Friday, August 14, 2009

Tick, Tick, Tick, It's Getting Louder

Another interesting week that found our last blog right on point. DIA $97s doubled in value this week before imploding, making for a very nice trade. Regional banks were called out on Wednesday by Elizabeth Warren of TARP review fame as undercapitalized. “We haven’t really resolved this problem of illiquid assets on bank balance sheets and it’s more acute for the small banks,” Warren said. This caused an 11% drop in Zion in one day along with other smaller regionals.


A Bloomberg article today also exposed flailing regionals, stating more than 150 publicly traded banks have at least 5% non-performing loans. "'At a 3 percent level, I’d be concerned that there’s some underlying issue, and if they’re at 5 percent, chances are regulators have them classified as being in unsafe and unsound condition,” said Walter Mix, former commissioner of the California Department of Financial Institutions." As an example, Colonial Bank, which had 6.5% of its loans non-performing, was just shut down and enveloped by BB&T this afternoon.


Even Dick Bove said this week that the bank rally is "running on fumes," shocking coming from the man who told us Lehman was grossly undervalued at $10 (he must have meant 10 cents). David Tice, who runs the Prudent Bear Fund, said today that stocks are "grossly overvalued" and expects to break our March lows. D.R Horton and Genworth Financial were downgraded this week as analysts finally looked at their prices and said, "C'mon!"


But optimism persists. J.P. Morgan predicts a V-shaped recovery that shoots right through predictions of sluggish growth. However, the news today wasn't so rosy as consumer spending shrank instead of grew, and sentiment retreated as well. How quickly we forget that our economy is a giant Ponzi scheme and when people don't spend, our economy craters. I still think we could sputter out a few large days over the next few weeks or even month, but the ticking is getting louder. Colonial was the largest bank failure this year. There are plenty more to come. Until then, we'll keep our eyes on these smaller banks and overseas for opportunities.


http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEneAhol5ZHc



http://www.bloomberg.com/apps/news?pid=20601109&sid=aTTT9jivRIWE

11 comments:

Anonymous said...

Ax...
Remember, a play against the banks is a play against teh house...

Dodd, Frank, and the Big O have given these guys EVERYTHING they need to to keep the charade running... Even Neil Brodsky from the TARP oversight acknowledged that Wall Street does what they do best... Apply their brians and talents to find new and unique ways to manipulate the system. "They are too smart for tTreasury to keep up with."

We will see what happens as the Round Table meets to auction-off... the toxic assets sitting in the Fed... Treasury etc... Blackrock and friends will show us amatures how it is done.

Questions... IYO will the proprosed changes in healthcare stop the runaway spending that is taking place in Medicare and MEdicaid? Should that gap be plugged in some way shape or form, then I would expect a major uptick in the market... If the Big O does not get "his plan"..or better yet, the Democratic Plan passed, I would expect a major sell-off... likewise, if it passes...it could be another leg up. I do however think we will have a sell-off by January!!!!

AX said...

Indeed, the game is rigged. But it was also rigged before the crash, and that didn't work out too well....remember, mark-to-market is back on the table.

I have no idea what will happen with healthcare. My guess is that any legislation that passes will be so compromised that it will have little long-term impact. Obama is losing on this one.

HKraig said...

Ax,

Love the blog. it is quite interesting to get some real insight from a former college baseball stud and current healthcare professional. Keep up the good work.

HH

AX said...

Thanks, HH. If this is who I think it is, I think you were equally studly as a college baseball player. Being listed 6th on the depth chart at a position you don't play doesn't boost the confidence. Hope all is well over there. Always interested in investment suggestions if you have any. Looks like we're heading for a tank today.

Take care!

AX said...

Wow, have I been on the last few posts? Destruction today, more to come:

http://www.marketwatch.com/story/delinquency-rate-on-bank-loans-up-to-record-649-2009-08-17

http://www.marketwatch.com/story/credit-crunch-likely-to-persist-bankers-say-2009-08-17-14600

Anonymous said...

If Dick Bove says the banks are in trouble, you'd better get over there and get your money out. He was extolling what bargains our financial institutions were right up until Lehman failed and the others claimed they needed a bailout to survive.

AX said...

Yeah, I always have Bove and Doug Kass in my head as the two who said Lehman could never fail and were the sure thing at $10. They were very smug when Lehman hit $15 again...right up there with AIG is the buy of the decade at $45.

HKraig said...

Ax this is one and only HH. I look forward to sharing some investment insight going forward although i am bit new to the trading game. I am just a lowly commercial real estate professional living in london. btw-are you familiar with the site Minyanville? It is really good stuff. later.

AX said...

HH, Minyanville can occasionally provided some insight outside of the mainstream, unfortunately, it is pushed by Marketwatch so it can't stray too far. If you really want to expand your horizons I suggest Itulip.com for a hardcore look at our economy and the ramifications of this stimulus.

I'll email your sister so she can forward it to you. Take care.

HKraig said...

AX-I would say that maybe another look at miyanville may be prudent just to make sure your not missing something. they had been discussing the financial meltdown years before it took place, one of the few that did so, and their content is no nonsense depsite being hawked by marketwatch. they also provide some excellent trading tools like real time information in thier buzz and banter forum. their association with MSM should make you cynical but i think a little digging will prove they are no joke! appreciate the itulip.com advice. i will sure to add it to my daily website rotation that currently consists of FT Alphaville, Naked Capitalism, The Big Big Bet ; ), Zero Hedge, The Big Picture and a few others. later.

AX said...

I will give it a more serious look and I like your other sources.