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Mike Mayo's Seven Deadly Sins of Banking

"What's Really Behind the Obama/Geitner Bailout Plan"

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FLASHROB

Mike Mayo's Seven Deadly Sins of Banking

1. we're losing WELL OVER 500,000 jobs per month - and they ain't Walmart jobs.
...like myself the average Credit Card User probably charges over $1000. per month...do the arithmetic...that's 1/2 billion dollars LESS PER MONTH to the Credit Card companies in lost revs. Add to that, good odds of many of these losing their jobs defaulting and declaring bankruptcy (I would estimate most of these people have multiple credit cards with 10,000 or more owed...throw that in...and you have 5 BILLION MORE IN LOSSES PER MONTH to the Credit Card companies and BANKING PARTNERS....)

2. All Obama's plans to FLOOD THE BANKS WITH CREDIT LIQUIDITY mean little...AS THESE CONSUMERS ARE TAPPED OUT CREDIT-WISE and WILL NOT BE ABLE TO TAKE ADVANTAGE OF THE INCREASED LOW RATE CREDIT. No, good job, equals LOSS OF CREDIT!

3. Freeing up credit liquidity ONLY KEEPS THE FEW DEEMED CREDIT WORTHY...mostly small biz...to keep operating...the PROBLEM IS: DECLINING CUSTOMERS...so the small biz can stay open...but their fighting a CONTINUALLY DECLINING AND LOSING BATTLE...as less biz comes in from consumers who NO LONGER HAVE CREDIT....

IS THERE SOMETHING YOU DON'T SEE IN THIS PICTURE... I would love to be wrong...but I'm just using "common sense" and some fundamentals...

where is the BANKS future rev stream...SHOWING OPERATING PROFITS without counting CONTINUALLY DECLINING ASSETS, which are exceeding those supposed "operating profits" is ridiculous... the banks as well as most small biz and retail WILL CONTINUE TO DECLINE...until JOBS AND THE CONSUMER are

BACK IN THE PICTURE in a positive way... no plan I've heard of, so far, CAN REFLATE CONSUMER SPENDING...

Obama is much too focused on plans that DON'T ADDRESS IMMEDIATE JOB LOSS...

I have suggested an immediate 50% 2008 tax refund to ALL INDIVIDUALS to JUMPSTART THE CONSUMER ECONOMY...thereby forestalling further JOB LOSSES...

the banks ARE A SEPARATE ISSUE...and with "mark to mkt" modification should not have to go bankrupt...(they still hold little promise as investment vehicles, as only a "super recovery" (unlikely) could restore them in my opinion....)

Obama should be focused on PROPPING UP THE CONSUMER not wasting TAX DOLLARS ON BIG BANKS...

most peoples local banks ARE IN MUCH BETTER SHAPE...and gov money can be funneled THRU THEM for BUILDING/INFRASTRUCTURE projects...

who really NEEDS A "CITI!"

flashrob

Waiting for the Government to Act on Banks

why BIG MONEY is not in this daytrader spin driven bear-rally!

why they are not itching to buy...they know it's going DOWN...

this is a daytrader spin-based rally...

listen carefully: WHEN "MARK TO MKT" IS RESCINDED OR MODIFIED...THE BIG BANKS "LOSE ALL POTENTIAL" TO RELEVERAGE HUGE PROFITS ON THE DERIVATIVES MKTS...

no world traders will touch them WITH UNCERTAIN ASSET VALUATIONS...

their stock prices WERE INITIALLY BOOSED TO THE HEIGHTS OVER THE YEARS because of "highly leveraged trading" in the derivatives mkts. Kill that, and you kill them.

They can't recover AS WHEN THEIR ASSETS are revalued to "higher fantasy numbers" so the fed don't have to bankroll them...

THEY CAN ONLY WATCH THERE "NOW REAL WORLD ASSET VALUES" DECLINE WITH REAL WORLD REAL ESTATE PRICES.

couple that with "lower interest rates" (they are only showing profits with cheap gov money loaned out to "the few" who want to borrow and will pay the high rates.

as soon as govs loosen credit...those interest rates go down as banks worldwide have tons of money, few who want to borrow, and they are all scrabbling for the crumbs...

however those OTHER INTL BANKS with "mark to mkt" can watch
their "highly leveraged derivatives" soar back up, in the event of a recovery...and we all expect a recovery somewhere down the road.

flashrob

Waiting for the Government to Act on Banks

...a shorter version of my previous post on the prospects for banks....

here's the REALITY:

1. bank assets CONTINUE TO DECLINE in a world economy continuing to SPIRAL DOWNWARD...continued high-paid job losses, more foreclosures, etc. NO HELP FOR BANKS HERE!

2. RECENT PROFIT ANNOUNCEMENTS by some of the BIG INVESTMENT TYPE BANKS...

a. mostly due to BORROWING CHEAP GOV MONEY and LOANING OUT at "high interest rates" due to WORLDWIDE CREDIT ILLIQUIDITY.

b. as soon as Obama and G20 (around the world) take various measures to PUMP LIQUIDITY into the banks...GUESS WHAT...

spread interest rates ON WHICH THESE BIG INVESTMENT BANKS are stating PROFITS will DRY UP!

...LOWER SPREAD RATES = LESS PROFIT FOR BANKS ON THEIR LOANS.

...COUPLE THAT WITH "real world WEAK DEMAND," because in a severely declining economy...FAR FEWER BUSINESSES "NEED LOANS!"

So, the banks MAKE LESS MONEY on the loans they are writing because of the gov etc. getting money pumped into many banks for competition to provide lower "interest rate loans" ...

and THERE ARE LESS LOANS NEEDED and demanded...

so lower profit rate loans for banks

and far less loans will be made

plus less leveraged recovery speculation by banks when "mark to mkt" is modified...meaning: they can't use as much leverage to recover.

IS THERE SOMETHING YOU "FANTASY LONGS" CAN'T SEE IN THIS EXPLANATION...

IT'S BAD NEWS FOR ESPECIALLY "BIG INVESTMENT BANKS" GOING FORWARD...and there position is getting worse....

flashrob

Waiting for the Government to Act on Banks

big problems for banks... BIGGER PROBLEMS FOR BIG INVESTMENT BANKS!

FIRST: regional and local banks!
the problem headed their way: though they have little exposure to "real estate based derivatives," etc., like most of the "big investment banks and financials,"
and their "assets" are already NOT "mark to market," but based on more realistic valuations, they HAVE A BIG PROBLEM in the future... as the economy continues spiraling downward (with more high-paid job losses to the payers of their more standard type mortgages). Their WILL BE MORE FORECLOSURES as unemployment continues to increase....

bottom line for regional and local banks in the future:
continued ASSET deterioration of NOW "non subprime" type mortgages. (also raising of reserve requirements)

note: these stocks and etfs are losing ground and going down, but more slowly since their assets are priced to the "more realistic" local type valuations (like real estate values in a region, might only be down 30-40%). So, their assets might be .60 cents on a dollar as opposed to "big investment bank" asset valuations (real estate derivative type) which some are "marked to mkt" at like .10 cents on a dollar, because that's all that the "global derivatives players" are willing to "bid" for them.

SECOND: most of "the big investment banks"

this group has "lots of problems:"

1. continued ASSET DECLINE - the overall decline in the economy and continued increasing job loss WILL CAUSE FURTHER DECLINES TO THEIR ASSETS, "mark to mkt," or not.

2. increased government regulation of and intervention in their activities and oversight of their assets.
(plus what else might the gov might find in there.)

3. modification of "mark to market" WILL HAMPER their speculation in the "global derivatives mkts" ...something these banks "DON'T WANT," and were probably counting on TO LEVERAGE UP THEIR PROFITS (based on asset vals... "mark to mkt" works great in an UPWARD mkt... works against you in a down mkt...IN A HIGHLY LEVERAGED WAY).
It's somewhat like trading options as opposed to trading stock. The banks think we're near bottom in the stock market, and want to be able to run their "stock prices" up quickly by using LEVERAGE. Take away or limit "mark to mkt" and THEY HAVE A PROBLEM ...not in recovering, BUT IN RECOVERING QUICKLY when the economy improves somewhere in the future. (probably a much farther future than they think!)

BUT THE BIGGEST PROBLEM "large investment banks" will face:

*Much is made of the "credit liquidity crisis" ...and groups like the G20 and the Obama administration are feverishly working on "freeing up liquidity."
Now, no doubt WE NEED more WORLDWIDE AND AMERICAN CREDIT LIQUIDITY in the financial system.

With governments around the world working on "increasing liquidity" (by various methods ...moving "bad assets" off banks books, suspending or modifying "mark to mkt," etc....

bottom line: LIQUIDITY WILL INCREASE, but Banks are borrowing cheap from gov right now, and lending at high-spread rates, thereby showing profits, like those announced by some BIG INVESTMENT BANKS recently, but increase liquidity and rates COME DOWN...banks MAKE LESS ON LOANS...do they want that? I don't think so, and that leads us to...

And an equally BIG ISSUE ...in a declining economy with biz slowdowns, company downsizings, WHO NEEDS ALL THIS MONEY provided by making HUGE AMOUNTS OF LIQUIDITY AVAILABLE.

BIZ borrows to EXPAND ...seldom to CONTRACT...and their are less potential borrowers going forward as the world economy continues to decline...

bottom line: In my opinion BANKS LOSE MORE (in this recessionary time, only) WHEN LIQUIDITY IS INCREASED!!!

And HERE comes "INCREASED LIQUIDITY" complements of like... O'bama and the G20....

SO, I WOULDN'T BE GOING "LONG" BANK STOCKS! local, regional, or BIG INVESTMENT BANKS!

Until, the economy REALLY STARTS TO RECOVER - and that looks LIKE YEARS OUT, it DOESN'T LOOK GOOD for the banking sector, AND IT LOOKS PRETTY BAD FOR THE "BIG INVESTMENT BANKS"
in particular.

flashrob

Probe of Citigroup et al Could Hit Financial ETFs

people are SHORT or LONG...based on their analysis...

Everyone probably has a "vested interest" in promoting their take on the outlook for mkts, sectors, or stocks.

However, because they may/may not have a VESTED INTEREST...DOES "NOT NEGATE" their REASONING!

in reality...being short or long on something...indicates.... PUT YOUR MONEY WHERE YOUR MOUTH IS.

My take...

how, can you be LONG the "financials" when the FUNDAMENTALS keep getting worse "day-by-day" ...week-by-week" etc.

SHORTS have BACKUP OF FUNDAMENTAL DATA...
...and their "short" because that's the PROBABILITY OF MAKING A RETURN ON YOUR INVESTMENT.

I LISTEN TO "all news, etc." AND TAKE A POSITION ...BASED ON "PROBABILITIES" of a sector, stock, etc.

whether, someone has or doesn't have a "so-called vested interest" GOES WITH THE news, analysis, etc.

Who, convinces me...is the WAY...and WHAT SIDE I INVEST ON!

short financials: all the fundamentals, news, statistics...STRONG CASE...

long financials: CHEERLEADING MOSTLY...no facts or logic to support their position...

suspect many LONGS are "shills" for "big boy investors" who like Lewis in the case of Bear Sterns...AFTER THEY TOOK A TERRIBLE LOSS as Bear Sterns kept declining over time...tried desperately to STAVE OFF "FURTHER LOSSES as Bear Sterns went down to like $2.

Looks, to me like "evidence" is for WORSE NEWS for "many large financials" and they will GO THE WAY OF BEAR STERNS...

screwing their investors...despite last minute help from the Gov to prop their prices, and rally the financials...but based on what...

the gov will let you survive...even the Gov will stop support when IT REALIZES THIS price prop spin WILL FAIL...

AND THE GOV WILL "TAKE OVER" MANY FINANCIALS or engineer Bear Sterns type buyouts...

geez, the Treasury is putting itself in position to "buy your stock!"

Hooray! ...you say...until you realize... they are not doing that to Prop your stock, or drive it up in an "unjustified by the fundamentals" rally...

...they know in the end, that when prop fails...THEY WILL BE BUYING YOU particulary FNM, FRE...FOR "PENNIES ON THE DOLLAR!"

think about it...if your a "weak" big financial YOU'LL GO THE "BEAR STERNS "precedent!"

FNN, FRE...another gov bureaucracy...

but...you the "common shareholder" in these entities...

ARE AT THE "BOTTOM OF THE TOTEM POLE" for "pennies on the dollar" (if that)...bondholders, preferred securities...

get paid out of "what's left over" in liquidation...the future for many of you...

Financials have not reached "bottom" ...the Gov just keeps lowering it...that's all.

Most Financials are like the "former great city of New Orleans!"

...was always REBUILT "bigger and better" after each calamity...in the twentieth century...BUT NOT THIS TIME!

just "small portions" mostly Gov related...

so you still have a GS financial...small portion probable survivor...but MANY...will like

New Orleans..."NEVER RECOVER!"

your money longs... gonna go down with a "Lewis" ala "Bear Sterns" or put your money in something more LIKELY to Recover....

flashrob

Financials Future Still Uncertain

some backup on this from Congress...

www.infowars.net/artic...

flashrob