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Two Ways To Play: Failure to Lend


Strengthen your portfolio in good times and bad.


Where is our TARP (Troubled Asset Relief Program) money going? According to Bloomberg, most US banks aren't lending after collectively receiving over $200 billion in taxpayer funds.

A Federal Reserve report today showed that approximately 65% of US banks have tightened lending policies on commercial and industrial loans, limiting capital to just large and middle-market companies. Many have continued tightening lending standards on credit cards and consumer loans as well.

Lending was most restrictive in the third quarter when the failure of Lehman Brothers sent shockwaves throughout the system. The survey was conducted in the first 2 weeks of January and covered 53 US banks and 23 foreign institutions.

Next week, Treasury Secretary Timothy Geithner will unveil an overhaul of TARP. President Barack Obama said the main goals will be to lower mortgage costs and extend credit to small businesses in an effort to create more jobs.

For more, see Professor Mish Shedlock's Wells Fargo's Balance Sheet: Scaring the Horses.

From the Bull Pen: The markets could see a bounce this week to relieve short-term oversold conditions. For a trade, bulls can consider Aeropostale (ARO) pulling back to its 20 DMA ($20). Sell stops can be set below that level.

From the Bear Cave: Bears continue to eye the transport index breaking below significant support. A countertrend rally in the broader indexes won't be able to last very long without this sector. Members in this group include Burlington Northern (BNI), FedEx (FDX) and CH Robinson Worldwide (CHRW).

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No positions in stocks mentioned.

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