for the large write down.

    But wait, these are position which they won’t be selling to the open market for another 2-3 years. The profit booked are just paper gains on arguably a bubble market. Sure, why not use it as collateral and cut another CDO out of it?

    Time to position for liquidating another 10%.

    Entry Filed under: business and economics

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