The Good News Economist

Why This Rally Is Unsustainable

>So where is the breaking point? A look into the
>why instead of how of this rally can offer some
>insight. This whole rally is essentially a scam to
>pass off asset depreciation in struggling financials
>to the taxpayer.

Do we really believe this conspiracy theory? The reality is that the market has figured out long before us that in fact recovery is here. Like every recovery before it, depressed equities turn up and do not look back. We are now approaching a 35% uptick. That in and of itself represents the fact that indeed this rally IS SUSTAINED. With history as our guide, if we keep saying the rally is not sustainable long, indeed we will get it right... but not this week...
seekingalpha.com/artic...
and probably not this year...
seekingalpha.com/artic...

GNE

Banks No Longer in Crisis Mode

@battman,

I don't disagree that the top banks decreased lending. (I have consistently not been an elite(top) bank fan and believe they should be split up and parceled out to the more responsible second tier solid conservative banks)

What I continue to maintain is this...
"overall business lending by *all US banks* was up 12 percent in 2008." The data is very clear on this.

GNE

Banks No Longer in Crisis Mode

@morph366,
As the opening sentence suggests, I am not implying that all is back to normal. I agree that the Fed's job is still difficult, but that doesn't mean they will not be successful.

@ paradigm1974,
Indeed almost all PR firms will concur that appropriate deliberation prior to release of good news is just as important as when then news is negative. One wrong sentence can provoke negativity even when not merited.

@Dustinian,
I too would like to see many of those top teams squirm a bit more. In fact, I'd like to see the mid tier bank execs be given the top jobs... better yet, break up the big banks and divide them up among the top banking teams that have proven the public trust.

@Gary A,
A liquid business is more likely to be solvent than a non-liquid business. However, not all businesses with liquid assets are solvent, and not all solvent businesses have strong liquidity.

@Default 1,
Even Arianna gets it right sometimes. Her quote is right on the mark whether she knows it or not. You may want to have a look at how big residential real estate market is compared to that of commercial.

@Prudent Man,
I disagree with your memory of history. Have a look at this article:
mast-economy.blogspot....
I too was around in the seventies. I really don't see this dip as any different... in fact as that article suggests there is fairly substantial evidence that our current "crisis" has much in common with other historical finance downturns in the past 800 years. (not just 30 years ago)

@mikesa69,
Thanks for reading. A closer look at my profile will reveal my name, my website and my rational for only choosing to cover the good news: the negativity is covered quite well elsewhere...

@WayneinOregon,
Thanks: one of my favorite quotes is "most economists make astrologers look respectable."

@jstratt,
I agree that bank problems still exist. IMHO, your disagreement is a matter of degree. One of the necessary outcomes of the stress tests will be some amount of objectivity in the midst of our subjective terms like "crisis"

@wholesalecd/jay,
Yes, I still "ignorantly" maintain that there really was never a "credit crisis" at *most* banks. Of the over 8000 chartered US banks the crisis was concentrated in the top 20. (A quarter of one percent)... And the total number of banks that have failed since Oct... 37 (not even one half of one percent)

Turning Toxic Assets into Gold

@Gravity,

Thanks for the catch on BAC.

GNE

Five Things That Could Resuscitate the Markets

Always enjoy your writing Rick,

Today I particularly resonate with your observation that:

>If we could get through a week without disturbing news from market-movers
>[snip]... smaller signs of recovery might get more attention.

No doubt some of the signs you list like the significant surges for AMZN and WMRT, along with a large initial claims drop, strong chain store reports for Feb, ISM numbers corresponding to much better GDP numbers, have been reported this week, but nowhere close to the spotlight...

The B indeed is closer... and one has to bet at this point that any one of your first 4 points will help to better define that B.

Thanks
GNE
goodnewseconomist.com

Banking Is Tanking Worse Than Ever

@the hand

No it is not worse than 1929. Ask your grandparent or any other person that lived through the depression and/or the dust bowl.

In comparison to back then, we have not a clue. Go read the book, "The Worst Hard Times" to get some perspective. If you think gloom and doom now, imagine 25-30% unemployment combined with black storm clouds that kicked up in the West and made it all the way to NY and DC and rained mud.
And few to no people living on entitlements.

Today bank failures are slowing significantly. No one has run on any bank. The elite top ten banks have all our eyes now on their stupid junk paper, but new mortgage notes are surging (and they are not sub-prime).

Many strong regional banks are refusing TARP funds. Their portfolio and asset structures are just fine including their commercial holdings.

When you start saving and using your recycling instead of putting it out to the curb, then we'll start some straight talk about really hard times.

But until such a time, bank stock indexes have no where to go but up from here.

gne
goodnewseconomist.com
PS. I own no bank stocks and never have.
mmm... perhaps I should now...

JPMorgan Beats: For Banks, This Is as Good as It Gets

Edward,

Great article on what we may be able to expect from some of these larger banks who are getting their portfolios back in order.

Very interesting "accounting" with WaMu.

Not sure that I agree that this is "as good as it gets." For that I think we need to look at strong banks downmarket... mast-economy.blogspot.... It is in many of the second tier banks where there is true strength moving forward. In reviewing the 10Qs of these banks in the 1B-10B revenue range, there is much less junk exposure in those banks that are one step smaller.

I agree though that this is indeed a very strong report. Particularly your observations in Commercial Banking, Treasury and Security Services, Asset Management, and Private Equity businesses...

GNE

Bleak Outlook for U.S. Banks Through 2009

This is a very misleading article. Twenty or so very large banks have failed. Why? Because they made stupid non-conventional bets to get larger returns on their deposits. Does it follow that all the mid-tier and smaller banks made those same lame bets? I think not.

My favorite example is First Bank of Lakewood Colorado. Have a look at
www.efirstbank.com/adv...

Where they highlight their stability, strength, and service. Not to mention growth.

The fed own data is just not there to support the claim that these mid-tier banks are in trouble or not lending. To the contrary lending is UP at these banks by the Fed's own numbers:
mast-economy.blogspot....

One banker I recently heard said this, "I don't lend to people I don't know and I don't buy paper instruments that I don't understand. Call me conservative, but it has always worked for me. And it's still working well for us now."

And for those 20 that have failed. Lookie there at the S&P chart, how much bad paper did they pass around? Looks like about $375B by that chart. And we've already got that and more on the Fed's balance sheet now.

Don't believe me or the numbers? If you've got a local bank, (not a big bank branch), call the president there. I'm sure he's doing just fine and the deposits there are doing just fine as well.

The bailout is behind us.

GNE