Yes. Apparently.
Shorts are getting positioned for the upcoming preferred to common stock dilution. The effect is to increase their tangible common equity or TCE which is both a regulatory and analytical measure of how well capitalized these banks are.
Even though this data is 2 weeks old (short squeeze or short float info is released bi-weekly), it is still relevant for pointing out the facts that the markets remains very overbought - from a lot of bearish covering not bullish optimism.
An alternate analysis is to examine the currency and bond movements which are forecasting a greater return to risk. As for grains, which I have been covering a bit in the past few weeks, they are overshadowed by wider movements in equities and forex.
Source: http://www.bloomberg.com/apps/news?
pid=20601109&sid=aAbmnwDjaZ1s&refer=home
The financial yardstick strips out intangible assets, goodwill -- the premium above net assets paid for acquisitions -- and preferred stock, including shares issued to the U.S. Treasury.Regulators want TCE to equal about 4 percent of assets, up from an earlier target of 3 percent, people with knowledge of the situation said last week. Seven of the banks under review have ratios of less than 4 percent, company reports show.
“Banks are going to need more capital,” Jacoby said. “Treasury doesn’t care about dilution. All they care about is financial mass and loss-absorption ability to offset what could be more nonperforming loans and writedowns in the future.”
***************************************************************************The The increase in short selling occurred as the S&P 500 Financials Index posted its best two months since 1989, when Standard & Poor’s started keeping records. The 80-member index has surged 41 percent since Feb. 27.
Stephen Wood, who helps manage $151 billion as senior strategist at Russell Investments in New York, said the stress tests will narrow the breadth of the rally.
“It will end up resulting in a differentiation of the shares,” Wood said. “It will be a vicious cycle for the companies that are not doing well. The share price will go down in anticipation of dilution with the issuance of new shares.”
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