I don’t need to tell you the news. It’s dismal:
+ European shares have plummeted to a 26-month low. European banks are truly in the toilet. Pimco’s boss told the Financial Times today that ” French Banks Could Tip Europe Back Into Recession.” He said French banks could tip Europe “into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession, and significantly worsens the outlook for the global economy.”
In an opinion piece, Mohamed El-Erian says Europe must move quickly to stabilize its banks “at its core in ways that go far beyond what the European Central Bank announced on Wednesday.” The European Central Bank said Wednesday that it will widen the range of securities it will accept as collateral for lending to European commercial banks while also limiting the amount of senior unsecured debt it will accept.
El-Erian said French banks are a particular cause for concern, noting that “credit markets now put their risk of default at levels indicative of a BB rating, which is fundamentally inconsistent with sound banking operations.” He adds that bank equity now trades at a 50% discount to tangible book value on average, while the ratio of market capital to total assets has fallen to 1%-1.5%, compared with 6%-8% for “healthier banks.”
“These are all signs of an institutional run on French banks. If it persists, the banks would have no choice but to delever their balance sheets in a very drastic and disorderly fashion,” he says. The result, he says, would be a banking crisis and a recession.
Although the ECB has moved to boost liquidity, El-Erian says “capital cushions and asset quality remain unaddressed. As a result, Europe is on the verge of losing control of orderly solutions to its debt crisis.”
He urges fiscal authorities and banks to work with the ECB on “three immediate, simultaneous and drastic measures.”
These comprise the injection of capital through public-private partnerships, a realistic assessment of balance sheet assets and improved depositor protection. “Greater burden sharing” with the private sector may also be needed, he adds.
+ Asian markets today are down 5% amid reports of weak growth.
+ Futures for today’s American markets suck. Mr. Market here hates what the Fed is doing, or not doing. It sees the chances of Obama’s jobs bill passing as close to zip. which basically means there will be no stimulus for today’s ailing economy. Most American money managers are now under water for 2011.
+ FedEx is doing awfully. That bodes ill for our economy because they’re the biggest private package carrier. Bloomberg reported this morning:
FedEx Corp. (FDX), operator of the world’s biggest cargo airline, cut its full-year profit forecast as volumes declined amid a slowing economic recovery.
Per-share earnings for the year will be $6.25 to $6.75, 10 cents lower than the previous range, the Memphis, Tennessee- based company said today in a statement. Analysts had projected $6.35, the average of estimates in a Bloomberg survey.
FedEx, which ships more packages by air than rival United Parcel Service Inc., has seen volume growth slow as demand for express shipments stagnates amid a weakening economic recovery. FedEx also has been spending more on jet fuel, whose average cost jumped about 48 percent in the period. The company typically has a two-month delay in recovering fuel costs through surcharges.
FedEx’s stock has plummeted and will probably drop some more after today’s news:
UPS looks like it’s ready to fall some more.
+ Even gold has gotten squirrelly of late. It’s being dumped along with the bathwater and the baby.
+ My mortgage REITs — AGNC, ANH, MITT, MTGE and NLY — are all now 5% below what I paid for them. Their high dividend yields (14%+) are more than compensating for their decline. While NLY’s dividend dropped from 68 cents to 60 cents, AGNC’s latest dividend has stayed at $1.40.
+ In contrast, Apple is one of the few bright spots. Its sales hould scream this Christmas. When I showed off my Apple nano watch at dinner two nights ago, two people said they would buy one for presents — for their husband, for their grandchaildren. They all said it had solved their present-buying problem this year. I’m guessing some of them will buy Apple stock for their kids also.
This will make you happy. We took out-of-town friends last night. They absolutely loved it. Now playing on Broadway:
There wasn’t an empty seat in the theater last night. But theater and movies also bomed during the depression. For tickets, click here.
Harry Newton who is pleased he’s warned against banks and the general run of no-dividend or low-paying dividend stocks. But he’s now annoyed with himself that he didn’t go short — especially since all this misery has been SO predictable. Still time to short the Dow and the S&P 500 — the easiest bets.
RonaldReagan, I wish you were right. Problem is, the World's solution is to apply more Keynesian to solve the problems they created. Think about this statement from today's column: The European Central Bank said Wednesday that it will widen the range of securities it will accept as collateral for lending to European commercial banks while also limiting the amount of senior unsecured debt it will accept.
Where does the European Central Bank get the money it lends to Commercial Banks? It prints it. The world thinks that there's some central authority, that knows better than anyone else, how to solve this crisis. Baloney. We can't print our way out of this, but that's what we'll try to do.
Larry, as I read your post the old Chinese proverb of “Death by a thousand cuts” came to mind. Let me ask you the following. When did the tech bubble end? Ans: When it ended. When did the housing bubble end? Ans: When it ended. As I'm sure you remember those two bubbles ended when everybody and their brother was in, make that “all in.” Do we have another bubble today? Seems to me the entire bond market is looking bubble-ish. We both know what the Fed has been doing and has further plans to do. Money printing, yea sure, representing worthlessness. We both know how big a slice of the pie is represented by the world bond markets. So I ask you: When will it end?
To me the world financial landscape of today can be represented by a rather simple notion…..Today the world central banks print worthless money to essentially prop up bond markets. Tomorrow that worthless printed money will be on it's way to “money heaven” via Mr. Bond Market. Sure some worthless money will quickly scramble and find it's way back into the equity markets, only to find another vehicle of transport to money heaven. If their's one thing I know “for sure” is that this bear market won't be over until you hear your brother-in-law tell you that “he will never buy another stock for as long as he lives.” Bill Gross, what a fool, Warren Buffett, what a lier, Barack Obama, what an ego maniac….they will all be revealed in the years to come. By the way, has anyone seen Robert Rubin?….yea sure.I'll leave you with this final thought: The internet is here, the truth is being communicated all around the world, the speed at which history unfolds is accelerating. Larry, you and I have an advantage at this stage of the game, we know the truth.
“If you are going through hell, keep going.”……..Sir Winston Churchill
Today we are witnessing the continued destruction of Keynesian Economics which has been a lie almost the entire world has been living for several generations. When will it end? For sure no one knows but maybe something resembling Dow 6000 vs. Gold 6000 (per oz) is as good a guess as any in my book. Some day, amongst the ruble, true economics otherwise known as Austrian Economics will begin to take hold. Austrian economics is part and parcel the foundation of “laissez fair capitalism” and 180 degrees away from all of the bullshit which has been taught at our institutions of higher learning. For decades now conservatives have been doing a rather poor job of educating their beliefs to the masses. Now, Mr. Market is going to step up and do the educating. Pay close attention students, for I warn you, Mr. Market is a very strict teacher.
On a day such as today allow me to recommend to you the interview done by Mike Wallace of Ayn Rand in the late 1950's which you can easily find on youtube. If any of the liberals who post here should venture into this realm, and I remember all of the Ayn Rand hate speech that's been posted, as a true conservative I wish you would remember this following statement : “go fuck yourself.”………I guess their's not much left to say.
Did you mean “higher learning” or “hyper learning” or perhaps, “hide from learning”? 🙂
I'd add that learning is out of date. It requires reading, studying, listening, thinking and looking around to compare these with what you see actually happening, then drawing intelligent conclusions. Doing this over 5 or 10 or even 50 years, learning along the way, is even better. Very old fashioned. Doesn't fit in 140 characters!
The one GOOD of all this crap, as previously stated, is that it is becoming visible. EXPOSED! Whether the people have the smarts and means to address it properly now and over the next few years – our leaders clearly don't – or just kick the can further down the hole, I mean road, remains to be seen.
Pahowley……as you go through your daily activities of living life pay close attention. What do you see “dying on the vine?” I see quite a bit, dear I say Hollywood. What do you see “beginning a new?” The Middle East comes to mind quickly. Imagine if the internet were gone tomorrow. How has it changed your life in the last 10 years? I understand we as conservatives have a gigantic mountain to climb, But I can remember those Reagan years and how fast things did actually change, or at least it seemed that way to me. At some point, who knows how far out into the future, things are going to change at an almost mind-boggoling speed. The void left from all of the socialist, liberal, Keynesian lies is just as gigantic as the mountain we conservatives see before us today. That mountain will come down and that void will be filled at the same time I believe. The truth is we are one European bank / sovereign away from a nice piece of that mountain coming down…..no?
As I said, the GOOD NEWS is all the bad stupid government policies and equally ignorant mass media being EXPOSED. It's so big and bad now, even a liberal can see it. Well, that may be a stretch. Even an intelligent liberal can see that! All three of them. Not sure about Paul Krugman.