Saturday, June 27, 2009

The FDIC is Effectively Bankrupt


If someone asked you to invest in this "Corporation", would you regardless of yield. They are effectively bankrupt, and problem banks and outright failures are increasing dramatically. 2009 is going to make 2007 and 2008 look like child's play.



The regional banks are holding much of the commerical real estate loans and many residential loans, and these have taken a major hit already, even while the "green shoots" have been fertilized elsewhere.





"This" Has Always been a Banking Problem, partly because this has always been a credit problem. We can't live beyond our mean without credit, and yet the illusion that a 70% consumer based economy can keep going forever, is based upon credit and the idea that a business economic cycle as well as a socio-economic cycle can be "engineered out" by the financial wizardry of the Government. All of this is fallacy.



5 Banks failed on Friday, one was in Minnesota....you know, the Fargo movie..."nice", except when the bank rep shows us to take your home, but even though they did, they still cannot flip it for enough to stay solvent. Because...well, because, home prices can drop another 30% to 50% depending on location. And because they are dropping. I "knew" this in 2004/2005 from being a contractor. The rate of change of costs were absurd, costs of building and building materials were absurd and kept going up.



And also because after a 30% in the Hawaii housing market in 1994 after the Japanese buying binge jacked prices way up and they started coming down, I bought my first house. A friend, a real friend, a realtor advised me that in 1994 I might as well jump, the overall trend is up and how much further could it go down...well, it could go down another 30%...and it did, and until 2004 I was underwater on that place. Then "miraculously" it doubled in 2 years, and I got out, coming pretty close to nailing the top.



The moral of the story--well housing can go down a lot more, and there are millions that are on the edge already...on the edge of throwing the keys on the doorstep and walking away to share a trailer park home with their in-laws.


Check out this list from the FDIC of Banks they have been forced to take over.

http://www.fdic.gov/bank/individual/failed/banklist.html

Junk bond yields are rising.

http://globaleconomicanalysis.blogspot.com/2009/06/junk-bond-yields-rise-fifth-straight.html

And I think this is truly original material, but the NTSE Advance Decline Issues is at a 50% Fibonacci.

http://screencast.com/t/6iNaZfo75wI

It would be optimal to posess real data on number of new stock shares issued in the last several months--it is probably in the 100's of billions, but the dilution effect has to be enormous even if the fundamentals take a while to work into the "weighing machine", and the number of insider sales compared to buy also seems incredible by anedoctle evidence

Enough Posting for tonight. I have a spreadsheet of roughly 300 regional bankers. If feasible, I will try to post so we all together can figure out the best bets to place.


3 comments:

  1. Very good analysis Steveo.

    Keep it up

    ReplyDelete
  2. nice one stevo. how is the RE situation in hawaii? i.e. does your friend still have a job?

    ReplyDelete

Insightful and Useful Comment!