Seeking Alpha

Richard Suttmeier's  Instablog

Richard Suttmeier had been a professional in the US Capital Markets since 1972, transferring his engineering skills to the trading and investment world. Richard has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. Richard began his career in the financial... More
My business:
ValuEngine
My blog:
valuengine.com/ve/ma...
  • More Bank Failures, as the Bear Market Rally Ends 0 comments
    Aug 17, 2009 06:16 AM | about stocks: CNB, BBT, GFG, SPX
    ValuEngine’s “Four In Four”
    Featuring Richard Suttmeier, Chief Market Strategist
     
    Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com. ValuEngine is a fundamentally-based quant research firm located in Princeton, NJ. ValuEngine covers over 5,000 stocks every day.
     
    A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks, and commentary can be found HERE.
     
    Suttmeier's Four in Four video can be watched on the web HERE.
     
    Welcome to ValuEngine’s “Four In Four”. I’m Richard Suttmeier, Chief Market Strategist.
     
    More Bank Failures and one is a Biggie, as BB&T takes over Colonial, the biggest failure of the year. I look at the daily chart for the S&P 500.
     
    We now have 77 bank failures in 2009 and 102 for “The Great Credit Crunch”
     
    The FDIC closed five banks on Bank Failure Friday. Three were publicly traded and on the ValuEngine List of Problem Banks.
     
    The culprit for most failures has been overexposure to Construction & Development loans and Nonfarm, Non Residential real estate loans, which I have been calling the Achilles Heel of the banking system.
     
    I sent an email question to the FDIC on the status of their Deposit Insurance Fund, which seems to have run dry, unless there was an unpublished assessment for member banks.
     
    I also asked them if they tapped their temporary $500 billion line of credit with the US Treasury. I will let you know their response, or lack thereof.
     
    Colonial Bank (CNB) became the sixth largest bank failure as they showed $26.4 billion in assets at the end of the first quarter.
     
    They were taken over by BB&T Corp (BBT), which in my opinion will have problems of their own.
     
    Colonial had $4.6 billion in C&D loans and overexposures of 248% versus risk-based capital for C&D loans and 510% for CRE loans with their pipeline 84% funded.
     
    I would love to see the media question Treasury, Federal Reserve and FDIC officials as to why they ignored their own regulatory guidelines set at the end of 2006.
     
    The guidelines cautioned community and regional banks concerning loan concentrations of more than 100% of risk-based capital for C&D loans and 300% for CRE loans.
     
    As you can see Colonial was way above the limits established by our banking regulators.
     
    The chart for Colonial shows that the stock fell like a domino, and the bank was one of the fifty I published on a List of Fifty Domino Banks published back in June 2006.
     
    BB&T Corp (BBT) is rated a HOLD according to ValuEngine with fair value at $17.57, which makes the stock 16.5% overvalued. ValuEngine shows 16.5% downside risk for the stock for the next 12 months’
     
    BB&T has a positive weekly chart profile, but still well below its February 2007 high. My semiannual value level is $25.13 with my annual risky level at $34.96.
     
    BB&T had $141.7 billion in assets at the end of Q1 with $17.5 billion in C&D loans, which is a risk ratio of 122%, which is above regulatory guidelines. I guess the FDIC has decided that BB&T is too big to fail.
     
    It appears that Guaranty Financial Group (GFG) faces failure as early as today. They too are on the ValuEngine List of Problem banks. GFG has $14.4 billion in assets and overexposure ratios of 193% for C&D Loans and 329% for CRE loans with commitments 100% funded.
     
    The daily chart for the S&P 500 shows MOJO at 7.9 ending the month long overbought condition.
     
    The next warning would be a close below the 21-day simple moving average at 986.17.
     
    My annual pivot is 967.1 with weekly and daily pivots at 994.4 and 1002.9 with the August 7th high at 1018. A week ago in the ValuEngine Morning Briefing I predicted that 1018 could be the high for the move.
     
    Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on our products and services visit www.ValuEngine.com
     
    That’s today’s Four in Four. Have a great day.
     
    As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. Daily, Weekly, Monthly, and Quarterly newsletters are available to track a variety of equity and other data parameters, as well as my interpretation of what is going on in world markets. An ETF and ValuTrader portfolio Newsletters are the newest offerings. I hope that you take a look and review some of the sample issues."
     
    My Policy is to have No Positions in stocks that I cover.
    Themes: The Banking System Stocks: CNB, BBT, GFG, SPX
Back To Richard Suttmeier's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Full index of posts »
Latest Followers
Posts by Ticker
AAPL, AF, AMZN, AXP, BAC, BBT, BNI, CMA, CNB, COF, CYN, DIA, DJ, DOX, DUG, EEM, FITB, FNM, FRE, FXI, GE, GFG, GLD, GOOG, GS, INTC, JNJ, JPM, MSFT, MTB, QQQQ, SPX, SPY, TLT, USB, WFC, ZION

Latest Comments


Most Commented
  1. Obama’s Home Bailout Bust (3 Comments)
  2. Stocks are Overvalued & Overbought (2 Comments)
  3. Tracking the Multi-Year Bear Market for Stocks (2 Comments)
  4. More Problems for Fannie and Freddie (1 Comment)
  5. Housing and Community & Regional Banks Lead SPX Lower (1 Comment)
Posts by Themes
Strategic Defaults, 000, Bad Loans, Bank Earnings, Bank Failure Friday, Bank Failures, Bank Failures accelerate, Banking, Banks, Bear Market for Financials Continues, Bear Market Rally, Bear Market Resistances, Beige Book, Bernanke, Bernanke Comments and Bad Loans Rising, Cash for Clunkers - Not just Autos, Charts for SPX, Charts show negative divergences, Charts Tell the Story, Clunkers, Comments on the FDIC, Commercial Real Estate, Commodities, commodities Stocks, Commodity Speculation, Community and Regional Banks, Community Banks, Confidence and Home Prices, Confirming a market top. Stop the Second Stimulus, Congressional Oversight Panel, Conservatorship, Consumer Confidence, COP, Copper, Council of Regulators, Crude Oil, Daily Charts, Defining Recessions, Dollar, Dollar Carry Trade, Dollar Carry Trade Continues, Dollar Poised, Dollar Weakness, Dow 10, Dow and Geithner, Earnings, Earnings Season, Economic Opinions, Economics, Economy,
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.