For those who were not around we mentioned in the spring how the Feds were quietly doing a hiring binge of retired bank regulators anticipating a surge of failures.
- The Federal Deposit Insurance Corp. wants to add 140 workers to bring staff levels to 360 workers in the division that handles bank failures, John Bovenzi, the agency's chief operating officer, said Tuesday. (50% increase)
- "We want to make sure that we're prepared," Bovenzi said ...
We had >1000 bank failures in the early 90s S&L crisis, and I contend this disaster is going to make that one look like child's play. There probably are far less banks nowadays with all the mergers and consolidation so maybe the numbers (of financial institutions) won't be so high, but the amount of capital evaporating will be much higher from this perch. And most will be smaller and middle sized private entities we've never heard of. Another situation is our FDIC insurance fund will essentially be broke (as are almost all things in the United States of Subprime) within the first 20-25 good sized banks to go ($50 billion will only last so long and IndyMac alone will take about 10-15% of that), so where will the funds be coming from to pay
back all Americans the $100K per bank they are insured against? Hmm... I have an idea. ------------>Can you hear the helicopters warming up? I continue to scoff at 'strong dollar' talk... dollars will be printed at a massive rate to replace capital burnt into the ether. I am chuckling at all those who believe regulation is such an evil thing - the free markets solve everything. Well they are 'correct' - the free market will solve everything. But it's going to be a bloody scene as it is being solved.
The market continues to act sick and intent on testing S&P 1225 again. We still have not had that panic in the air feeling. And what a disgrace that we cannot even hold a rally when all the King's Horses and all the King's Men used our taxdollars to save Humpty again. (for a few months at least)
5 comments:
TM: Happy Monday! This is something I have been writing about for awhile and that is the mantra of "don't fight the Fed" has been and continues to be a losing strategy. When the Fed intervenes there is a short term psychological lift to the market but nothing else.
Remember back to the example I provided many months ago of a dying patient. We do our best to try and save them; we try this drug and that drug; eventually the numbers (blood pressure, heart rate, etc) look great but there is nothing left. That's where we are and have been for the last 12 months. No matter what the Fed does and no matter what medicine they have in their arsenal, the patient (the market) is not responding. Nature needs to take its course.
Having said that I still remain bullish for a bounce and this bounce should go maybe 4 to 6 weeks; THIS IS STILL A BEAR MARKET and I believe this bear can continue for another year at least. The risk to my short term forecast--if you want to call it that- is more downside as bear markets tend to produce deeper "oversolds" then the current environment.
Guy - share those thoughts with you. Just let me know when this elusive bounce begins. I'll be on cruise/snooze control until/if/when. :)
Gold is making a move
It is very, very hard to predict these things with any degree of accuracy and this is from someone who tries to do that very thing-- time the market. In essence, we buy low and sell high or buy fear and sell greed. It works most of the time but for those times it doesn't you better have a strategy in place to reduce risk because they don't ring a bell to tell you that this time is different.
From my perspective, positions GLD and GDX have taken the bite out of the downside risk in my index equity positions. Also I don't go all in at one place or point in time.
But even then, if and when the rally gets started I probably won't even know it myself as "they" won't ring the bell for that one either!!!
Staffing up the FDIC is a sign of things to come.
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