National City Upgraded. Are You Kidding Me?

National City Bank, one of the largest banks in the U.S., is teetering on the edge. In a matter of months the company has lost twenty years of shareholder value. That's really quite an amazing feat. How much did the CEO make for his accomplishments? Whatever they paid him, I could easily destroy this company for much less. Management 'managed' this one hundred and sixty year old institution to the precipice in a matter of a few years. National City was founded in 1845. National City's death occurs in........to be determined.

In recent days rumors have started to fly about KeyCorp, Fifth Third or Wells Fargo acquiring the company. Rumors are just that. We've seen numerous short lived rallies in the stock based on pure speculation the company would be sold. Yesterday the stock was up over five percent at one point. The speculative juices are still very much alive in the stock market as investors are still taking tremendous risks. Buying this stock is a prime example.

It might be of interest to note that the perception that National City is a conservatively run super regional appears to be anything but. National City is one of the largest users of derivatives of any U.S. bank. And their lending risk management practices this cycle were brilliant as witnessed by the company's implosion.

National City has just hired Goldman Sachs to help it map out strategic options. What strategic options? Let's see. Option 1) Go out of business. Option 2) Pray the company is taken over for peanuts. Option 3) Start selling off the company's good assets and create a death spiral. How much more shareholder money are they wasting to hire Goldman? The only value Goldman brings is finding a buyer. Why don't they simply take out a full page newspaper ad? 'For Sale' or 'We Need Cash'. Management might have thought about strategy before they made a mess.

What is really quite amazing is that Morgan Stanley just upgraded National City. If Morgan is upgrading National City, someone needs to be downgrading Morgan because their decision making is impaired. Did banks learn anything about catching a falling knife after Bank of America's financial fiasco with Countrywide? With the Bear Stearns' plunge to $2? How about a little word association? Upgrading a company with as many problems as National City reminds us of what words? Gambling comes to mind. Incompetence is another word that comes to mind. How about Clownish? It's a mad, mad, mad, mad world.