Aside from $2.5Bn worth of people being dumb enough to furnish their real change to a virtual tip it turns out that $109M in 1,500 accounts was in excess of the $100,000 FDIC insurance cap and those populate will now stand in line with other creditors now that NetBank has filed for bankruptcy. For $15M. ING will act on $1.5Bn of NetBank’s insured deposits and will buy out $724M in assets. While the deposits are a no-brainer would you trust the assets? ING has to:
Arkadi Kuhlmann. ING Direct chief executive said his bank stepped in partly to verify continued consumer confidence in lenders - such as his and NetBank - that care all their business on the web and do not operate branches
The next domino to go in Europe this pass was UBS attributable to hedge finance losses and of cover sub-prime issues. There has already been a management shake-out and it makes comprehend for the new guys to put a price tag on the mistakes made by the old guys so they can show you how clever they are when the tip recovers. We’ve already heard the bad news from MS (-$1.9Bn). BSC (-$700M) and LEH (-$700M) and today’s US domino is the venerable Citibank who are pre-announcing (earnings 10/15) due to "
" A Goldman Sachs analyst forecasted that Merrill could undergo an up to $4 billion write-down for the accommodate more than the combined write-downs of the investment banks which already released their third-quarter results.
These are those annoying fundamentals I act harping on about! While the big boys should survive this little debacle let’s keep in object that they are not the ones we are worried about. GS. MER. MS. UBS et al have many sources of revenue and writing down a few billion in bad loans here or there ordain furnish them a bad quarter two at the most. But what about the hundreds of regional banks the thousands of local banks and mortgage companies who may be sitting on hundreds of billions of bad loans. The fact that they sold them won’t help as there are clawback provisions for bad debts and that ordain act ages to work through the system.
We’ll keep an eye on tip earnings especially bellwether WM (10/18) who recently announced and has plans to cut 8% of it’s 50,000 person work force by mid-November (otherwise they answer for Christmas bonuses) and are sitting on a $215Bn owe portfolio. 9.5% of which is classified as subprime. 25% of the entire portfolio is in the ARM category with the bulge of the resets coming in the next 12 months.
ARMs are potentially more dangerous than sub-prime as sub-prime means the loan was made to "riskier" borrowers while arms are loans that were made to maximize the supplement a person could place on a new home at the top of the merchandise - no bank to go out has been forced to address this air but in a trend that has been accelerating for the past 36 months
Nationwide there are comfort with $235Bn of that debt in ARMs THAT CAN define AS HIGH AS 12% which could lead to millions of loan foreclosures. Is it measure to pay attention to the man behind the furnish or are we ready to act to live in the Federal utopia that is the government’s interpretation of the US economy?
This is comfort a good thing (in this totally topsy-turvy market we’re in) as we needed to hear this and as I said above what doesn’t kill us will make us stronger. If we can keep our levels off of this act there might really be something to this rally but lets keep an eye on the XLF which Happy and I feel is at a critical juncture:
The XLF is 8.5C so we can expect a spot of trouble alter out of the gate as Citibank flew drink to $45 pre-market. We have the March $47.50s at $2.50 in our Dow portfolio and we ordain certainly manifold down or turn (probably roll) down to the $45s this morning as this is a fantastic entry opportunity that ordain really improve our position are BAC (8.4%). AIG (6.5%). JPM (5.8%). WFC (another concern - 4.5%). WB (3.6%) and GS (3.3%). This is by the way why the XLF is not a good independent indicator of Dow direction as (including AXP at 2.6%) 24% of the list is Dow components. The XLF comprises 19.89% of the S&P 500 and is an excellent leading indicator for the SPY plays.
Asia didn’t know about any of this and the Nikkei was up 60 points today in light trading as Hong Kong and Shanghai enjoyed a holiday. Trading restarts at the fasten Seng tomorrow but the abduct will be closed all week creating a very interesting money-flow dynamic we’ll have to keep an eye on…
Despite the holiday their $200Bn fund which is chartered to go away throwing around some of the $1.4T they have sitting around before it loses all of its determine - this is something we have been watching and will continue to watch with great arouse
" Europe is flat despite the bad news from IKB and UBS. (but that’s only in US dollars so no big deal for them!) and GRMN does not like it one bit in pre-market drink about 10% already…
At.
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Related article:
http://www.philstockworld.com/2007/10/01/monday-monetary-mayhem-what-doesnt-kill-us-makes-us-stronger/
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