MarketWatch: Bank failures to surge in coming years
Submitted by
CalculatedRisk on Fri, 05/23/2008 - 5:08pm (48 comments)
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shotgu
Let them come. Better to do today what must be done tomorrow.
It's just not a challenge any more.
first?
haloscan's gone crazy
No one home??
Can anyone comment on when these failures will occur?
"Barr names several banks that might fail, including IndyMac and Corus."
With this headline, there are going to be a boatload of shortsellers entering the market against Indy and Corus.
And they will all be squeezed.
Ego and logic can get you killed in this market.
Foremost, Idulge Recession session Topics
what are good candidates for short sell in this sector NOW?
I wouldn't short Indymac or Corus. Everybody already knows about them, and has for months. I'd look at the little local banks where you can talk to somebody in your hometown who knows. If I were looking for a bank short (I'm not), I would be investigating Bank of Granite, BBT and NewBridge Bank. I don't know if any of these would be a good short, but that's where I would start. You can drive down the street in your hometown and get some ideas.
Bank failures?
Whoocoodanode?
Someday this war's gonna end...
Shorting individual stocks, especially if they've fallen a lot, is a lot riskier than it appears. You're essentially short an option. All you can earn is a fixed amount (i.e., the stock falls 100%), but the position can explode an unlimited amount against you. And since you need to borrow shares, you're ripe to get squeezed, as noted above by Quincy Q.
Generally it's best to enter trades where the payoff is 2:1 in your favor (or more) if you're right. That way, you can be wrong more than half the time, and still be ahead. Plus, you sleep better at night.
Now its getting interesting.
AllenM, someday this war is gonna start. . .
They are firing about 5% of their workforce which will demand severance packages, let's say conservatively about $100 million.
From reggie's safe haven article referencing LEH.
my concern is this Demand comment.
are any of these guys in position to demand anything , or will the severance be more 'hush' money.
All I can say is, it about time!
The most significant credit crunch since the GD and only 3 bank failures YTD?????
C could still be a decent short candidate, the float is too big to manipulate and has more bad news coming down the pike.
If there's a small bank index, that'd be worth looking at, otherwise get out of the way of that runaway train.
Reggie Middleton has some great analysis of the banks with the worst capital positions on his boombust blog:
Great stuff
I agree with bond guy, go short something with some meat on the bone. Indy Mac and Corus are just piles of rotting gristle waiting for the scavengers.
Funny Analogies
- School::Stupid, Bank::Credit Crunch
- Let's just say banks were dumb
- How much are people paid to come to this conclusion?
- US Govt will try to stop bank failures
- It won't work
The "credit crunch" excuse for banks is lame... if I fail in school I'm stupid... banks fail because they are stupid as well... (or perhaps lazy).
Then there's this blogger over here who says not one, not two, but "32 commercial banks and thrifts may see the feces hit the fan."
(Some charts and graphs included at the link.)
Check the banks with one or two star rankings (the lowest) on Bankrate.com. You can find them by state. That would be the start of identifying the "endangered" ones.
there is almost a bank on every corner here in Sarasota Fl. The latest Momentum Bank I do not see how all of these banks can stay in business
On a side note in Sarasota check this out
http://www.heraldtribune.com/article/20080523/REALESTATE/805230408/1060/news
Congress will come up with yet another multi billion dollar bailout package.
$400B bailout of Ibanks (Bugabe's balance sheet)- check
$150B bailout of retailers - check
$300B bailout of rich farmers - check
$300B bailout of flippers - check
$300B bailout of banks - on order
As I've been saying, Corus is going to fail and be taken over by the FDIC. Whether you short them or not just depends on your time frame and ability to deal with up/down volatility. Eventually, the stock will be worth zero and the FDIC will be holding a $3-5 billion bag.
This fiasco is totally the FDIC's fault. The FDIC allowed Corus to pay the highest rates on 1-year CDs for three years and plow almost all the money into hi-rise condo construction loans that were give-aways to developers. The FDIC didn't monitor Corus' concentration in condo construction or in over-saturated condo markets. Several months ago, the FDIC should have told Corus to stop, but instead they were allowed to initiate billions more in CRE office construction loans, like that too-late diversification into the next washout CRE market somehow will save them.
The management of CORS is a bunch of lying crooks, as bad as anything that came outta the S&L fiasco. The SEC should be investigating them for not disclosing the depths of their loan portfolio problems.
sdtfs, are you jdi..di from TT board? I lost your email address. Would you please email me at ugly.betty77@gmail.com?
G.
Who will the federal reserve side with...Americans or the banks? Print, print, print, print, print.
Well,
For the year that is a mega disappointment that the bears can only come up with 3 (yes, three) bank failures only. Wern't we supposed to be in the midst of a Great Depression by now? I thought there would have to be some more bank failures, then. I guess bears will finally look into Wright B.
O-Joe
I personally knew Gary Holloway. He told us about his big boat, new lake house and travels but...he isn't going to say a God damn word about what FDIC's role was in this huge and growing regulatory failure. That's why FDIC invited him back. He's a good old boy to the max.
Lots of opinions, no data. My 15 year old niece could have written this article. Come on CR let's improve the content. You're pitching softballs.
Banks alot. See you tomorrow. Or maybe not.
O-joe
You are right hold on tight to those bank shares. don't sell them for anything.
do a search on District of Columbia Organic Act of 1871
very scary. America has 2 constitutions.
When lenders need to raise new capital, they can try to boost deposits by offering attractive interest rates on certificates of deposits, or CDs.
Wow, deposits = capital? I'm going to learn a lot from this "Marketwatch" thingy.
sam
klaatu berada nikto
sdtfs, are you jdi..di from TT board? I lost your email address. Would you please email me at ugly.betty77@gmail.com?
not me
Come on CR let's improve the content. You're pitching softballs.
Steeerrriiiike one!
Regarding IMB, I think the market has already come to that conclusion.
safehaven.com
You have to have a lot of conviction to stay short a financial. Also, I don't know that I would be loading up the boat on the short side right here. The time to do that was about a year ago.
If you do so, I would recommend an index product instead of an individual bank. It's too easy to rumor around a stock. Even though they're absurd, Buffett/Ross/et al rumors tend to have the desired effect.
My question is, I wonder how far up the food chain this will be allowed to go. I am thinking the line stops somewhere before WM.
I believe that the Feds are dragging their feet on shutting down Countrywide, IndyMac and others because they know what it would do to what's left of the housing market. Countrywide REO statisticss smell fishier than a 2-week old mullet left in the sun. They are probably just letting people miss payments and live "rent free" so they don't have to report more foreclosures.
I suspect we will have to wait for the changing of the administration in January to see action taken. The corruption and complicity between the government and big business reeks.
I don't see how any banks are still in business. http://flippersintrouble.blogspot.com/
The main reason we haven't had a flood of bank collapses is the FRB's unprecedented effort to prevent a flood of bank collapses -- interest rate cuts, loans on "AAA" colateral, sales of Treasury securities, and more.
In my opinion the Fed will eventually fail to prevent the flood of bank collapses, because of the sheer volume of bad bank loans, and because of the parallel crisis in unregulated financial institutions. Will the US Treasury become the DONOR of Last Resort? Is the Treasury capable of bailing out everyone?
More bank collapses seem inevitable. We have had exceptionally few during this RE cycle decline. By this point in the last RE cycle we had about a thousand bank failures. And by the bottom we had about 1,200.
Of course, we should have far fewer this time because the bad loans are mostly sold to investors now. The banks have far less of it retained on their own balance sheets.
New blog? diebankdie.com...
That would be funny.
OT- Happy Memorial Day weekend and heartfelt thanks to those who have actively served and their families who've had to deal w/ the stress of their absence.
Re: "Bank failures don't cause recessions, they lengthen them," Mason, the Drexel professor, explained. "We could get a mild recession that could linger for a while longer because of the inability to recharge capital in the banking and financial system.""
Finally! Someone offering reality!
Tanta - I had a heck of a time trying to look up Linda Richardson, until I finally figured out her name is Laura Richardson.
Banks will start getting the clap by the fall after the summer "selling season" has produced what fruit it can. Coincidentally, that's when bac is supposed to close on CFC.