Sunday, August 17, 2008

The Hundred

100. Significant number for many reasons. Number of meters to run to be world's fastest (can't believe Bolt jogged a 9.69). Number of lies banks and the Fed tell before we finally give up. Number of patients I saw the last 3 days. And this, my loyal readers, my 100th post. And I'm feeling friskier than ever with a hurricane threatening to blow by my house and the end of "earnings" season a week away. Let's get to it.

Since someone from Lehman, not unlike Schwab, has been logging on, let's start with you. Looks like you're going to preannounce your return to earnings in the 3rd quarter with a $1.8 billion loss. Nice work. While you feverishly search for someone to unload your horrible mortgage and CRE portfolio of $40 billion, no one is buying, not even at 22 cents at the dollar. Not even with the promise of bearing the first $5 billion in additional losses that those securities might bring its new owner. Sounds promising. And what percent are you going to have to pay on your new round of capital? 10%, 12%?

Wachovia has to regurgitate $9 billion in ARSs to its clients. While this won't come as a direct loss, those assets will be gone and I'm sure that the customers who you defrauded with "same as cash" promises will run to renew deposits with you. All the while, your Pick-a-Pay option ARMS are even worse than the sub-prime loans causing all the damage. But don't worry, only 45% of your loans fall into this category, and most won't reset for 2-3 years. Of course, when they do, homeowners will have to make 60-80% higher payments on a home worth less than it was 10 years ago. Good luck getting that money back.

My new buddy, Randall Forsyth, editor of Barron's Online, recently wrote how he had no idea how stocks were rising in this financial environment. Last week rewarded us with a drubbing, albeit a reduced beating by week's end, of financials. You're not alone, Randall. "The financial crisis will probably not end until next year or even 2010, Germany's Handelsblatt newspaper quoted Morgan Stanley co-President Walid Chammah." This on top of reduced profitability forever more for investment banks according to Chammah.

And the market's friend the last month, declining oil prices, may have awakened the monster. OPEC. Seems they don't like the price of oil dropping with the world economy going into the flusher and demand, not speculation, driving prices down. If they can't sell as many barrels, they'll just have to cut production, by say, 30K barrels a day. Yep, that should do it. Keep prices nice and high. And with our "strong dollar" negating the only thing keeping our debatably positive GDP above water, exports, that could lead to another spiraling sinkhole in the economy. That, and all of Europe and Japan going into a recession doesn't exactly bode well for exports. Don't poke the tiger....

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080817&id=9037031

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080817&id=9037087

http://www.economist.com/finance/displaystory.cfm?story_id=11921871

http://online.barrons.com/article/SB121846688955529837.html?mod=b_hpp_9_0002_b_online_exclusives_weekday_r1

3 comments:

Tiger Coach said...

On Paulson's Spring trip...OPEC increased production of 1 mil a day... Just stop that and watch the wrench that will be thrown into things.... of course at the next meeting Iran will announce a greater push to drop the dollar...

I thought Cramer said the financial crisis was over:)

Anonymous said...

Note Senator Brown's comments re: Fannie and Freddie at usmegatrends.blogspot.com
It appears to be a prophesy.

AX said...

Wow, TC, was that a post from your wife? I already read your blog! Let's see if the former IMF economist is also a prophet, large bank failure coming...