SubscribeThat Sound? The FDIC Insurance Suck
August 10, 2008
According to Meredith Whitney of Oppenheimer, there is a huge amount of uninsured deposits at many of banks which could soon be causing a huge problem. If you think about it, it makes sense. As time goes on, more and more money will be moved from bank to bank as depositors become more concerned about the amount of money they are insured for. Essentially, money will be spreading around and:
- Fewer people qualifying for mortgages
- Banks recapitalizing and not providing credit
- Wachovia 35% uninsured
- Capital with be flowing from weak hands to strong hands
- People who need capital/credit will not get it, those that don’t, will.
- Available credit for consumers will shrink
- Some financial stocks will revisit lows
Think about the above list for a moment. What I think is the most interesting takeaway here is the fact that money will be moving out of banks at a very fast pace if we continue to see banks taken over by FDIC. This is because it will actually be detrimental for the FDIC to rescue Read more
The Housing Bill: Uncle Sam is moving into the spare bedroom
July 28, 2008
Well, over the weekend the Housing Bill was passed by a 72-13 vote in the Senate. Now, we wait for President Bush to sign and all will be fixed it seems. Yeah right !
It must have been an interesting conversation that the Senators had when they discussed how the U.S. government would now be partners with homeowners their home’s future price appreciation, as long as they take a deal they cannot refuse. To be honest, I think it is unconscionable that the the U.S. government is now going to “own” a portion of the greatest asset that most people will ever have.
Of course that is only after lenders “volunteer” to write-off a portion of what they are due to help out borrowers. Also, with that, Senators also asked Santa for a new train set and a puppy Read more
The Fat Lady ain’t singing!
July 21, 2008
It ain’t over it seems. Apple (AAPL) aside, the big news after hours was American Express (AXP). The earnings are awful, the business is in the dumps and now AMEX wants to withdraw any 2008 forecast. Bloomberg reported:
Profit in the company’s U.S. card business dropped 96 percent to $21 million from $580 million a year earlier as provisions for losses more than doubled to $1.5 billion from $640 million. uncollectible debt in the unit rose to 5.3 percent of loans from 2.9 percent a year earlier.
After hours, my old friend Capital One (COF) was knocked for a loop on the news as well. The credit card industry has proven itself to be no better that two-bit loan sharks. They rape customers with exorbitant fees, ruin your life if you cannot pay and now lie to protect themselves. I am totally disgusted with the way they have handled themselves.
Still Diggin’ DUG
July 13, 2008
For the past several weeks, we have been adding to our position of UltraShort Oil & Gas ProShares (DUG) as we believe that the underling fundamentals for the Oil Sector are faltering. The fact that the price for oil is rising and DUG is rising continues to show that the thesis is solid. Here are some interesting points from economy.com:
* Rising energy prices have cut almost half a percentage point from real U.S. GDP growth in each of the past five years.
* The recent surge in oil prices is being powered by increased financial demand and not tighter underlying demand and supply fundamentals.
* Oil prices are expected to soon peak and to decline measurably by this time next year.
* Lower prices will allow the Federal Reserve to hold policy unchanged for the remainder of this year, and will help the economy find its footing by this time next year.
The fact remains that our general oil dependency will continue to prove difficult on our economy. More so, the fact that we cannot keep our financial house in order will continue to show the world that ours in not an economy worthy of investment. Once more it is easy to see why our dollar is so weak.
Now, add that to the crude reality that oil and the dollar are tied together and it becomes obvious that unless we can figure out a way to cause the dollar to strengthen, there will be higher oil prices to come. No matter, it is becoming clear that oil companies are still tied to the global economy and we are finally seeing the dislocation of oil prices to oil company share prices. Therefore: No longer will they be positively correlated.
The Week Ahead: A Few Nuggets
July 12, 2008
This week will be full of exciting earnings announcements that may actually show some promise. As investor anxiety grows, sometimes a stock will mistakenly get caught up in the hysteria/euphoria and shares will behave erratically. In these conditions, if a company can prove that it isn’t in imminent danger by showing a string of solid earnings in the face of financial adversity, investors will bid shares up with a vengeance.
There may actually be a few nuggets that will show up this week. Yes, even in a market that seems to whipsaw investors around daily, there may be a few good stocks out there. Even in the worst forest fire there is usually some form of life left that will help to bring life out of the ashes. With that in mind, here are few ideas to ponder:
Stocks: (SCHW) (C) (IBKR) (FNM) (FRE) (OXPS) (INTC) (EBAY) (COF) (GOOG) (MAT)
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