Highlights from the 2009.Q2 FDIC Report

The only thing better than reading reports from The Fed is the quarterly FDIC report:

http://www2.fdic.gov/qbp/2009jun/qbp.pdf

Here is the highlights with pithy comments by me (in red):

INSURED INSTITUTION PERFORMANCE
1) Higher Loss Provisions Lead to a $3.7 Billion Net Loss

"Are you low balling the provisions to remain solvent?"

2) More Than One in Four Institutions Are Unprofitable

"That's 2,048 banks! Yikes...25%"

3) Charge-Offs and Noncurrent Loans Continue to Rise

"Meaning... things are getting worse and you are low balling #1 above."
4) Net Interest Margins Show Modest Improvement

"Duh... You borrow at near 0% and lend at much higher rates"
5) Industry Assets Decline by $238 Billion

"People are taking their money out of the banks"

Now for some scary graphs.

The FDIC can only cover 60% of the failing loans. So they are hoping that 100% don't fail? Which means they are in no position to insure your bank deposits in total if there was a "run on the banks". That's a pretty good indication that the 8,195 insured financial institutions in the United States are approaching insolvency and their primary insurer, the FDIC, is technically bankrupt.

Problem institutions were increasing >20% per quarter for 2 years! If this continues, by 2010 more than half of all insured US financial institutions will be listed as "problem". If this isn't the tipping point for the whole US financial system then simply wait till 2011 when we reach 100% problem institutions.

US Children Fund GM-CHINA Deal

"SHANGHAI (Reuters) - General Motors said on Sunday it has agreed to set up a light commercial vehicle production venture with major Chinese automaker FAW Group, with total investment of 2 billion yuan ($293 million)."

A bankrupt company taking money from the US government; money which the US government acquires by selling US debt to the Chinese whereby the future generations of the Americans are left to pay the interest.

Debt is future consumption pulled forward to the present. The result is less consumption in the future or default because--- nothing is growing faster than debt.

Chatter

I may have been a year too soon but the chatter is building again. Beware. Prepare.
If this is wrong what is the worst that can happen? You squirrel away 3 months of living expenses in your floorboards that could have been in a financial investment earning 0.05%.

People don't prepare because they are afraid of looking foolish.

http://tedbits.blogspot.com/2008/10/bank-holidays.html

Greenback Emissions

I heard someone say we are too worried about greenhouse emissions and better start worrying about greenback emissions! Jeez, I wish I could think of clever lines like this.

Anyway, his comment reminded me that I haven't written about something that I think is very important.

The Federal Reserve and the US Treasury have been placing well timed trades in the S&P Futures markets since early March. Some of this you can see on the balance sheet of the Fed. Some you can't because it is being held off-balance sheet.

Such futures action makes it look like the stock market is going to go up. This results is really smart people front running this trend and less smart people putting money in the market driven by herd mentality.

At some point this will stop. Further, at some point those positions may have to be unwound.

What do you think will happen then?

Now that you read this please remember that any information that follows is neither a solicitation to buy or sell securities. The writer of this article may or may not own such securities at the time you are reading this article. And, don't be a complete idiot-- do your own research before you buy financial instruments of any kind.

Sold Out

Before you read on please remember that any information that follows is neither a solicitation to buy or sell securities. The writer of this article may or may not own such securities at the time you are reading this article. And, don't be a complete idiot-- do your own research before you buy financial instruments of any kind.

Since some of you may have been following along from the market report I gave on March 20 (http://tedbits.blogspot.com/2009/03/bulldog-returns.html), I wanted to let you know that as of today, I am completely sold out of the above holdings and related equities. Signals were clear as of the first week of August that the market was weakening and I systematically tightened up my "stops". Over the past few weeks I have been taking money off the table and as of today, I am completely out. It was a great run.

I still believe in the China Recovery/Commodity Strategy but will not buy back in until I see a good 10%-15% retrenchment from current levels. My short position on the US Dollar is now closed and I am neutral on the dollar at this point. I like gold at $880/oz.

Other things I am watching:

Blackstone (BX) after it goes ex-dividend. Would love to see this at $10/share and probably start nibbling at $12.

China Battery (CBAK) at about $2.50/share.

And of course GLD, UDN, DBB, DBC, DBO after proper retracement.

For a speculative trade consider Image Sensing Systems, inc. (ISNS). Be very careful though because this stock is thinly traded. I am hoping for some institutional investors to move in on this one and send it to the stratosphere. I continue to have a minor position in ISNS.

It is possible that we will form a double bottom (http://tedbits.blogspot.com/2009/04/decoupling-double-bottom.html) because uncertainty is reoccurring in the financial markets as commercial real estate loans are defaulting.

Lastly, I must say I am getting more and more confused about inflation vs. deflation. I really believe we are heading for inflation if you've followed previous posts. However, I have read some compelling cases for deflation from reputable sources. The most clever point I read was a prediction for inflation in necessities and deflation in discretionary purchases. Ever since I read this it convinced me that this is probably our future.

Oxygen

If you are a regular vistor, I hope you noticed that often times you can read about something here in my blogs about 3 to 6 months before it becomes news. I am not a psychic. Trends and patterns are obvious and how this world works is quite predictable.

Here is the next topic to watch for: Oxygen

You see, global warming is getting old. And after 11 years of cooling temperatures the polls are showing "it isn't selling" anymore.

The same thing happended in the 1970's and 1980's when the big thing was the "next ice age" that was soon coming. During these decades temperatures were actually warming.

Whether warming or cooling, it seems we just can't get the world to buy into the catastrophe of dramatic climate change. We can't generate enough fear.

Now there is something brewing that will really scare people. The world is running out of oxygen. You haven't heard much about so far because we haven't figured out a way to blame human behavior. But as soon as we do, watch out.

If you are still part of the greenhouse gas crowd... remember most of the green house gases in the atmosphere are NOT man made. Here is a link to a prior posting

Merchants of Death

Here is an interesting graph. Draw your own conclusions. Click to enlarge.