Monday, November 05, 2007

Bank Smack Down

It was a Canadian female financial wonk working for CIBC who brought down America's biggest bank.

Woman behind US banking rumble
CIBC World Markets analyst Meredith Whitney, an outspoken television pundit who is married to a professional wrestler, delivered a body slam to the U.S. banking sector this week that has sent stocks reeling in markets around the world.

The champion stock-picker even talks a bit like Rowdy Roddy Piper.

"No one had the moxie to put in print, what I put in print," Ms. Whitney said yesterday.

She had earlier hit Citigroup with a downgrade when it was already hurting from weak profits.

"Is Citigroup's dividend safe?" she demanded in a tough report that followed a 57% drop in third-quarter earnings at the world's largest bank.

Pro Wrestling of course was a popular blue collar sport in Canada well
before it became big entertainment in the U.S. Take that.

And so she was subjected to the macho American male egos in their marketplace, no uppity woman and a Canuck at that will tell them the Emperor has no clothes. Not when they keep cheering on the fiction that nothing is wrong in their market.

CIBC analyst got death threats on Citigroup - report

Meanwhile the CEO of Citigroup leaves the bank with the booty while the U.S. market crashes.

Citi Watch: A Princely Sum for CEO’s Exit?

Perhaps he will take it out with a wheelbarrow like they did in Germany way back when.


As Jim in San Marcos who blogs as The Great Depression of 2006, writes;

Economic Turpitude

Banks, hedge funds and what ever are taking billions of dollars in loan loss provisions. I have been suggesting for over a year, that a lot of this money may be coming from our retirement funds. Think about it. If your wife buys a new fur coat with your paycheck, now you can’t pay the rent, that is obvious very fast. If the wife turned a trick with the old geezer down stairs and bought the coat, you are stuck wondering how she did it. The reason I suggest Retirement funds, is that the losses suffered so far appear to affect no one. But bear in mind, retirement income funds deal with the future. Most people are not ready to retire so these funds should have plenty of time to recover losses (keep quiet, keep your job). The write downs are massive. Nobody even blinks an eye. What’s a 10 billion dollar loss? The perspective is beyond comprehension. This money has to be coming from somewhere. Whoever’s money it is, they don’t seem to need it--yet.

The money supply worldwide seems to be contracting. Usually this would imply a rise in interest rates. That doesn’t seem to be happening. Commodities are increasing in value, which could be an inflation indicator. If reserves are being added to the banking system, then this could explain why rates are not rising (using a truck is cheaper than a helicopter).

A lot of the new earned money entering into the economy is not being used to create new jobs, its being “invested” in financial instruments. Workers are not creating new product, investors are placing side bets on the financial markets. The profit is gone from home building industry. Investment in rental property is a losing enterprise. Consumption seems to be tapering off. Home remodeling appears to have hit the skids. Starbucks seems to be doing OK, you have to draw the line somewhere.

Interest rates are dropping but you can't force people to borrow money unless there is some sort of return (like a house appreciating at 20% a year). That would explain why the stock market as well as the commodity’s markets are still in play. Cramer the other night was forecasting Google at $750. Everything is still going up. The stock market had a little hiccup on Friday. Nothing to worry about, Google kept on ticking just like a Timex watch. Of course it can’t be a bubble, bubbles don’t get that big!

You have a bunch of banks forming a consortium to bail out the CDO and SIV holders . They are creating a new financial instrument called a "USA," which is short for “Up in Smoke Assets.” It ought to be a hot item if they can figure out a way to package it. It’s kind of like selling invisible goldfish. Give the buyer one or two extra for free, so he thinks he’s getting a real bargain and sell him some invisible fish food to boot.

The economy’s current condition reminds me of the embezzler and a millionaire taking a vacation at the same resort. The embezzler knows whose money he is spending. The millionaire has no idea that he is broke, but hey, everyone is having fun. Are we broke yet?

It's All Good

The Wall Street Journal came out with an article on write downs tied to mortgage debt Saturday. Their bar graph (left) displays about 20.7 billion in 3rd quarter losses. Washington Mutual with 1 billion of charges this quarter didn't even make the list. The amount shown for the Bear Sterns doesn't really reflect what happened when this mess started (BS had a 1.6 billion hedge fund bankruptcy). Of course Amaranth is long forgotten.

The above chart is mixing brokerage houses with banks. So these write offs or what ever, could be coming from several different places, bad housing loans, credit card debt and hedge fund investments. Don't worry everything is "contained." Yea, right!

Here's a list of the top world banks. The banks in the top picture seem to have a handle on projected losses if you compare their net holdings (left) to declared write downs (top). But this is just third quarter losses. So do we multiply this by four to come up with a yearly total? It sounds logically conservative and nightmarish. [Note: Morgan Stanley in the top pic and JP Morgan Chase in the one at the left are not the same company, the first is a brokerage house and the latter is a bank, they were one entity at one time]

HSBC wrote off 11 billion in March, Citibank plans to announce earnings October 15 and refers to earnings as "abysmal" in their news release last week. Two banks not saying much are Bank America, and JP Morgan. It could be an eye opener when they report quarterly earnings.

Now mix in 2.46 trillion dollars of credit card debt. Here is list of the top ten issuers of general purpose credit cards:

1. Bank of America
2. J P Morgan Chase
3. Citigroup
4. American Express
5. Capital One
6. Discover Card
8. Washington Mutual
9. Wells Fargo
10.U S Bancorp

The puzzle is starting to come together. We know who the players are. Citigroup made all three lists, which doesn't sound too good. They might have company, if Bank of America and J P Morgan "measure up" in the next week or two when they announce earnings. The real problem is the three month time frame this mess transpired in. How can we believe that things are now OK?

The stock market is still going up, go figure. I guess you could call it herd (heard) mentality. Follow your favorite stock commentator over the cliff.
Good to see some American's are realizing that all those folks on the 24/7 Business News channels are wearing rose coloured glasses to go along with their ruby slippers. Of course these Market Wizards belong in the land of Oz.

'It will be a garden variety recession'
Economic Times, India -
US consumption, which is now a record 72% of US GDP, has nowhere to go but down and that has raised the risk of recession in the US and the potential impact ...

Morgan Stanley exec: US recession likely BusinessWeek

BBC NEWS | Special Reports | global credit crunch

For shaky economy, oil spike is irritant
Housing, credit messes -- now this?

But $100-a-barrel oil and possible higher gasoline prices would come at a bad time for the U.S. economy. As an economic force, analysts said, higher oil prices alone would not be enough to cause severe economic damage. Yet on top of other major economic concerns -- a brutal housing correction, troubled financial markets and hard-hit banks -- they could be the catalyst for a possible recession.

Recession symptoms near fever level

Scott Badesch of the United Way is used to seeing people in need. Usually, it is the homeless or the poor who tap the services of Palm Beach County's leading community fund.

But these days, Badesch notices something different.

"We're seeing more and more of the middle class falling into these situations. The demand in our shelters and in our emergency food pantries has never been as great as it is," said Badesch, chief executive of the United Way of Palm Beach County.

Ken Rappaport, a Boca Raton bankruptcy lawyer, also sees people in financial distress.

But when Rappaport received 250 applications for a $10-an-hour receptionist job in his office, that's when the area's economic troubles hit home. Many of the applicants were real estate and mortgage brokers used to sky-high salaries.

"That's scary," Rappaport said. "And that was the thing that brought me to the conclusion: I don't care what anybody says, we are in a recession."

Let's hope women are wrong

Women will be pleasantly surprised if we're not all dining at soup kitchens soon. A Los Angeles Times/Bloomberg poll asked people whether it's likely the economy will go into recession in the coming year, and women of all sorts were much more likely than their male counterparts to think that it will. Among people with household income under $40,000, for instance, 78 percent of women expect a recession, vs. 44 percent of men. There's a similar gap between college-educated women and men, 71 percent vs. 54 percent. Among Democrats, 82 percent of women and 64 percent of men expect a recession; among Republicans, the gap is 67 percent vs. 54 percent. Overall, 73 percent of women and 56 percent of men foresee a recession in the coming year.


Fred Thompson WYSIWYG

U.S. Economy Entering Twilight Zone

Sub Prime Exploitation

The Cost of War

America's Debt Economy

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1 comment:

Bac Pham said...

The Too Big To Fail banks have been waiting with trepidation for a ruling from the Supreme Judicial Court of the State of Massachusetts on the case titled US Bank National Association (as trustee) vs. Antonio Ibanez. They were right to be fearful. The state supreme court has ruled against the banks and upheld a lower court order that nullified foreclosures by US Bancorp and Wells Fargo, on the grounds that neither bank had the legal right under Massachusetts law to foreclose. Today’s ruling has far-reaching consequences for the banks and the housing market in general, as it throws into serious question the legal soundness of millions of mortgages in the US if, as expected, courts in other states come to similar conclusions as the Supreme Judicial Court of Massachusetts Elite Escortsadult facebook