Puerto Rico's Banking System On The Brink & The Fake Rich

Banco Popular's Shares Got Crushed: What You Need to Know

What: Shares of Banco Popular of Puerto Rico (BPOP) fell as much as 11.4% on above-average trading volume. [Banco Popular's stock hit $1.02, but closed at $1.11, down 8.61%]

So what: Fellow Puerto Rican bank Doral Financial got a NYSE delisting notice on Friday, and Popular is likely to get one from the Nasdaq pretty soon unless share prices bounce back. Moreover, analysts at Barclays highlighted these two as severely undercapitalized and in need of a white-knight buyout.

Now what: The stock is exploring all-time lows, just below the levels set by the 2008-2009 banking crisis, and hasn't paid a dividend since 2009. You'd have to be a very brave soul with a dramatic turnaround plan in mind before buying Puerto Rico's big banks today. The smartest investors prefer American banks right now.

From AOL Money & Finance

Analysis

Contrary to any economists or politicians, Puerto Rico's economy is NOT growing. It's still contracting. It's tough to see it. Between the media and the politicians, we are shown shiny distractions which seem positive. They're right, it is great that are bonds are doing better, but we're not being shown the crumbling foundation of our economy.

If Doral Financial or Banco Popular are delisted, to quote Ross Perot, "There will be a huge sucking sound," as billions or dollars of value disappear. If you are a stock holder in Doral Bank (DRL), and they are delisted, your investment is now worth $0. That is, unless you own preferred stock. ;-)

If any of these financial tragedies were to occur, it might even go by quite un-noticed, locally. There is still a lot of money in the Puerto Rican marketplace, many analysts attribute that to Puerto Rico becoming a narco-state. According to El Nuevo Dia:

Hace unos tres años, Estudios Técnicos, la firma que preside Villamil, estimó que la economía informal en la Isla oscilaba entre $12,000 millones y $14,000 millones al año. De esa cifra, unos $5,000 millones podrían estar vinculados al narcotráfico.
¡Ojala, que no! But if DRL or BPOP disappears, we would be cash rich, but significantly poorer. As the wealth created from 1950 - 2001 disappears, we have become the "fake rich."

This tragedy would hit hardest mutial-fund owners of the stock and the local 1%. Of course, if DRL does gets gobbled up, there would be a trickle down effect; as it would lead to bank closings and layoffs. That's the last thing we need, more "fake rich" looking for easy money. Goodbye, formal revenue! Hello, informal economy!

One final thought. If you listen to the 4th estate or government [same?], for any plans to mitigate the collapse of our banking system, all you will hear is "¡Coqui!"

Saving Puerto Rico
will require us to eliminate the 1% and our government [same?] as providers of solutions. We're on our own! No one can help us, if we can't help ourselves.