Leading Banking Analyst Cautions Investors During Downtrend

Unless buying materialises,says Richard X. Bove,vice president of equity research at Rafferty Capital,LLC in a note to investors,there is nothing to stop a massive move to the downside due to the lack of liquidity in the markets.At this moment,I would strongly caution to remain on the sidelines until a definable source of new funding is determined to maintain or bolster stock prices.
At its base,the key problem is that the historic protections that once existed in the markets to prevent massive downslides have been removed.This country's claim that it has deep and liquid markets is being put to the test.*
Mr.Bove is bitterly critical of the plethora of new regulations that have been imposed on the banking industry post-financial crisis.These include the US Congress passing the Dodd-Frank Act;Basel III,Supplementary Leverage Ratio;Liquidity Coverage Ratio;and the Orderly Liquidation Authority;and the Total Loss-Absorbing Capital Regulation.The impact of these regulations,rules and pieces of legislation has been the complete takeover of the banking industry by the government.In my view,the industry has been effectively nationalised,Dick Bove said in a December 2014 interview,in which he also predicted that banking industry regulations would limit the earnings of banks in the long term.It is these regulations that have also ultimately restricted the flow of funds to the point of making the markets vulnerable to collapse.

Early Edition:Leading Analyst Buys Goldman

Dick Bove,a leading banking analyst at Rochdale Securities,says he would buy Goldman Sachs stock despite the firm's being charged with civil fraud by the Securities and Exchange Commission.The charges will have a short term negative impact,Mr.Bove said,but Goldman will still be Goldman.I don't want to defend them;if they have done anything inappropriate,they should be penalized,the analyst stated.
Dick Bove described Friday's plunge in Goldman's share price as a massive overreaction.Goldman's capabilities in trading and good systems suggest no one can take its place.The reputation of people within the division is strong enough that the business is gonna continue to thrive.Still,Mr.Bove observed,the shadow the charges cast is pretty sizable.He asked whether the SEC action is the first of multiple attacks on Wall Street firms.
The most likely outcome of the matter is an out of court settlement,in which Goldman will pay a few billion dollars to the government.It has already repaid the government loans received at the height of the financial crisis.Goldman reportedly has some 65 billion dollars in equity with which to pay the fine.Questions have been raised,however,about the tenure of CEO Lloyd Blankfein.There is also the possibility that the Justice Department will file criminal charges in the case.