. July 16, 2008 SouthAmerica: About one hour ago I was watching CNBC â Power lunch and their talking heads were in full Damage Control Mode. I wonder if investors heard their misinformation on that program and lost a lot of money if they could sue that cable company for broadcasting misinformation that caused people to lose their shirt. Can CNBC be held liable for broadcasting misinformation to their audience? They had a segment where they were trying to Debunk the possibility that we are in the early stages of a depression here in the USA. For all practical purposes the run on the banks started with Bear Stearns, now it is the turn of IndyMac (technically the second-largest bank failure ever, second to Continental Illinois) then Lehman Brothers probably it will be the next large casualty. After that there are about 1,000 other banks around the United States in the edge of the abyss and ready to go under at any time. Misinformation is all around us and the US government is on the top of the list about giving useless economic information that people use it as if it was worth anything, then they are surprised when things go wrong when they use these information to make actual financial decisions. Basically the GPD figures are inflated, the real unemployment is at least 3 times the figure that they report on a monthly basis (as if you by under reporting they would make the problem to go away), the official inflation figures it is a joke and also away under reported (in the inflation figure they have been playing games with the way to figure out that number to show a lower figure than the actual inflation affecting the daily lives of most people in the US). We have discussed these subjects on the threads below: The US economy and the real GDP http://www.elitetrader.com/vb/showthread.php?s=&threadid=126048 The US dollar and the biggest default in history http://www.elitetrader.com/vb/showthread.php?s=&postid=1893607&highlight=unemployment#post1893607 Last night on the Charlie Rose Show an expert about the environment that gives his expert advice to the large auto makers in the United States, and he said that one year from now we will have only two major American car makers in the US and that one of the current auto makers in the US is going to file for bankruptcy in the next 12 months affecting the lives of at least 1 million Americans with all the ramifications of such demise. The entire airline industry is in trouble, major trouble like never before because of the price of gas, and in the coming months things are going to get even worse because the American people are going to cut on their air traveling plans because of economic reasons. The people on CNBC keep painting a rosy picture for the US economy, which I am sure is far from the reality of what is happening. Today CNBC has become just a damage control arm of the US government and they spread misinformation about the state of the US economy. It is like being in the Titanic when that ship hit the iceberg and CNBC is saying to the passenger donât worry about because the ocean is not that deep here anyway and please go inside and enjoy your trip. .
Can you please provide specific data to back up your claims above regarding the 1,000 banks in the U.S. that are ready to go under at any time? And your here bashing CNBC for misinformation?
This is an often repeated claim: in truth there is an uncirculated list of about 94 banks that are being 'watched'. The parlor game now is 'who's next?' Really a waste of time http://biz.yahoo.com/ap/080714/banks_earnings_preview.html
. Now is Now: Save yourself a lot of aggravation.....don't watch it!! **** July 16, 2008 SouthAmerica: Some times they interview some guests that are worth watching it such as Warren Buffett, Paul Volcker, Paul Krugman, George Soros, Stephen Roach, and a few others. But half the time the talking heads and many of their guests on CNBC sound like just damage control and nothing else. At least I can see through it, but millions of people might buy their bullshit and end up losing tons of money. ***** Landis82: Can you please provide specific data to back up your claims above regarding the 1,000 banks in the U.S. that are ready to go under at any time? ***** SouthAmerica: I heard on Bloomberg News the other day, some fellow was being interviewed about the current banking crisis and he was commenting on how the crisis was spreading to little banks around the country very fast and he was showing how the banks were having trouble raising new money in the current borrowing crisis, and how their portfolios were getting sour with commercial loans going bad. He said that hundreds of local banks around the US got caught on this Perfect Storm. And now with GM having a complete restructuring and one of the 3 major US car manufacturers going out of business in the coming months this is going to have a major ripple effect in the US economy and it will affect many communities when other business also would have to go into bankruptcy. Now all this negative stuff keeps feeding into itself and making matters even worse. But if you prefer the listen to the rosy scenary painted by CNBC please donât listen to me and listen to them and start bottom fishing in this crazy market. I donât care if you lose your shirt on your investments. Many smart people who work for the large Foreign Sovereignty Funds thought that they were picking up bargains here in the US market, and a year later look at them after their investments lost half of their value. The one good thing about the stock market is that you always find some fool that listen to the wrong advice at the wrong time. Good luck to you. .
Translation - southamerica made up the "about 1,000 other banks around the United States in the edge of the abyss and ready to go under at any time" stat. He references something he heard from "some fellow" and turned that into a talking point about 1,000 banks ready to go under. And this from the same person that complains about misinformation. Pot Kettle Black.
yes, think Southamerica over-stated the problem, tho was it 700 i heard were 'at risk' or 76 ? however: "During the savings-and-loan crisis (1986-95), 2,377 banks failed, representing 67% of the 3,559 bank failures from 1934 through May 2008. At the peak of the crisis (1988-89) 1,004 banks failed, a rate of one failure every 1.38 days." http://www.usnews.com/articles/business/economy/2008/07/15/the-10-biggest-us-bank-failures.html oh and cnbc, i watch BNN the Canadian equivalent which i much prefer, not because of the extra Ca content rather there's none of those annoying sound effects, distracting visuals and interviews that continue for many minutes rather the seconds given to guests of cnbc - do guests on cnbc pay to appear ?
. GTS: He references something he heard from "some fellow" and turned that into a talking point about 1,000 banks ready to go under. ***** SouthAmerica: It was some analyst specialized on the banking area. I did not catch his name I just listed what he was saying because he was painting a bleak picture for hundreds of local banks from around the US. He said all these banks had been caught in this Perfect Storm and possibly a large number of them were not going to be able to survive. Let's check a year from now if that fellow was right on his assessment of the banking industry around the US. I am not a banking analyst I am just mentioning what I heard on the radio, but I assume that Bloomberg news interview people with the right credentials. If you think that the current credit crisis has reached only the major banks then good for you. Maybe you are reacting the way you did is because you assumed that I said that 1,000 banks are going to fail in the near future. By if you go back to my posting and read it again I said that the bank analyst said there are 1,000 bank that are at the edge of the abyss and many of these banks are not going to make it. He did not give an actual estimate of how many of these banks are going to go out of business - who knows how many of them are going to fall into the abyss. But I can tell you one thing the more banks goes out of business such is the case of IndyMac and people keep watching on television these long lines of people trying to get their money out. The Panic can spread to other banks that might had the chance to survive on this tough environment, but any rumor or God knows what can trigger a run on the bank. I just hope that most of these banks that are at the edge of the abyss are insured by the FDIC - at least the depositors don't lose all their money. And since so many banks are in trouble around the US the FDIC will need to increase the insurance premium for these banks making the matter even worse for these institutions that are in the border line of going broke. .
. July 16, 2008 SouthAmerica: I just read an email that I received from RGE Monitor saying media alert with the following info: I have heard Professor Roubini being interviewed on Bloomberg News a number of times and I also have read some of his articles over time â I am aware that we are in the same wavelength for a long time regarding our economic forecasts of the US economy. I always enjoy listening to what he has to say. I may not have credibility with some of you guys even after all this time. That is fine with me, and my record based on my articles speaks for itself. But Professor Roubini has the credentials and the track record that should demand some respect from you guys and here is what he has to say: **** RGE Monitor MEDIA ALERT: Nouriel Roubini predicts the worst financial crisis since the Great Depression and the worst U.S. Recession in the last few decades. New York, July 15, 2008- In a series of recent writings on the RGE Monitor Nouriel Roubini â Chairman of RGE Monitor and Professor of Economics at the NYU Stern School of Business - has argued that the U.S. is experiencing its worst financial crisis since the Great Depression and will undergo its worst recession in the last few decades. His analysis leads to the following conclusions: · This is by far the worst financial crisis since the Great Depression · Hundreds of small banks with massive exposure to real estate (the average small bank has 67% of its assets in real estate) will go bust · Dozens of large regional/national banks (aâ la IndyMac) are also bankrupt given their extreme exposure to real estate and will also go bust · Some major money center banks are also semi-insolvent and while they are deemed too big to fail their rescue with FDIC money will be extremely costly. · In a few years time there will be no major independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank. · The FDIC that has already depleted 10% of its funds in the rescue of IndyMac alone will run out of funds and will have to be recapitalized by Congress as its insurance premia were woefully insufficient to cover the hole from the biggest banking crisis since the Great Depression · Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers. · This financial crisis will imply credit losses of at least $1 trillion and more likely $2 trillion. · This is not just a subprime mortgage crisis; this is the crisis of an entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds and where counterparty risk â and the collapse of many counterparties â will lead to a systemic collapse of this market. · This will be the most severe U.S. recession in decades with the U.S. consumer being on the ropes and faltering big time as soon as the temporary effect of the tax rebates will fade out by mid-summer (July). This U.S. consumer is shopped out, saving less, debt burdened and being hammered by falling home prices, falling equity prices, falling jobs and incomes, rising inflation and rising oil and energy prices. This will be a long, ugly and nasty U-shaped recession lasting 12 to 18 months, not the mild 6 month V-shaped recession that the delusional consensus expects. · Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. Thus, equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of stock markets. · The rest of the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time. Already 12 major economies are on the way to a recessionary hard landing; while the rest of the world will experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks. · The current U.S recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries â U.K., Spain, Ireland, Italy, Portugal, etc. â leading to a risk of a hard landing in these economies. · But over time inflation will be the last problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order of 20-30% will further reduce inflationary pressure. The Fed will have to cut the Fed Funds rate much more â as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial disaster and severe recession cycle. · The Bretton Woods 2 regime of fixed exchange rates to the US dollar and/or heavily managed exchange will unravel â as the first Bretton Woods regimes did in the early 1970s â as US twin deficits, recession, financial crisis and rising commodity and goods inflation in emerging market economies will destroy the basis for it existence. · Thus, the scenario of 12 steps to a financial disaster that I outlined in my February 2008 paper is unfolding as predicted. If anything financial conditions are now much worse than they were at the previous peak of this financial crisis, i.e. in mid-march of 2008. .
This guy South America is a joke. Everyone knows that Dick Bove, the banking analyst at Ladenberg, Thalmann & Company came out over last weekend with a report that was entitled "Who's Next?" He ranked 107 of the nation's banks with more than $5 billion in assets using 2 measures of risk. Why 107 banks? Because that represents about 79% of the industry's assets. When all was said and done, the most stringent of the 2 measures of risk ( a bank's non-performing assets as a percentage of its loans at the end of Q-1 ) showed that there were ONLY 7 banks of the 107 that were over the 5% threshold. They were: Downey Financial - 13.9% Corus Bankshares - 13.2% Doral Financial - 12.8% IndyMac - 10.5% First Fed - 6.7% Oreintal Financial Group - 6.12% Bank United Financial - 5.4% And by the way, WAMU ( which has taken more than its fair share of abuse this past week ) was 12th on analyst Bove's list at 3.9%