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Roll Up the TARP!


Stop wasting it on failed programs.

Editor's Note: This article was written by Richard Suttmeier, chief market strategist at, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.

TARP Should Be Rolled Up Instead of Being Wasted on Failed Programs

After fourteen months, the TARP should have prevented foreclosures, and helped small businesses get affordable credit. TARP failed to accomplish this objective and instead we have 10% unemployment and Bank Failure Friday, as 130 banks have failed this year, including a few TARP recipients.

Rising Foreclosures Evidence That "The Great Credit Crunch" Continues

The fact that foreclosure filings will total 3.9 million in 2009, up from 3.2 million in 2008, is a signal that "The Great Credit Crunch" continues. Foreclosures would be higher, but banks are reluctant to proceed on the process due to the cost. Community banks are under pressure from several angles: raising capital, writing down C&D and CRE loans, and having to pay three years of Deposit Insurance Fund fees to the FDIC upfront and by the end of this year.

Foreclosures declined 8% in November because millions of homeowners are in the midst of being evaluated to see if they're eligible for a mortgage modification. It's a sad situation when 77,000 homes get repossessed last month alone, when Obama's housing mortgage modification program has helped only 10,000 year to date. Talk about fuzzy math, the US Treasury claims 31,000 mortgage successes.

The extension of the TARP until October 3, 2010 kicks the problem down the road, and it appears that this is the drop-dead date for TARP. With foreclosure problems up 18% year over year, additional waves of foreclosures are likely right through 2011, which is the date when Alt-A mortgage resets taper off. As long as unemployment stays high, prime mortgages will continue to join the default list.

Elizabeth Warren, chair of the Congressional Oversight Panel told reporters that TARP is "not working" and that it had failed to make a dent in the record level of foreclosures. More than 14% of homeowners with a mortgage are either late on their payments or in foreclosure.

JPMorgan (JPM) sees more Credit Losses in 2010. Credit-card losses for its Chase portfolio is projected to be 11% by the end of the first quarter of 2010 and losses in the Washington Mutual portfolio could hit 24% over the next several quarters.

Equity Bulls Claim $3 trillion on the sidelines, but mortgage specialists say that homeowners have lost $5.9 trillion in home values since the housing market peak in mid-2006.

In a Bloomberg survey of consumers, almost half feel less financially secure since President Obama's inauguration, and fewer than 33% feel that the economy will improve over the next six months.

The weekly chart for the 10-Year favors higher yields. This yield is headed towards its 200-week simple moving average at 4.07 given a close today cheaper than 3.42. Today's support is 3.62.

Comex Gold remains overbought on its weekly chart. The parabolic bubble has popped. Supports are $1107 to $1094 with my quarterly pivot at $1135, and resistances at $1150 and $1179.

Nymex Crude Oil has a negative weekly chart profile with my annual pivot at $68.81, a daily pivot at $70.33 and the 200-week simple moving average at $75.67.

The Dollar Index shifts to positive on its weekly chart given a close today above $76. The euro shifts to negative on its weekly chart given a close today below 1.48. My annual support is 1.4036.

The Dow
shows overbought MOJO on its weekly chart. My annual pivot is 10,012 with down trend resistance at 10,550. The down trend resistance drops to 10,520 next week.

No positions in stocks mentioned.

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