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Sucker’s Rally? Stock Gains Likely to Be Short-Lived

Posted by Charlie Kilo on July 17th, 2008

No doubt about it…

While this week’s stocks rally isn’t making long-term believers out of many people, it does have market pros excited about being able to cover damage caused by recent woes on Wall Street.

“It’s a sucker’s rally,” Kathy Boyle, president of Chapin Hill Advisors, says of this week’s market move. “If you make money here, don’t get greedy.”

Fed Chief Gives Gloomier Outlook On US Economy

Posted by Charlie Kilo on July 15th, 2008

Its just the beginning, Ben. But you already knew that:

A weakening housing market, a strained banking system, and rising oil prices threaten the U.S. economy, and restoring financial market stability is a top priority, Federal Reserve Chairman Ben Bernanke said on Tuesday.

It was a gloomier assessment than the central bank’s policy-setting panel gave in late June, when it said risks to economic growth had diminished somewhat.

Ben Bernanke

Bernanke, in his semi-annual testimony on economic conditions to lawmakers Tuesday, acknowledged that financial markets had grown increasingly anxious in recent weeks, particularly over the financial condition of mortgage finance companies Fannie Mae and Freddie Mac.

He stressed that the outlook for economic growth and inflation was unusually uncertain.

Confidence Ebbs for Bank Sector and Stocks Fall

Posted by Charlie Kilo on July 15th, 2008

The house of cards begins to fall:

Even as the Bush administration moved to rescue the nation’s two largest mortgage finance companies, confidence in the banking sector spiraled downward Monday. 

In Southern California, lines snaked around branches of IndyMac Bancorp, the large lender that was seized by federal regulators on Friday, as customers hurried to withdraw their money. As the anxiety spread through the financial markets, two other big banks, one in Ohio and another in Washington State, were compelled to assert that they were sound.

Even as federal regulators issued assurances that depositors’ savings were safe, Wall Street analysts circulated lists of lenders that might be vulnerable. Shares of regional banks plunged in one of the sharpest declines since the 1980s.

Second biggest bank failure…ever

Posted by Charlie Kilo on July 11th, 2008

IndyMac Seized by U.S. Regulators Amid Cash Crunch. Who’s next? Wachovia? WAMU?

IndyMac Bancorp Inc. became the second-biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.

In the eye of an economic storm

Posted by Charlie Kilo on July 11th, 2008

This “Hurricane” analogy makes good sense:

This hurricane season will be quite different than seasons past. While most start with tracking tropical depressions that gain momentum and eventually develop into hurricanes graded on the Saffir-Simpson Scale, this season will be about subprime loan losses developing into a gale-force financial wind that may well destroy everything in it’s path.

Like all hurricanes, this one will have three components: The front wall, the eye and the back wall.

The subprime mortgage mess was the front wall of the hurricane currently rocking our financial system. Once-great investment banks, like Bears Stearn, were destroyed overnight. America’s largest home lender, Countrywide, was sold to Bank of America to avoid bankruptcy. Now the subprime mess may take down a commercial lender like Citigroup or B of A.

This is just the beginning of the devastation to come from this hurricane season.

Paulson Offers No Hint of Fannie, Freddie Bailout

Posted by Charlie Kilo on July 11th, 2008

Watch The Fed ride in on their white horse to “save” this one:

Alarm swelled on Friday that Fannie Mae and Freddie Mac might run short of capital, placing the fragile U.S. economy at even greater risk, as the Bush administration offered no hint of a government bailout of the largest U.S. providers of financing for mortgages.

Treasury Secretary Henry Paulson, responding to reports a government takeover was under consideration, said “our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.”

Worries about Fannie and Freddie grew after The New York Times said the administration was considering a plan to put the companies, thought to have implicit government backing, into a conservatorship if their problems worsen, citing people briefed about the plan.

End game: Dow dips below 11,000

Posted by Charlie Kilo on July 11th, 2008

Dow 9,500 and waiting for capitulation:

There’s a joke among news folks that two points make a trend. If it does, and of course it doesn’t, I heard an alarming one this morning: the Dow going down into the 9,500 zone.

It came from Ben Lichtenstein, president of TradersAudio.com, on “Squawk Box” this morning. I listen to it on my satellite radio as I drive in. He suggested if the Dow trips through 11,000 or lower, then 9,500 is a possibility too.

Personal bankruptcy up 30% nationally

Posted by Charlie Kilo on July 10th, 2008

Its just the beginning:

Utah may have escaped much of the pain from the nationwide economic downturn so far, but thousands of the state’s residents have not been as lucky.
    The U.S. Bankruptcy Court for Utah reported Wednesday that 4,216 Utahns and businesses in the state filed for bankruptcy protection during the first half of this year, a 42 percent increase over the first six months of 2007.
    “Our [bankruptcy] numbers continue to increase,” U.S. Bankruptcy Court for Utah clerk David Sime said, adding the number of petitions filed with the court appears to be on a steady upward trend.
    Nationally, U.S. consumer bankruptcy filings increased 30 percent during the first six months of 2008, compared with the same period a year ago, according to the American Bankruptcy Institute, a Virginia-based organization that provides research and analysis of issues related to insolvencies.
    “The overall trend of rising bankruptcies reflects the growing financial strain felt by U.S. households burdened by high debt, rising mortgage costs and falling home values,” said Sam Gerdano, the ABI’s executive director.
    Bankruptcy filings nationwide plummeted in 2005 after Congress adopted reform legislation intended to make it more difficult for consumers to avoid paying their debts. Since that initial plunge, however, bankruptcy filings in Utah and the other states have increased significantly.

We’re All Homeowners: Nationalization of Fannie, Freddie Unavoidable

Posted by Charlie Kilo on July 9th, 2008

Unbelievable!

Fears about Fannie Mae and Freddie Mac retreated somewhat Tuesday after their federal regulator, OFHEO Director James Lockhart, said new accounting rule changes should make “no difference in the risks of the two firms.”

On Monday, Freddie and Fannie shares plummeted after a Lehman Brothers analyst said a new FASB rule could require the two firms to write-down as much as $75 billion.

Rather than the accounting rules, what’s really got investors spooked is a growing realization the government will have to nationalize Fannie and Freddie, says Kevin Depew, executive editor of Minyanville.com.

The two mortgage lenders are simply too big to fail and too critical to the housing market, Depew says. Given Fannie and Freddie own or guarantee 50% of all housing debt, according to the WSJ, continued stress on their balance sheets means higher borrowing costs for the firms, and ultimately higher mortgage rates for individuals. It also means another round of write-downs for the battered financial sector generally, which owns a lot of Fannie and Freddie-backed paper.

But nationalizing the firms, each created by an act of Congress, would mean a wipeout for equity holders, who have already seen their holdings decimated in the past year.

The nationalization of Fannie and Freddie and would put U.S. taxpayers on the hook for the socialization of the housing market, but Depew says we’re already there whether we know it or not.

Omen Predicts Stock-Market Crash

Posted by Charlie Kilo on July 9th, 2008

An ominous technical signal known as the Hindenburg Omen could be predicting the next stock market crash.

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