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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
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  • Housing & Banking set to lead another economic wave lower 0 comments
    Oct 19, 2009 08:18 AM | about stocks: ZION, CMA, MTB, AF, WFC, CYN
    I begin the week by summarizing comments on the Housing and Banking Sectors by Elizabeth Warren, the Top Cop of the Congressional Oversight Panel. And, Bank Failure Friday resumes.
     
    It’s time for Congress, Geithner, Bernanke and Bair to heed the warnings from the Congressional Oversight Panel, as Elizabeth Warren sees the risks I have been talking about in Housing and Banking since April 2006.
     
    Warren says that, the Big Banks always get what they want. They take the money and write the rules. They report record profits and pay themselves record bonuses.
     
    She agrees with me that the housing market is getting worse not better with foreclosures up 5% in the third quarter. Foreclosures are outpacing mortgage modifications two to one.
     
    Look for ten to twelve million foreclosures by the time “The Great Credit Crunch” ends. Foreclosures are mushrooming out to prime borrowers and will continue as unemployment rises. Creditors and investors need to take a haircut to easing the pain on Main Street.
     
    On banking, Warren says that the Stress Tests need to be re-done as economic conditions have blown through the worst case of the Stress Tests and tests need to be repeated and extended through 2012.
     
    On TARP, Warren indicates that there is zero chance that we will find out where the money has gone. TARP was supposed to price and remove toxic assets, it did not. Then TARP was supposed to increase small business lending, it has not.
     
    Wall Street thinks that we have returned to business as usual, while Main Street is struggling with job losses, tighter credit, foreclosures, leading to a lower standard of living.
     
    After a week off, Bank Failure Friday returned with the 99th failure of the year.
     
    The FDIC closed San Joaquin Bank (SJQU) a small community bank in Bakersfield California. This $775 million bank had huge overexposes to C&D and CRE loans with risk exposures of 320% and 1002% versus the ignored 2006 regulatory guideline of 100% and 300%. The FDIC and other banking regulators were clearly asleep at the switch to allow there failures to occur.
     
    This bank was on the ValuEngine List of Problem Banks and cost the Deposit Insurance Fund $103 billion, which by my back of the envelope estimate puts the fund $5 billion in arrears. Remember that the FDIC does not keep track of the Deposit Insurance Fund on a daily basis – What a sad joke.
     
    This is the week for earnings from several community and regional banks. Here are a few rated SELL according to ValuEngine.
     
    Zions Bancorp (ZION) is projected to decline 33.9% over the next twelve months. They report today.
    Comerica Inc (CMA) reports on Tuesday and is projected to decline 26% over the next twelve months.
    M&T Bank (MTB) reports on Tuesday and is projected to decline 17.3% over the next twelve months.
    Astoria Financial (AF) reports on Wednesday and should decline 27.1% over the next twelve months.
    Wells Fargo (WFC) one of the “too big to fail” top four also reports on Wednesday and is projected to decline 14.9% over the next twelve months.
    City National Corp (CYN) reports on Thursday and should decline 18.3% over the next twelve months.
     
    Each of these financials has a short position in the ValuTrader Model Portfolio, which is a subscription product offered at ValuEngine.com.
     
    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.
     
     
    Richard Suttmeier
    Chief Market Strategist
    ValuEngine.com
    (800) 381-5576
     
     
    As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sample issues of my research.
     
     
     
    “I Hold No Positions in the Stocks I Cover.”
    Themes: Bank Earnings, COP, Bank Failures Stocks: ZION, CMA, MTB, AF, WFC, CYN
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