Y’know, I continue to be gob-smacked by the outlandish hope and ignorance on Wall Street with respect to the banking sector.
All anyone has to do is read their 10K/10Q’s. Run down the balance sheets and ask “What the f*(&(*^ is THIS?!”
All the fancy SIV’s, conduits, structured products - the whole freakin’ lot of it - all now highly suspect, IMO. And the more complicated it is, the further they move it away from “real accounting” or a real valuation.
All of these issues are signs for me that there’s a lot more dirty laundry to be brought out into the fresh air for everyone to see.
Then we have the regional banks, who have over-lent their balance sheets into construction loans. Oh, yea, that’s going to be a well-performing class of debt going forward, with the housing market continuing to tank and diesel fuel going skywards. Riiiight.
The banks have done it to themselves and to us, the taxpayers of the US. Bernanke’s Fed is slowly learning more about how the banks are run and as they do, getting increasingly contentious in their meetings as to whether it is right for the Fed to bail these clowns out.
The more I look at the aftermath, the more I think they should have allowed Bear to go under. It would have forced a much faster “come-to-Jesus” confessional among these over-levered banks. Sure, the market would have gone down hard and fast - but we’d get this mess cleaned up faster.
As it is, with the twin demons of insolvent banks and high fuel prices — there is nowhere for the economy to go but down. It will be starved for capital and excess cash that was sitting around is being flung into fuel expenses.
You bring up so many good points in your posts, like this one, it really helps me to stick with my convictions. You are more sophisticated than me in your knowledge of the markets and I appreciate reading all of your posts. I agree with so much you’ve said.
The liquidity crisis is not nearly over. Some say we are in the 3rd inning, some say the 6th? Who knows? There is much more toxic paper hidden from view and full transparency is needed to go forward.
I am dumbfounded by the optimism out there as well. A lot of people are less sophisticated investors than I am and just stick to the basics like dollar-cost-averaging or buying dips, without even trying to think through if the fundamentals warrant being in equities at all.
And I too wonder if it would have not been better to just let Bear & other banks fail and get it over with and behind us, despite the pain. But its an election year and no way Bush would let BurnYankee do that, even if BurnYankee had the mind too do that, which he did not.
Quick question... Do you think the losses and write downs are being exposed at a reasonably good rate? It seems to me that financials are continuing to show losses on their balance sheets and are willing to expose the toxic paper. No, they aren’t doing it all at once, but they seem to be willing to expose these losses much quicker than the Japanese banks did.
I guess I’m asking if you think the write-downs will all be exposed in a reasonable time frame, allowing us to maybe avoid Japan style stagnation, or are the banks still hiding most of the losses. I feel like they are doing a decent job of exposing their losses and bringing them to light.
What do you think?