ice-cream-zombie1Let’s see what happened after I wrote my article last week after how nationalization is the wrong thing to do in this environment. Citi came out on Monday and pretty much forced a conversion of some of their preferred stock on its investors. And what happened? All preferred stocks took a hit, just as I predicted. JP Morgan’s trust preferreds are now trading at 50 cents on the dollar. Wells Fargo even lower.  And of course, just as I wrote, this helped destroy insurance companies even more.

Interestingly, the Citi trust preferreds that do not need to be converted, such as the C-PZ, are currently trading lower than the impaired preferreds (such as the C-PP). My trade recommendation is to switch into the trust preferreds for a pickup in yield and to retain the full upside potential in case Citi survives.

Currently some Republican senators such as Richard Shelby are on the tape again, suggesting closing down big, “dead” banks. Reading about these moronic, short sighted statements made me realize something important: there aren’t just Zombie banks in the world, there are also Zombie senators! They just keep aimlessly walking around from, talk show to talk show, but instead of muttering “Brains, Brains”, their mantra is “Nationalization, Nationalization”. They are completely oblivious to simple market relationships and market interdependencies. Why are people like that even in the position to comment on what needs to be done? Shouldn’t that be reserved for financial professionals?

Good thing is, they are largely irrelevant in today’s political world. Unfortuantely, though, they keep on moving and talking. Just like Zombies.