Subscribe RSS Feed
More Bad Banks
Posted On Thursday, August 27, 2009 at at 1:54 PM by Finance Fanatic
Well, we've seen the wrap up of yet another day of low volume, back and forth trading that conveniently closed the Dow up about 37 points for the day. It is very clear the unorthodox movings of the stock market has scared most investors out of the market (including myself). Even bulls are having a hard time pulling the trigger as we saw one of the lowest days of volume yet. We do need to factor in it being August and a very popular time to travel before the kids go back to school and I expect, as time goes on, many people will be forced to sell and liquidate as many consumer business continue to be strapped for cash. I do feel the still the present risk of deflation is a real risk that could cause a big turn in the market and is beginning its course.
Today, the FDIC announced that its list of distressed banks rose to its highest level since 1994. At the end of June, 416 banks were numbered on the FDIC's "problem list", which is pretty strong jump from the end of March's number of 305. What tickles me is that despite such big and large profits that many of the banks have supposedly been turning the past few months, the distressed list grows larger and larger at a rather aggressive rate. You can smudge the numbers to make them say whatever you want with altered accounting standards, but in the end, that pile of defaulted loans still stares the banks in the face. In tonight's premium podcast (subscribe here), I will discuss more problems that face the banks in coming months.
In addition to the expanding list of bad banks, the FDIC also reported a quarterly loss of $3.7 billion compared to last year's profit of $4.8 billion. The FDIC insurance fund has been drained of about $50 billion to about $10.4 billion (all that remains) in just a year. As times continue to struggle, which I believe they very much will, we can be sure that fund will be maxed out. It is no wonder that lending is scarce with banks right now (which if you are looking for a reasonable consumer loan, Lending Club could be a great option to look into).
Like I've said before, despite the recent gains on wall street, industries (including the financial sector) are still racking up massive losses. There is only so much investors can absorb until they are forced to sell. We are heading into the last quarter of the year, which as we saw last year, can be a scary time for wall street as it is usually redemption season. Cash has been looking very good to me as of late. Happy Trading.
Hello FF, even more bad banks but the market continue to rally. Look at all the shit company AIG CIT FRE and you name those fire up like space shuttle. I am tried to consider this is bear market rally or bull market now, because it does look like someone is manipulate the whole thing and look so fake!
But there is a sentence in Chinese, "once you are fooling around there will be payback time soon or later".
Have a nice weekend.
WHEN IS THE MARKET GOING TO CRASH? WHEN ARE THE BANKS GOING TO HAVE TO COME CLEAN AND MARK THEIR WORTHLESS RES. AND COM. ASSETS TO THEIR ACTUAL VALUES? I THINK THE DOW IS GOING TO HIT 4,356 WITHIN THE NEXT 12 MONTHS. WHAT ARE YOUR THOUGHTS?
Hey Anon,
If that is your bet, just go buy some Jan 2011 put options. However, I most definitely think that "worst is over". Look at charts of PCLN and AAPL and RY and click MAX. As if there has been no recession for these stocks. You will realize what a lifetime opportunity we have all missed by listening to people who once earned some money by buying SRS at $150 and selling at $200. There is always mini crashes every once in while, but those are the times to start loading up. And if deflation is real, that would be the time that owning stocks would make more sense as US dollar will be worthless. I think either way, stocks will have more value as they are making real business and money. Of course, don't choose bankrupt companies. I wonder when FF will capitulate. Nice try though. But good news for FF that I am also expecting a pullback (not sure though). I mean also as a bull I am not adding to my positions but rather waiting for a pullback to add. I am happy that shorts are paying the price of shorting the market to S&P 500 to 6000's. Because they shorted so aggressively, now we are having an aggressive rally. Ans as long as investors do not get panic, we are all fine. The more short squeeze, the more we get confident and the less chance for a crash. And finally, it is never late to convert to long. We will well receive you FF. Actually, I have benefited from your long ideas as all of them were correct. Hope this helps.
Anon,
Technically, Nasdac is closed to 10year resistance line now and mid-September will be a breakout point to test it.
Treasury maturity of September and stop of Quantative easing in October will make dallas stong and lead a big downturn at the end of September. However, if FRB will extend quantative easing more, it will keep a bull market.
Liqudity rall should be distinguish from a fundamental rally. It goes up by printing money power whatever economy is bad or not.
The most important factors are quantative easing(inject money) and exit stratedgy(take out money) that decide the liqudity of market.
Quantative easing cycle: US goverment sells treasuries-FRB buys treasuries and give dallas to government by printing them-US government give these dallas to big banks(bail out)-Big banks buy treasuries together with FRB, buy their own stocks(finantial strong), buy emerging market assets(china, brazil bubble), and give bonus to excutives..
This cycle will be supposed to end in October and FRB will start weak exit stratedgies(not raise interest) to avoid future inflation risk. It will creat stock market downturn.
Anon,
The bad bans need to be closed.
Users can transform their wall into a movie theatre to watch videos, give a presentation, or even play games like Fruit Ninja using hang gestures on the table or cast onto the wall