Global Pie: Get Assets on the Cheap, While Banks End Up With No Equity

Bloomberg just posted a very interesting story on profiting from corporate distress: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAeVSwaMsgDQ : John Paulson, CEO of hedge fund Paulson and Co, believes that it is the time to pick up the debris that the financial storm has brought: corporate distressed loans and mortgages that went sour.

While by itself the idea is not new, what is interesting is Paulson's view on 2009 prospectives for banking industry. He believes that many banks will end up losing more than their equity. He might be very right and this possibility explains why U.S. Government is so rushing to boost up banks' equity position by converting preferred shares and using TCE ratio to demonstrate banks' solvency and to prevent total collapse of the banks. Someone else mentioned recently that by the end of the year Citigroup and AIG will have no equity. 2008 was dead scary. Is 2009 going to be even more turbulent?