Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Financial Stocks on Tsunami Watch

Stock-Markets / Banking Stocks Sep 02, 2009 - 02:15 AM GMT

By: David_Urban

Stock-Markets

Best Financial Markets Analysis ArticleAfter seeing quite a large rally from the March lows the market appears to be extended and indicators (stocks above 200 day moving average, market PE, bullish/bearish %'s) are signaling some rough seas ahead.  While stock could conceivably move higher there are a few reasons why I am bearish at the present time.


Harkening back to 2007, I would like to give credit and thanks to Credit Suisse for the following graph.

As one can see the initial tsunami of bad loans has receded and financial stocks have been licking their wounds and repairing their balance sheets but we are at the beginning of the second wave.  This second wave of option reset mortgages will do more damage because of the already weakened state of banks. 

The relaxing of mark to market rules has helped repair balance sheets but there will continue to be problems throughout 2010 and into 2011 until the 2nd wave of resets recede.  

As the resets continue, non-performing loans continue to rise, causing additional strain on an already weakened banking sector.  It is unlikely that we will see a significant drop off in non-performing loans until the bulk of the option resets are completed. 

Bank failures continue on a weekly basis with the problems being felt mainly by small and medium sized institutions.  Some larger weakened institutions have succumbed to the pressure as well.  Recent comments that the FDIC may need additional capital should sound a warning bell across the financial space. 

While the housing data has been bullish due to buyers assistance programs, one needs to keep in mind that the reported figures are month-over-month data, not year-over-year.  As we get into the fall and winter months the MoM figures will decrease as seasonal patterns take place. 

Housing inventories continue at a high level, with many homes being taken off market and rented until the selling climate improves.  As we continue through the resets, it is likely that inventories stay high until the potential overhang from option and agency ARM's clears.  Any spurt in new home construction will slow the housing inventories from being worked off in a timely manner.

Retail sales numbers continue to be disappointing, although we are entering a period where comparisons will be much easier.  The year over year data shows a 9.4% decline in June and an 8.3% decline in July.  Again the YoY data is more telling than the MoM data.

High levels of unemployment will constrain spending and GDP growth into 2010 and later.  Government stimulus programs will provide the necessary counterbalance to weakness in consumer spending helping to guide the economy through this difficult period. 

This is not an approval for the governments polices but one needs to note that a similar path is followed in every recession.  The authors problem lies in the wasteful programs and high deficit levels that state and federal governments carried coming into the recession which only exacerbates the problem going forward.  Spending that is targeted at areas to provide future growth is preferred over the construction of dog parks.

So while global economies are likely to come out of the recession without much problem (Japan will be an exception) GDP growth in the US is likely to be below normal levels. 

Inventory restocking will give a bump to GDP growth in the coming quarter as will government stimulus programs.  This combination will set the stage for renewed consumer and business confidence in the coming years but first we will need to get through the a possible double dip recession in 2010.

So while the market itself may move higher I see better value and higher upsides in the precious metals and agriculture sectors where there are some very interesting values globally.  Quite often the best values are off the beaten path. 

By David Urban

http://dcurb.wordpress.com/

Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author.  We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. 

Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile.  This is not intended to be investment advice or a solicitation to purchase any of the securities listed here.  I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

David Urban Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules