28
January
2008

2007/08 Crash call for Bank shares

I called the crash of the financials in 2007 and issued several warnings in 2008.

 

Updated December 14, 2008

While many in the press are trying to call for a bottom in financial stocks, the bottom is nowhere in sight. We are in the process of unraveling a generational credit bubble that took flight nearly three decades ago with the peak in inflation and yields in the early 1980s.

There is warning after warning....would one keep sitting on Bank & Financial shares after reading this one? Click here for more....

This time last summer the largest loss estimates were around $400 billion and by the end of the year it was twice that. Then last quarter we saw estimates rise to $1 trillion. Last week, the number was raised to $1.6 trillion - four times official, original estimates and enough to pose a grave risk to the world’s financial system. The ordeal of the financials is far from over!

By engaging in selective protectionism of a their buddies rather than re- imposing the up-tick rule and treating all companies equally, the SEC furthered the appearance of favored treatment for Banks and Financials that raises serious moral hazard concerns and dampens confidence in U.S. financial markets.

 

The following is the list of the 19 firms that the powers-that-be decided were worthy of special protection from market forces:

  • BNP Paribas Securities Corp.

  • Bank of America Corporation

  • Barclays PLC

  • Citigroup Inc.

  • Credit Suisse Group

  • Daiwa Securities Group Inc.

  • Deutsche Bank Group AG

  • Allianz SE

  • Goldman, Sachs Group Inc.                                                  

  • Royal Bank ADS

  • HSBC Holdings PLC ADS

  • J.P. Morgan Chase & Co.

  • Lehman Brothers Holdings Inc.

  • Merrill Lynch & Co., Inc.

  • Mizuho Financial Group, Inc.

  • Morgan Stanley

  • UBS AG

  • Freddie Mac

  • Fannie Mae


Posted August 4 and updated November 14, 2008

Morgan Stanley issues  alert on Spanish banks. 

Morgan Stanley, the investment bank, has issued a major alert on the health of Spanish banks, warning that a replay of the ERM crisis in the early 1990s could wipe out the capital base of weak lenders exposed to the property crash. Click here for more.

Be aware that the involvement of the Spanish banks in the Spanish Real Estate market is HUGE. Also, they are very exposed to the South-American situation.


Posted July 15, 2008 

As our charts and fundamental information show, the world's financial sector is collapsing! Yet, most investors keep yawning or are in disbelief. They are acting as external observers with the conviction the soup is not going to be eaten as hot as it is being served....Today, not only the Real Estate markets are collapsing, but nobody really realizes what will happen if stock markets keep on going down!?  The real weapons of mass destruction are the Fractional Reserve Banking and the Fiat money created out of thin air; what we see, is a paradigm shit. Fortunes will be lost and fortunes will be made. Which side do you want to be on?

Fortis warned about 6000 banks are in serious trouble and CNBC warned 2,300 U.S. banks need to go. There is NO WAY the assets of the FDIC will be able to cover even part of these losses!

The least one can do is deposit his savings into an ISI Class 1 institution and stop being a spectator. What we see, is not a bad dream. It is for real!...click here to have you cheek pinched.  And it won't go away even if Paulson, Bush, Bernanke, Trichet and all the politicians and bankers in the world would appear tomorrow on television and swear the worst is over.

It looks like we might see the bottom of the bank shares soon.

However, what we are about to see is not the bottom one would like to see. After Bear Stearns, Washington Mutual has come down from about $ 47 in 2007 to $ 3 . We are getting very close to ZERO.... Plenty of similar examples apply. This is what the Tsunami of a Credit Crunch that is the result of Fractional Reserve Banking and creation of Fiat Money out of thin air does.                                                                                              


The Single and Double Top parade of the Banks - posted July 9 and updated November 4, 2008 

Shares of American financials/banks have been coming down in sequence (first the weaker followed by the stronger) since 2007. During the slide, the best we saw, was a momentarily sideward rest before the next step down was set. We all know that what happens in America also comes to Europe. Examples like Citigroup, don’t spell lot of good. Note that Citigroup is taken as an example, but that the whole sector shows similar weakness. Not a single chart shows signs of Bottom building yet. But a death cat bounce is certainly possible. Nothing goes up in a straight line and hopefully nothing comes down in a same way. Be advised these HUGE DOUBLE TOP REVERSALS have broken their ultra long secular uptrend and there is a technical confirmation they have now entered a SECULAR DOWNTREND.

Understanding Technical Analysis is important, understanding Fundamental Analysis is also important. The answer to the question: “What will happen to the stock price of Citicorp and other Banks once the interest rates go up?” is far from not glamorous.

Chart 1: Citicorp 

Citicorp shows a double top; the 1st in 2000 and a 2nd in 2007. By lowering the interest rates, the bank sector was rescued in 2003/2003 and there was a subsequent new top. However, there is a limit to lowering interest rates (the key rate in the US is 2 % and the real interest rates negative) and all ammunition was used before Citicorp could break through the 2000 top. In 2007, Citicorp fell out of the 2003-2007 distribution pattern and confirmed a 1st stop loss by falling through its long term uptrend line. Ever since Citicorp is sitting in a Secular Downtrend. The slide resumed with little reaction and the stock fell through its 2002 bottom of  $ 24 all the way to $ 18 before we saw the 1st Death Cat bounce ($ 18 to $ 26). Over the past weeks, Citicorp has also fallen through the $ 18 bottom and is coming down even more.

Chart 2: HSBC

The chart shows a similar pattern as Citigroup but is lagging. 2000/2001 we have a 1st top. 2007 there was a 2nd one. The 2nd one shows a reversed cup and handle formation (this is a strong technical formation). Not only has HSBC fallen out of the formation but it has also fallen out of its secular uptrend and tested the stop loss level.

Chart 3: Fortis

Clear double top formations confirmed by Death Crosses on the Moving Averages (like for all Bank/Financial) shares. We have reached and penetrated the 2003 bottom. Time for a Death Cat bounce?

Chart 4: Société Générale

This is a perfect example of an Elliott Wave cycle. There is no problem in numbering each and every wave and the last parabolic upward move is distinct.  We have fallen back to the level from where the parabolic rise started from. We have support and a Death Cat Bounce is possible. (The French typically use an employee who is blamed for the loss.)

>back to financials

Categories: Press, Investment Pyramid, Bank & Fin. Shares (charts), Shares are Real Assets

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