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Apropos, of the last post about Citigroup, JJ Hornblass posts about Credit Losses Seen Doubling in 2009. Christopher Whalen, director of sales and marketing at Institutional Risk Analytics offers a very sobering outlook for credit losses in the financial arena going forward,
Here are a couple highlights of his assessment:
we are about halfway through the credit loss cycle
subprime credit losses wont peak until next year.
Credit losses will go to 4% from 2%
We have a $32.5 Trillion problem with credit default swaps
Whalen sees AIG still going into bankruptcy (U.S. taxpayers will have wasted at least $150 Billion)
Finally, ALL current capital at banks will need to be replaced. All!
No Obama or any other politician has a fix. Only the market and time will do the job.
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Election day, 2008, Citigroup (C) traded at $14.81. Then it started to slide and currently it is trading at $3.81. (See chart) If C closes at this price, it will be down some 60% in one week! The WSJ reports that top executives are considering the dale of thebank.
The debate within the company is at a "preliminary stage," and officials said the company has "ample capital, funding and strategic direction," the daily said.
Mish Shedlock disagrees.
Looking ahead, foreclosures, credit card defaults, and bankruptcies are going to soar along with a soaring unemployment rate. Banks in general, and citigroup specifically, are woefully undercapitalized and unprepared for what is about to happen. One look at a chart of Citigroup should be proof enough.
The market seems to believe Citigroup is insolvent and so do I.
Add Citigroup (C) to your list of troubled companies along with JP Morgan (JPM) and Goldman Sachs (GS).
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On October 22nd I posted The Pennant Race To The Bottom and said:
His focus on pennants got me looking at the DJIA chart with new eyes ( see chart). If you connect the two most recent highs (9794.37 and 9284.55) and the two most recent lows 7882.51 and 8197.67), you have a pennant in the DJIA and the DJTA also shows a similar formation. A braking of support in the DJIA pennant gives a downside target of 6194!
We did break down out of the pennant and then went up and back into it. Today, however following the DJTA, the DJIA broke to a new low. It like the pennant was converted to a channel, but the target still remains the same; down another 1,688 points or a target of 6.277!
There's no guarantee or any real way to know for sure, but Richard Russell notes the 50% principle level is 7470 and the 2002 low is 7286. Certainly levels to keep an eye on.
I might note that yields, beneficiaries of a flight to safety, hit 0.11% for 90 day Treasury paper. 1.09% for 2-year and 3.38% on 10-year paper. And the FED is considering lowering interest rates further.
Talk abounds that China will increase its Gold reserves from 600 tons to 4,000 tons. The Chinese love Gold. This chart courtesy of Le Metropole Cafe illustrates the growing demand in China:
You might be interested to learn that 24-Hour Gold has started keeping track of the market for physical supplies of Gold based on supply and demand for gold coins and silver coins on eBay. You can find it here: Gold on eBay, U.S. and Worldwide and Silver on Ebay, US and Worldwide
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When I was a kid there was Sears, JC Penny, Woolworths, Montgomery Ward, and K Mart. Sears and JC Penny were the biggest for a long time. Now you know that Walmart is the big cheese today and Woolworth's and Montgomery Ward are gone
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The NY Times today reveals that American International Group (AIG), who we've bailed out to the tune of $144 Billion, needs additional money. You and I have agreed to give then another $150 Billion. (I don't recall getting a call seeking my permission. Perhaps I was out that day.) The NYT writes:
About $30 billion of the government money will be used to buy complex debt securities that were insured by A.I.G. and about $20 billion more will be used to buy securities backed by home loans.
[ Click here to read more ]
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Gold is near to a breakout. Currently up 32.17 to $756.6, it needs to exceed the last high of $772.20 to give a short term buy signal. According to the video from Adam Hewison, that target is around $800.
Silver is also up today. Currently up $.32 to 10.11, it needs to top $10.14 (see chart
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Gold at the moment is perplexing to a great many traders. To many it was a shock when gold recently traded below the $700 an ounce level. So the question is, what happened to the $2,000 an ounce target that most gold bugs were calling for?
Adam Hewison just released <a Really Long Link new gold video</a> in which he explores that question and looks at what he thinks will be this markets next move. You might find hisr analysis and conclusions rather surprising
[ Click here to read more ]
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Comment by Mike Landfair
on ARE THE CONSUMERS TO BLAME?
Market Bugle
"So what! Are we taxpayers supposed to rush in and make everyone whole? I say to heck with them all. I don't have much sympathy for victims. I think everyone should have the right to fail."