citi and fargo to buy wachovia

PROTECTIONISM IN FULL GEAR

there is rumour that citibank and wells fargo are in a bidding war for wachovia. what i find interesting is that just last week wachovia was in talk to buy over morgan stanley and now a few days later, wachovia itself is going to be bought over. as for citibank, what financial position are they in to buy another bank when they are struggling themselves to stay a float.

in my opinion, this exercise is meant for the following:

1. the us government forcing the american banks to merge to prevent more american banks from been sold to foreigners

2. i think one of the two banks mentioned will buy over wachovia. there will be share swap because neither of the two banks will have enough cash to pay for the deal

3. once the bail out plan is approved, the government will buy over the rubbish loans from the purchasing bank and help it recapitalize itself, leaving the bank with a healthier balance sheet

finally, i think the us government is doing all its best to stabilize the financial market and there will be a joint effort by most central banks to do the same. we are too global to see any major economy especially the us from free falling. so stay long on equities and indices and we should see some usd strength for the time being.