The Great Credit Crunch Is Deepening
Consumers will feel the effects in the form of tighter credit standards.
Bank Assessments to Cover "Too-Big-To-Fail"
Within the proposed banking reform bill, the House Financial Services Committee wants banks and funds to make payments in advance for companies deemed "too-big-to-fail".
This fund will be capped at $200 billion, insuring that taxpayers won't wind up paying for a bailout should a big bank fail.
The Senate version permits bank regulators to use taxpayer funds to unwind a failure and later recoup from the banking industry.
Guess what? These costs will be passed onto consumers in terms of tighter credit standards and less favorable borrowing rates. This will extend "The Great Credit Crunch".
Wall Street Banks Have Record Profits, While Main Street Banks Fail
This is the end result of the dollar carry trade. (See also, The Decoder: Carry Trade). Wall Street will get record bonuses because of proprietary trading, while Main Street faces higher unemployment, reduced pay, mortgage defaults, and foreclosures.
Why did this happen? Because we bailed out the "too-big-to-fail" banks while we ignored the risk guidelines that would have helped community and regional banks survive "The Great Credit Crunch".
Housing Starts Fell Sharply In October
Housing Starts declined 10.6% in October sequentially and are down 30.7% year-over-year. So where's the housing recovery? The annual rate of starts is just 529,000 units annualized.
Single family homes, the beneficiary of the $8,000 first-time home buyer tax credit fell 6.8% to an annual rate of 476,000 units. Will this be just a lull, as the tax credit expired but then extended beyond November 30? Go to contract by April 30 and to closing by June 30 to qualify.
It's tough to keep a housing recovery going with community and regional banks choking on C&D and CRE loans, strapped to pay Deposit Insurance Fees and TARP Dividends. Bank failures will continue.
On Tuesday, I'll be dissecting the FDIC Quarterly Banking Profile for the third quarter, and predict that we'll see continued deterioration in assets among most consumer and real-estate loan categories.
For the Dollar Index there's a potential weekly key reversal. The dollar reached a new low for the move on Monday at 74.75. A close this week above last week's high of 75.88 defines a weekly key reversal. A weekly key reversal followed by two weeks of higher closes confirms a dollar bottom.
The daily chart The Dow Industrial Average is overbought with the 50-day simple moving average as support at 9,893. Note that since March 6, there have been four mini-corrections to the 50-day.
Source: Thomson Reuters
The weekly chart for the Dow is also overbought with Ascending Wedge resistance at 10,458, and the down trend that goes back to October 2007 at 10,675.
Look at the 120-month simple moving average on the monthly chart. That resistance is at 10,476. Note that the October 2002 and March 2003 lows tested and held the 120-month simple moving average.
Send me your comments and questions to Rsuttmeier@Gmail.com.
That's today's Four in Four. Have a great day.
Want the flow of Wall St on your desktop? A free trial of Buzz & Banter gets you access to 30 top traders all day.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter