http://www.financialsense.com/Market/wrapup.htm
Snippet:
Return of the Credit Crisis – Did It Ever Leave?
Time to brace for more bad newsBY FRANK BARBERA, CMT
Don’t look now, but its back. Swept back upon the rocky shores and thrown harshly against the rocks by a vicious tide, the banks' shares are once again moving to new multi-year lows. Of course, the news is horrible, but the price action of financial shares suggests there is far worse yet to come. For those just looking at the last few days of the stock market rally, it might be very tempting to conclude that the averages are stabilizing and that things have gotten ‘back to normal.’ Ah, if only. As it happens, ‘normal’ is not even within hailing distance and lo to the investor who decides that now is the time to take his eye off the bouncing ball. In this case, the bouncing ball has been and remains the monumental credit crunch sweeping the globe. It is the proverbial elephant in the middle of the room that few like to talk about, and which once again in the last few days has passed another major round of gas. To begin with, we note that for the first quarter 2008, Banks' earnings fell by 46% to $19.30 billion with the number of officially reported ‘problem’ banks jumping from 76 to 90. In the first quarter, US Banks set aside a record $37.1 billion to cover losses, however, even government regulators don’t believe that will be enough to stave off further problems. According to Sheila Bair, Chairwoman of the FDIC, Federal Deposit Insurance Corporation, loan-loss provisions and bank failures will likely continue to rise in coming quarters. “While we may be past the worst of the turmoil in the financial markets (ed. Don’t count on it) we’re still in the early stages of the traditional credit crisis you typically see during an economic downturn” stated Ms. Bair.
In fact, Ms. Bair went on to point out that the ‘coverage ratio’ for banks is still declining, a ‘worrying trend.’ The coverage ratio compares bank reserves with the level of loans that are 90 days past due. According to the FDIC, “The ratio fell for the 8th consecutive quarter to .89 in reserves for every $1 of non-current loans, the lowest level since the 1st of 1993.” This trend has been reflected in a constant parade of banks reporting ‘worse than expected’ results and simultaneously increasing their loan-loss reserves. Take Keycorp (KEP) for example, which recently doubled its forecast for loan losses for the second time in the last few months. The stock collapsed by more then 10%, and as of last night closed at a new multi-year low and a new closing low for the entire decline.
Bruce
Snippet:
Return of the Credit Crisis – Did It Ever Leave?
Time to brace for more bad newsBY FRANK BARBERA, CMT
Don’t look now, but its back. Swept back upon the rocky shores and thrown harshly against the rocks by a vicious tide, the banks' shares are once again moving to new multi-year lows. Of course, the news is horrible, but the price action of financial shares suggests there is far worse yet to come. For those just looking at the last few days of the stock market rally, it might be very tempting to conclude that the averages are stabilizing and that things have gotten ‘back to normal.’ Ah, if only. As it happens, ‘normal’ is not even within hailing distance and lo to the investor who decides that now is the time to take his eye off the bouncing ball. In this case, the bouncing ball has been and remains the monumental credit crunch sweeping the globe. It is the proverbial elephant in the middle of the room that few like to talk about, and which once again in the last few days has passed another major round of gas. To begin with, we note that for the first quarter 2008, Banks' earnings fell by 46% to $19.30 billion with the number of officially reported ‘problem’ banks jumping from 76 to 90. In the first quarter, US Banks set aside a record $37.1 billion to cover losses, however, even government regulators don’t believe that will be enough to stave off further problems. According to Sheila Bair, Chairwoman of the FDIC, Federal Deposit Insurance Corporation, loan-loss provisions and bank failures will likely continue to rise in coming quarters. “While we may be past the worst of the turmoil in the financial markets (ed. Don’t count on it) we’re still in the early stages of the traditional credit crisis you typically see during an economic downturn” stated Ms. Bair.
In fact, Ms. Bair went on to point out that the ‘coverage ratio’ for banks is still declining, a ‘worrying trend.’ The coverage ratio compares bank reserves with the level of loans that are 90 days past due. According to the FDIC, “The ratio fell for the 8th consecutive quarter to .89 in reserves for every $1 of non-current loans, the lowest level since the 1st of 1993.” This trend has been reflected in a constant parade of banks reporting ‘worse than expected’ results and simultaneously increasing their loan-loss reserves. Take Keycorp (KEP) for example, which recently doubled its forecast for loan losses for the second time in the last few months. The stock collapsed by more then 10%, and as of last night closed at a new multi-year low and a new closing low for the entire decline.
Bruce
{Promotion Removed}
