Of Nationalization and Fear

- Both Citigroup's and Banc of America's share prices fell to under USD3 and USD4 respectively on early NY trade.

The market forced the massive sale of these two stocks on speculation they will be nationalized i.e. fully taken over by the state because no way the companies can sustain trading at such low levels.

That would mean that shareholders will be left with nothing as the firm will now belong the government and creditors instead. As a result, the sell off in the financials spread to other stocks, including consumer focused companies and tech firms. The Dow is currently trading at -150 around the 7330 level as the market tries to break the 2008 low.

I think we will do just that because there isn't really anything to console the market at the moment.

But wait... if the government doesn't step in to save these companies (in effect to try and stabilize the financial sector), who else can?

So is nationalization a good or a bad thing? this is a question my team had been discussing today.

I personally think we don't have a choice.

My economist brought up the notion that we're only halfway through the writedowns. USD 1 trn has been written off by banks but the final total might be USD 2 trn or USD 3 trn as highlighted by famous economists like Roubini and Krugman.

At this point, only the state can step in to stabilize things.

And at this point, only gold is true safe haven as an asset to hold. Gold has finally touched USD1,000 today.