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January 2018
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CIT group

CIT group Bankruptcy, ouch

                Every day people ask me, why are you so bearish on stocks.  Ironically, my answer has been the same for 3 years; nearly every publicly traded company is financially insolvent.  Sure, they have decent earnings, report profits and what Wallstreet has accepted as healthy balance sheets.  But if that was the case, not the perception, we wouldn’t have events like the one that’s happening today at CIT group.  How can a company go from over $10 a share to $0.35 a share in 6 months?

                Now, here is what really drives me nuts…. CIT Group Inc. is really just a shell company for CIT bank that provides commercial financing and leasing products, and management advisory services to the small and middle market companies worldwide.  Basically, they have very little of their own assets and capital at risk.  CIT Group borrows money for cheap, than they lend to small companies at a profit and then transfer the profits to the executives.  Like Mr. Alexander Mason whose salary is 1.68 MILLION.  There are numerous others executives at CIT group, all getting paid what most Americans would consider a small fortune per year.

                All of CIT Groups risk is transferred to the public!  Yes, the fools the buy and hold stocks for ever with a few others.  Instead of building a strong cash base like any business should have, the money is quickly looted in good times.  When bad times come, you just close the doors and transfer the losses to others.

                Do you know who is another company that behaves just like Cit Group, Goldman Sachs!  Less than one year ago, they had to raise 10 Billion in issuing new stocks, 5 Billion for Buffet, over 10 Billion from government and a gift of 25 Billion from AIG.  That’s a lot of Billions…no wonder the average bonuses for GS employees will be over $1,000,000 this year.  What I’m trying to say is that most publicly traded companies are overleveraged.  They need to borrow on a daily basis to keep the company afloat.  But as rates increase, expect more companies to declare bankruptcies and common shareholders holding the bag.

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