Read em and weep guys

[peternap]

 July 14 (Bloomberg) -- U.S. stocks fell, sending financial shares to their lowest level since October 1998, on heightened concern that bank failures will spread.

Washington Mutual Inc. posted its biggest drop ever and National City Corp. tumbled to a 24-year low after last week's collapse of IndyMac Bancorp Inc. spurred speculation that regional banks are short of capital. The companies said they've seen no unusual depositor activity. Fannie Mae and Freddie Mac erased an earlier rally fueled by Treasury Secretary Henry Paulson's plan to help rescue the largest U.S. mortgage lenders. Alcoa Inc. jumped, limiting the Dow Jones Industrial Average's drop, after Goldman Sachs Group Inc. advised buying the shares.

The declines pushed the Standard & Poor's 500 Financials Index of 89 companies down 4.8 percent and the S&P 500 Banks Index to an 8 percent tumble, its steepest drop since at least 1989. The S&P 500 slid 6 points, or 0.5 percent, to 1,233.49 at 3:42 p.m. in New York. The Dow slipped 5.29, or 0.1 percent, to 11,095.25. The Nasdaq Composite Index slipped 10.78, or 0.5 percent, to 2,228.3. Three stocks dropped for every two that rose on the New York Stock Exchange.

``The factors that affected IndyMac are not isolated; while they're probably more severe, the pressures are evident in other financials,'' said Alan Gayle, the Richmond, Virginia-based senior investment strategist at Ridgeworth Capital Management, which oversees about $74 billion. The Treasury's plan for Fannie Mae and Freddie Mac is ``encouraging, but it does suggest that credit availability is going to remain somewhat impaired and borrowing costs will likely be higher.''

`Unmitigated Disaster'

Benchmark indexes rallied at the open as confidence in the banking system was boosted by Paulson's plan to ask Congress for authority to buy unlimited stakes in Fannie Mae and Freddie Mac and provide loans to them. Fannie and Freddie erased their advance after investor Jim Rogers said in a Bloomberg Television interview that the government's proposal was an ``unmitigated disaster'' and Goldman predicted the shares would resume falling.

Washington Mutual retreated $1.64, or 33 percent, to $3.31. The biggest U.S. savings and loan is seeing ``business as usual'' with no unusual depositor activity, spokesman Derek Aney said in an interview. National City, Ohio's biggest bank, tumbled 69 cents, or 16 percent, to $3.74 even after saying there was ``no unusual depositor or creditor activity.''

Lehman Brothers Holdings Inc. in report today predicted a rise in loan-loss provisions at Washington Mutual for balance- sheet losses that may total $26 billion this year.

Zions Bancorporation, the Salt Lake City-based lender with operations in 10 Western U.S. states, fell 20 percent to $20.65. First Horizon, Tennessee's biggest bank, slumped 22 percent to $5.22.

`Substantial Credit Losses'

Goldman Sachs analysts recommended investors sell Zions and predicted dividend cuts may be in store for Zions, SunTrust Banks Inc., Comerica Inc. and Bank of America Corp.

``Substantial credit losses are going to have to be absorbed,'' said Henry Herrmann, chief executive officer of Waddell & Reed Financial Inc. in Overland Park, Kansas, which manages about $65 billion. ``We're right on the cusp of earnings season, and more and more of this is going to be manifest.''

M&T Bank Corp., the lender whose second-largest shareholder is billionaire investor Warren Buffett's Berkshire Hathaway Inc., plunged 16 percent to $58.24, its biggest drop since at least 1985. Second-quarter profit at the Buffalo, New York-based bank plunged 25 percent on losses tied to mortgages.

Wachovia Corp., the fourth-largest U.S. bank, fell 11 percent to $10.26, a 17-year low, after being cut to ``neutral'' from ``buy'' at UBS AG, which predicted a dividend reduction to 1 cent and the sale of $5 billion of common shares.

IndyMac Seized

IndyMac became the second-biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash last week. The Pasadena, California-based company, which specialized in a type of mortgage that didn't require borrowers to document income and lost almost $900 million when borrowers fell behind on payments, was taken over after U.S. markets closed on July 11.

The successor entity, IndyMac Federal Bank, will cover 50 percent of uninsured deposits initially, its chief executive John Bovenzi said yesterday. All accounts up to $100,000 will be fully insured under the Federal Deposit Insurance Corp.

[peternap]

Freddie Mac fell 33 cents, or 4.3 percent, to $7.42 after earlier rallying as much as 26 percent. Fannie Mae rose 3 cents, or less than 1 percent, to $10.28. The shares had surged 32 percent earlier. Paulson's proposal, which the Treasury anticipates will be incorporated into an existing congressional bill and approved this week, signals a shift toward an explicit guarantee of Fannie Mae and Freddie Mac debt.

The Federal Reserve separately authorized the firms to borrow directly from the central bank.

`Sad Commentary'

Goldman analyst Daniel Zimmerman said the plan won't benefit shareholders. He lowered his share-price forecast for Fannie Mae to $7 from $18 and for Freddie Mac to $5 from $17.

Fannie Mae tumbled 45 percent last week and Freddie Mac sank 47 percent on concern the two companies, which own or guarantee about half of the $12 trillion of U.S. mortgages, may require a bailout that would wipe out shareholders.

``It's a fairly sad commentary that the government has to step in and take these actions,'' Liam Dalton, New York-based chief executive officer of Axiom Capital Management, which oversees $1.3 billion, said on Bloomberg Television. ``The overall market probably remains in a malaise, because the market is very respectful of the fundamental issues.''

The S&P 500 Financials Index slid 4.8 percent to its lowest level since October 1998, two months after Russia's debt default sent the index down 23 percent in a month.

1 Million iPhones

Apple Inc. rallied $2.17 to $174.75. The company sold 1 million iPhones in the first three days following the new model's debut. Piper Jaffray & Co. analyst Gene Munster estimated sales of 425,000 devices in the first three days.

``IPhone 3G had a stunning opening weekend,'' Chief Executive Officer Steve Jobs said in a statement today, after starting sales of the device in 21 countries July 11. It took 74 days to sell a million of the original iPhone, which was only available in the U.S. at first, he said.

Anheuser-Busch Cos. rose 38 cents to $66.88. InBev NV will buy Anheuser-Busch for $52 billion, putting the maker of Budweiser beer under Belgian control after almost 156 years as a family-run company. The $70-a-share transaction ends a month of court fights and public denunciations as InBev tried to acquire the St. Louis-based beermaker in a hostile takeover.

``A takeover such as the InBev-Anheuser one is a positive sign,'' Thomas Tilse, head of portfolio strategy for private clients at Cominvest in Frankfurt, which has the equivalent of $101 billion under management, said in a Bloomberg Television interview. ``Such mergers and acquisitions show that stocks are still very attractive and cheap at their current levels.''

Allegheny Technologies Inc. rose $4.83, or 9.6 percent, to $55.18, the biggest advance in the S&P 500. The specialty-metals producer that supplies titanium to Boeing Co. said second-quarter profit was $1.65 to $1.67 a share, exceeding the $1.52 average analyst estimate in a Bloomberg survey.

[desdawg]

.

Washington Mutual retreated $1.64, or 33 percent, to $3.31. The biggest U.S. savings and loan is seeing ``business as usual'' with no unusual depositor activity, spokesman Derek Aney said in an interview. National City, Ohio's biggest bank, tumbled 69 cents, or 16 percent, to $3.74 even after saying there was ``no unusual depositor or creditor activity.''

They can say that cause Scott hasn't gotten off work yet. I think I will take my WAMU card and go shopping. Actually it is locked up in my safe at home so I don't use it. I suppose I won't be getting any more special offers. Looks like you could buy WAMU for $3.00 a lot sooner than NCC.

[peternap]

 '

[/quote]
  Looks like you could buy WAMU for $3.00 a lot sooner than NCC.
[/quote]

I;d be afraid too now Des. I can read the bounce the first day but after that, it gets confusing. Especially when Cramer opens his big mouth. You have to figure the Cramer bounce in with the other buyers and sellers.

I'm afraid a lot of the financials are are going all the way down soon and I don't want to be holding any when that happens.

[desdawg]

You mean you don't like Bob Cramer? Actually I like thestreet.coms analysis format. It seems pretty thorough to a novice like me. I can get them on some stocks at Ameritrade.

[ScottA]

I got most of my money out of WM. Only 300 left in the account and I'll yank that out by atm before the end of the week. If they don't get some help tomorrow I'd say they are doomed.

[desdawg]

Cramer says deposits are safe. If you own stock sell. I don't know if he is right. Peter doesn't trust him. He is loud and ebullient but I like his analysis methodology.

[peternap]

Cramer says deposits are safe. If you own stock sell. I don't know if he is right. Peter doesn't trust him. He is loud and ebullient but I like his analysis methodology.

Cramer is a very intelligent man, has had a lot of hard knocks in his life although it was a little like knife fighting with a silver carving knife. He's made a lot of money as a Hedge Fund manager so he knows the ropes.

Advice is difficult to give with any certainty and that's where he falls down. He advises on matters that he has either not studied recently studied or are just too unpredictable to call.

If you read his books and follow his advice in the books, he's a good source. Unfortunately, his biggest following are the unwashed masses who do as he does, not as he says.

On his quickie recommendations, he's wrong more often than right.

I actually DO like Cramer as a person but I learned a long time ago to buy sell on MY research and gut feeling.

THIS MESS...Who Knows!

My feeling is that we are like an AIDS patient right now. This country's economy is alive but it won't take much to kill it.

It's right before the opening bell now and Asia took a whuppin, Europe followed suit and our beloved FED Chairman is about to speak. He always drags the market down (Kind of like seeing Rosie Odonnell naked). It's not going to be a pretty sight today.

Just a quick update:
Opening bell and all three exchanges are down and EVERYTHING on my watch lists are RED

[muldoon]

I wrote a reply to this thread last night and when I went back to re-read it it was too depressing and I just closed the window and went to bed.  After a nights sleep on it, I feel a little better but not much. 

I believe we have passed the point of no return here.  While the stock market can go up or down (and I think the direction is definitively down), it no longer is the metric by which to measure our countries health.  I think a depression is unavoidable based on where we are today, it could come this year or spread out over the next decade.   I still have much work to do. 

I think this weekend was the inflection point.  From calculus, an inflection point is a point on a curve at which the sign of the curvature (i.e., the concavity) changes. It is the point at which the change occurs.  If your driving a car into a curve, its the point where your wheels are going straight as you change direction.  It does not signal a crash, it clearly defines the point at which everything changes. 

This weekend we had FNM and FRE effectively nationalized with talk of up to 300billion in losses transferred to tax payers.  Our treasury secretary Paulson led the charge to do this.  We have Indymac bank go belly up, and everyone should go look at the pictures of their bank run http://news.yahoo.com/nphotos/IndyMac-seized-federal-regulators/ss/events/bs/071308indymac/s:/nm/20080714/wl_canada_nm/canada_indymac_col;_ylt=At1M9yelKKWhPAdPHoPqXeHxrGIF#photoViewer=/080715/photos_pl_afp/dc98bf5683ad1e6e6d28a1329a506b4f

or the video, police called in to help keep the peace as a line of people go around the block, some waiting for 2 days now.   
http://cbs2.com/business/IndyMac.Finance.Pasadena.2.770438.html
I fear this is about to from bad to really bad. 

IndyMAC had 6.7billion in deposits, and the FDIC claims the seaizre will cost somewhere between 4-8 billion. 

Yesterday, we saw Wachovia, Wamu, BankUnited, First Fed, National City, Downey all slammed and rumors abound about their solvency everywhere.  To be honest it doesnt matter, what matters is perception.  If people get scared no bank can sustain a run.   Its fraction reserve money, the deposits dont exist to make everyone whole. 

Lets look at one of those banks. 
At March 31, 2008, WaMu and its subsidiaries had assets of $319.67 billion.  Looks like WM had around $186 billion in deposits.  http://www.bankingdetail.com/banks/branches/washington-mutual-bank-stockton-california.asp

The news story from yesterday claimed they had 150billion in deposits makes it clear that 36 billion has already been withdrawn.  How much would a bank run on WaMu cost FDIC?  100Billion plus?  Seems they only had 51 billion to start the year and are down to 14 billion now.  This again would be transferred to the tax payer.  And the next one, and so on. 

So, why is this the inflection?  Most of you know that bad news has been non-stop for at least 6 months.  What changes today is that the fed has already shot through 800 billion in that 6 months as now sits on 25 billion in treasuries.  FDIC cannot cover the loss and will go the way of fnm/fre.  Nationalize the losses, there's no more powder, no more bullets to use.  As many know, the US is broke.  In fact were more like 7 trillion under.  We don't have money to bail them out, we must borrow it.  Who is going to give us another 2-4 trillion?  At what price?  What are the odds that we pay that back?  The world is thinking those odds are declining, and you can see this in the dollar index.  As the dollar falls, our money is worth less.  It's a distinct possibility that we lose reserve currency status, oil gets priced in euro or yen, or hell gold, and we get pesos out of the deal.  As scary as that sounds, that's a real scenario right now. 

If we cant borrow it, we print it.  I never thought this would come into play as even a remote possibility.  If it does, I have some crow to eat.  I now admit it is possible for them to try this.  If no one will buy our bonds and we do - just to generate the issuance of currency then the yields on them go up, so we print, and they go up, and we print and soon enough were printing million dollar bills (probably not dollars, they would likely be treasury certificates).  I still don't see anyone actually pursuing this, but were running out of options and this is getting scary. 

This is a watershed moment, and in history books of the future this week will be labeled the catalyst that broke us not unlike what the creditanstalt bankruptcy did nearly 80 years ago. 

Try to stay calm, the sky wont fall.  The worst is still years away.  Our country has been through bad times before.  People may even come and ask you what you think about whats going on.  Try not to panic people in your responses, we need to take care of our families, friends and neighbors.  Were going to need them. 

[ScottA]

I think a lot of us have been predicting this for a while now. Even though we knew it was comming we didn't know when and now that it's here it's still a bit of a shock. muldoon you have some great insights on all this thanks for taking the time to share. Time to head for the hills I guess. My tip for the week...buy euros.

[glenn kangiser]

Al Martin (ex-Navy Intelligence and Iran Contra shaftee if I remember right) predicted that dubya would destroy the US before he got into office.  He said that every time Daddy Bush wanted a business to fail for him to somehow profit, he put dubya in charge.

Does it look like that has any bearing here?  One world government - the coming of the Amero - dictatorship- etc.  Who benefits from this collapse?  We know who loses.

muldoon --- don't worry about posting the bad news - depressing stuff --- we are all grown up and we all need to grab ourselves by the buttocks and swiftly jerk our head out so we can see what is going on.  There is light outside and we need to look at who is doing what and why? 

Where are they headed with our money?

...and thanks again for posting your views.

[glenn kangiser]

Some kind of quote from memory - don't remember where.

The stock market is the only place where people who don't have any money can tell you what to do with yours.

[apaknad]

oh peternap,

i have been depressed for some time now about the economy but your analogy of "kinda like seeing rosie o'donnell naked" has made me positivly suicidal. thanks alot!