Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Imminent Bank Failures- Credit Crisis Worst is Yet to Come

Stock-Markets / Credit Crisis 2008 Aug 23, 2008 - 05:28 AM GMT

By: Anthony_Cherniawski


Best Financial Markets Analysis ArticleThe deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed Wednesday, fueling another battering for banking shares.

Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was likely.

“The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come,” Prof Rogoff said at a conference in Singapore.

Earlier this year, the FDIC stated that possibly 100 banks would fail this year. So far, only 8 have failed. Could the deluge come in the third or fourth quarter? The Conference Board of Leading Economic Indicators fell .7 in July , more than triple the forecast taken in a poll by Bloomberg. Separate reports today showed the number of Americans collecting unemployment insurance remained near a five-year high last week and manufacturing in the Philadelphia region shrank for a ninth straight month. This is not a good outlook for the economy.

$100,000,000,000.00 needed to bail Fannie and Freddie out of trouble.

During the past week, investor confidence in Fannie Mae and Freddie Mac has dwindled amid rising speculation that government intervention is inevitable. Share prices have plunged, as Wall Street watches for any sign that the two companies are no longer able to roll over their debt. Fannie has about $120 billion of debt maturing through Sept. 30, while Freddie has $103 billion, according to figures provided by the government-chartered companies and data compiled by Bloomberg.

In a debt sale this week, Freddie Mac paid yields that had the highest spread on record over U.S. Treasuries. In Aug. 20 trading, Fannie Mae slumped 27 percent and Freddie Mac dropped 22 percent, extending its losses to 90 percent for the year. Fannie Mae declined $1.61 to $4.40, the lowest since 1989, in New York after falling as low as $3.95. Freddie dropped 92 cents to $3.25, the lowest level since 1990, and earlier in the day fell to $2.95.

The reason? Fannie Mae and Freddie Mac may need to raise as much as $100 billion in order to cover potential losses on their mortgage portfolios - a goal that might prove impossible to achieve, an analyst predicted.

Good-by stockholders…hello, Uncle Sam! Uh…I mean, taxpayers!

Slouching to Armageddon.

The Dow and S&P 500 rose on Thursday as surging oil prices drove up energy shares, though fresh fears of more credit losses on Wall Street kept gains modest and pushed the Nasdaq into negative territory.

At Thursday's close, the S&P 500 Index was only 6% above the July low. This failure to thrive in the markets means that the lows will be tested again very soon. This is one rally to sell into, rather than hope for a miracle.




Are bond investors crazy to buy treasuries?

It has been observed in the past that, when stocks declined, bonds rallied, and vice-versa. The correlation between the cyclical patterns is getting too close for comfort to be able to make that call today.

Carolyn Baum lays out the reasons that investors are buying treasuries today. Unfortunately, they may be a bit premature. The chart suggests much lower bond prices and higher yields sometime in the future. Anyone trying to reduce risk by buying anything but the shortest-term treasury bills may be asking for a beating from the market.



Gold has rallied, but the damage may be done.

Gold futures closed at their strongest level in almost two weeks Thursday, and other metals prices rallied, propelled higher by the U.S. dollar's tumble against other major currencies and strength in oil prices amid rekindled fears about the financial sector.

Those of you who follow my comments know that 845-850 is a critical area for gold. The break two weeks ago did critical damage to gold's outlook. Today it was retesting that area. If it cannot rise above $850 per ounce, the chances are good for an even deeper decline.




The Nikkei is really on the edge.

Japan stocks fell for a third day, sending the Topix to the lowest in almost five months, on concern financial companies won't be able to raise needed cash and HSBC Holdings Plc said credit costs at domestic banks will rise.

Folks, we are only one bad day away from a major breakdown in stocks worldwide. The credit crisis has already spread to Japan and Europe .




Chinese shares gain on Wednesday, lose on Thursday…

…this is much ado about nothing. What should be pointed out is that the share prices on the Shanghai Exchange are now at the level that they were in 2006. And there may be more declines to come, but not before a potential rally in the Shanghai index. I still cannot tell whether it will be a substantial rally or not, but Shanghai is due for some relief.





Is the rally over?

The answer may be more intriguing than you think. In short, no. The rally is due to recommence in the next few days. And it may not be over for several months, yet. The dollar bears are still hopeful for the next decline will wipe out the rally like a bad dream. Folks, that is not the earmark of a failure in the market. Remember, the bull climbs a wall of worry. There is still too much worry that the dollar will collapse. That sentiment must be totally crushed before the next serious decline takes place.




Intergenerational financial planning.

Seniors with liquid cash and who are looking for better returns on their money are adopting a new planning tactic, according to a local realtor/auctioneer. They are withdrawing their funds from the stock market and bank accounts and purchasing foreclosed properties at auction for their children and grand-children. The arrangement can be as simple as drawing up a land contract on which the younger generation pays for the house to more complex trust arrangements. The benefit to the retirees is an income stream that is more generous than bank accounts and even some bond funds...and possibly more reliable, too. There is always the issue of the property still falling in value, but it is probable that the largest hit in value has already been taken by the bank. The benefit to the next generation is they have an affordable property to own.



Why Oil won't go below $100? 

Last week, falling oil prices looked unstoppable. The last few days have seen a halt in that slide. Still with prices well below the record set in July and a shaky world economy threatening demand, the question remains: How low can oil go?

Many analysts say oil is unlikely to go much lower than $100 a barrel, and it has to do with the rising cost of production. My reply to that is oil companies will still produce, but probably at a loss. There is a tremendous fixed cost that must be paid, even with cheaper products.



How do you spell relief?

The Energy Information Agency's Natural Gas Weekly Update tells. “ A reprieve from the summer heat in many areas of the country helped push spot prices lower on the week. The dampening of space-cooling demand in Florida , which was largely the result of Tropical Storm Fay, and the limited threat to offshore production areas contributed to price declines across much of the country. Furthermore, favorable weather conditions in high gas-consuming areas of the Northeast led to some significant price declines in that region on the week.”




Your ability to live the good life on plastic may be over.

For the past several years, the average inflation-adjusted total pay of American workers hasn't been increasing. That means we haven't been building a foundation for increases in our living standard. You might be tempted to say that by definition our living standard couldn't have increased, but that's not quite right. Even with stagnant real incomes, we can always live a little better every year through borrowing and pretending that our living standard is still rising, just as it was for decades.

Since credit card debt has been growing much faster than the economy - more than 8% in last year's third and fourth quarters and over 7% in May (the most recent month reported)- people are apparently using it as a substitute for income. Thus, for the past year or so we have still maintained the standard-of-living illusion.

The squeeze has already started, which is why Congress is in the process of passing the Credit Cardholders' Bill of Rights, which would prevent issuers from changing rates and terms without warning, among many other provisions. But bottom line, the credit card money window is going to start closing - and soon.

We're on the air every Friday.

Tim Wood of , John Grant and I are back in our weekly session on the markets. This week we debate what the market is telling us, near-term. It should be fascinating. You will be able to access the interview by clicking here .

New IPTV program going strong.

This week's show on is packed with information about the direction of the markets. I'm on every Thursday at 4:00 pm EDT . You can find the archives of my latest programs by clicking here .

Please make an appointment to discuss our investment strategies by calling Claire or Tony at (517) 699-1554, ext 10 or 11. Or e-mail us at .

Anthony M. Cherniawski,
President and CIO

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

© 2005-2022 - 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