This is a very important indicator of the recovering health of the financial markets. The TSLF was setup to swap trash-for-cash, essentially, when banks were suffering from a frozen winter in the credit and repo markets. According to Tony Crescenzi, the initial bid/cover ratio at its launch was near 2 to 1 as banks hit it up like a man hitting up a water fountain in the desert. Today? zero.
Liquidity is flowing again. And with the newly defanged mark-to-market rules, banks are now free to earn their way out of trouble. Bank of America CEO Ken Lewis is on the record saying his company has a normalized $30 billion in earnings power, translating to $5/share. Simple arithmetic implies a $50/share value given a normal 10x earnings multiple. Of course, take what any CEO tells you with large helpings of salt and Tabasco sauce, but it's without question that surviving bank stocks will be multi-baggers in the intermediate future.
I have owned Goldman Sachs for several months now, averaging down to about a $70 cost basis that has paid off handsomely since. I am now looking seriously at Bank of America, as I think it is clear 1.) it will not be allowed to fail, 2.) it is unlikely to be nationalized given its earnings power combined with PPIP and forbearance in the form of relaxed M2M.
Sometimes, it's just that easy. Shelve the righteousness and take what you can get. Be steadfast during the rocky day-to-day volatility.
Those of the more cautious persuasion should take a look at any of its deeply discounted preferreds. Many of them are more than 50% discounted from par, and yield a ridiculous 15%+.
