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Bank & Financial Shares

Updated november 1, 2011 - Banks shares are doomed and banks will rot to the core!

  • September 11, 2011. European Central banks mistrust Commercial banks and are depositing their funds with the American Federal Reserve. Germans authorities are preparing an escape plan for the German banks in case Greece goes bankrupt.

  • The Bank of America, Wells Fargo and Citigroup are about to be downgraded. The credit rating of Goldman Sachs has fallen below the rating of Citicorp.

  • WHEN Greece falls into bankruptcy its largest creditor or the Deutsche bank can follow.

  • The financial problems have a direct impact on the dangerous structure of CDO's (derivatives, structured products,...) which brought Greece down in the 1st place and on the Financial markets: stocks, commodities, bond!

  • Most large European banks are simply not solvent if there are major sovereign defaults. The US banks have sold some $90 billion in credit default swaps on Greek, Irish, and Portuguese debt to European banks. That is supposedly balanced with other purchases of CDS, but much of that insurance is from German banks.

  • Banning Shorters only make matters worse. This continues to be the tale of a dangerous adventure. Banks are bankrupt and they will rot to the core! There is no way to keep bailing them out without risking Hyperinflation and there is not even a plan to mop up all the extra QE....It will take Hyperinflation before the Herd SEES that the Emperor has no clothes.

  • An unique aspect of Banking systems is that they cannot be rebuilt once they turn insolvent. They rot in place and nothing can be resuscitated except for the balance sheets. Not even the higher capital requirements required by the Basel III regulations can solve this problem. The Basel agreement gives banks 9 years to comply with a 7% reserve level, practically nullifying the exercise.

  • One has to be a fool (or a Hedge fund manager) even to consider buying Bank shares. Fractional Reserve Banking is nothing more than Premeditated Theft. Charts are issuing warnings all the time. Stay away from Bank and Financials: it is probably safer to travel to Las Vegas and use your funds to play the Roulette than to speculate on Bank and Financial Equities.

  • So many banks have been closed down (+ 120 from Jan to Sep. 2010 and so many will follow) that the FDIC has run out of funds! Increased capital requirements are still insufficient and Financials remain dangerous as long as we have Fractional reserve banking and creation of fiat money out of thin air. The FDIC lost $ 25 bn and last June it was in the hole for $ 10bn.

  • The exposure of the major banks to Derivatives is scary. Derivatives are a nuclear financial bomb and Interest Rates is the detonator.

  • The crisis in Greece is not so much about Greece, which is irrelevant in the greater scheme of things (at 2% of the EU economy). It is about the German, French and British banks and the consequences if Greece defaults, followed by Ireland, Italy, Portugal and Spain (the infamous PIIGS). These countries will default on their sovereign debt; it's just a question of when. Creditors worldwide had a combined direct exposure to the PIIGS of almost $2.4 trillion, according to the Bank for International Settlements, as at Dec 31, 2010. (The total profits of all the EU banks for the six months ended June 2010 were just €46.8 billion while total equity was €1.8 trillion, according to European Central Bank data).


Technical pattern A down trend it is...SELL
Resistance 1200
Support 1200
Bearish Objective ZERO
  

The Bank index in Gold (click to enlarge)

October 3 - fresh break down !!!

The situation of the Bank sector is A LOT WORSE than what is openly admitted.

Our Opinion:

  • In the USA an average of 3 Banks have to be closed down each week.

  • There is NO WAY authorities will risk the bankruptcy of any bank. They will bail them out ALL and this will continue until Hyperinflation hits.

  • In Europe the same process is happening...but there are less banks and it's done in a more subtle way. Spain is a good example.

  • LONG TERM trend doesn't look good. Why take the risk to invest in Financials???? There are better and SAFER investment instruments.

  • There is NO WAY you can trust the financials as they are real masters in cheating on the investor.

  • The credit markets are medicated by direct involvement of the Central Banks and the balance sheet of the FED looks like a levered junk bond fund.

  • Just look at Greek banks and how fast problems can occur.

  

BANK pf1

   

Short term candle October 4

 Chart comments
  
  • April 14: still a bearish constellation!

  • June 2 : SELL - SELL - SELL

  • July 11:BEARISH ISLAND REVERSAL

  • August 22 - September 9: CRASH !

  • September 30: interesting Candle chart with Deleveraging spikes.

  • October 4: key day reversal in bullish wedge...it was too much, too deep and too fast.

  • November 1 : still a solid bear trend it is.


Long term candle September 30

.


Updated September 30, 2011 - Authorities will rather risk Hyperinflation than let banks go bankrupt.

US and European Banks have been nationalized and being state owned they won't be let down. [ Bank equities are not a lot better than Cash and Bonds....but there is much better investments than Bank shares]. Increased capital requirements and Stress test on both sides of the Atlantic are nothing more but propaganda to avoid a potential 'Run on the Banks'. A run on the banks would mean a De Facto Bankruptcy of the Banking system : the money you think you have in your bank account...well, it is not there...it is gone...

  • Technically speaking, most large banks are bankrupt. Banks are all over the economy like a solid cancer would be. The dramatic situation in Greece, Spain, Portugal and now also in Ireland...is such that the Authorities have no choice but the bail these countries out. A failure to do so would also bring down German, Dutch, French and British banks and the ruling politicians with them. Under NO condition will the Authorities let their best buddies - the Banks - go down. In other words, they will do WHATEVER is requested to keep them alive. There is however a limitation to their actions. It will show up in due time and we call it HYPERINFLATION. Countries like Argentina and Zimbabwe are life examples of what is to happen. During 2008 about 25 banks went belly up. For 2009 we already have 100. September 2010 120 banks disappeared. 2011 an average of 3 banks are closed down (taken over) each week...

Charts as of September 30, 2011 - ALL BANK SHARES are a SELL -

Goldman Sachs Morgan Stanley Citigroup Bank of America AIG

SELL

bearish wedge confirmed: SELL

bearish wedge confirmed: SELL

down trend

this is what a CRASH looks like

Suntrust Aetna life

bearish wedge confirmed: SELL

dangerous

* the performance of AIT (Aetna Life) is the consequence of the manipulation of the Bond market (municipal and Treasuries) by the FED = extremely dangerous.

 


* Bank shares in the EU and Switzerland: Amazing is to see people still trust Banks and even still buy Bank shares and (even
worse) Bonds issued by Banks!? Having said this, Banks won't go insolvent as long as Governments are solvent. For this reason the
overall situation is even more dangerous.

Charts look slightly different because expressed in US dollars  but DOWN TRENDS we have!!!!!
Deutsche Bank Credit Suisse UBS Barclays ING

downtrend

aborted up trend

downtrend

downtrend

downtrend

HSBC Société Générale
SELL

 

note: above charts are somewhat different because of the Dollar/Euro fluctuation but clearly sent their message!


 

  • AXA, Deutsche Bank, Credit Suisse, UBS, Barclays -. A lot of damage has been done. Fortunes and more have been lost. [We heard of people hanging themselves because they lost all of their savings as they had it invested in Fortis.] This is definitely not the place to be. Multiple bottoms are broken indicating lower lows are yet to come...insofar as lower lows are possible. We all know this will end with some kind of nationalization followed by Hyperinflation....

  • Imagine the additional damage that will be done when interest rates will rise.....

  • Bank shares were an excellent trade if one bought these at or near the bottom. The risk however was huge as both the fundamentals and technical analyze are negative. Having said this we still think one must make a difference between a Casino play and investing. A banker may not mind to hear one of his clients hanged himself but we would.

Note: Bank leverage for Swiss banks (UBS, Credit Suisse,...large banks) is even worse with figures running in the 70's.

  • The EU is kept together BECAUSE OF DEBT. The irony will be that exactly this DEBT will blow the EU apart.

 

 


This is how it was in the 1920-30's:

 


Updated December 29, 2009

 

Today's derivatives are the Margin Accounts of the 1920's and 1930's

The Crash of the Financials or how are the Banksters doing? This so said conservative and safe way of investing caused many people to loose all of their savings!?

 

What we see now is the financials resuming what they were before the Great Depression and Bank crisis of the 1920's. Investment banks and deposit banks are again becoming 'one entity'. Exactly the very situation which created the big depression...People never learn. I can't believe I am living long enough to see this idiocy happen again!

Note: A bank leverage of 50 means that if a bank makes a loss of only 5% , it wipes out its complete capital.


Posted November 1, 2010

 VIDEO ONE


Posted August 9, 2009 - Another Bank crash in 6 to 9 months and how Goldman Sachs and Banks are still misunderstood by university professors. Very disturbing!

 VIDEO TWO


Posted June 15, 2009


Posted May 8, 2009 - Too big to fail?

VIDEO THREE


Posted October 2008

October/November 2008 the LIBOR (London Interbank Rate) has peaked to unseen levels. Banks have come to a point where they don't trust each other any more. Either the Central banks keep on injecting fresh money or the financial system will stop operating. Our bet is that the Authorities will do all they can to avoid such a disaster because it would plunge the whole economy into a Deflation spiral.

We have a money system that is not even based on money. It is based on debt. Now that we have a bear market, liquidity is failing and positions need to be liquidated (multi-trillions) in the markets = huge deleveraging = greater losses on the debt!  The upside of this debt system was rewarding, however the downside is just devastating. We’re paying the price of the stupidity of Greenspan and co. Just to stop the holes (solve the process is just impossible) needs trillions and trillions (hyperinflation) and at the end, the dam will break anyhow.

Who are these people who pretend a Fortis share is still worth a dime? This is how bad it is:

  • Deutsche Bank leverage ratio of 50x, total liabilities 2 trillion Euros, equivalent to 80% of German GDP

  • Barclays  leverage ratio of 60x, 1.3 trillion pounds, equivalent to 100% of UK GDP

  • Fortis leverage ratio of 30x, equivalent to 300% Belgium GDP

Add to this the OFF-BALANCE items: special purpose vehicles, structured products,...only some billions more!?

Central banks now also entered this market and will buy unsecured debt instruments in order to try to cure the problems caused by off balance sheet credit default derivative buying in the form of non-performing failed counterparty credit default derivatives. This toxic paper will be purchased to an infinite degree. As most of this garbage originates in the US, the Dollar is about to take the biggest hit.

This is how the shares of Bank shares have deflated since 2007 up to 2009.

click on the pic below to enlarge


Posted September 4, 2008

Bill Gross of Pimco calls for Monetization of the debt. Such an action is the prelude to hyperinflation.

U.S. Must Buy Assets to Prevent `Tsunami,' Gross Says (Update3)  By Jody Shenn

Sept. 4 (Bloomberg) -- The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund.

Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in commentary posted on the firm's Web site today.

``Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,'' Gross said. ``If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.''

Politicians and Banks cannot and will not allow a Run on the Banks!

"Safe yourself a run on the banks. Your savings will be (hyper)inflated anywhere they are, under your mattress, in a safe or on a deposit account. What we are to live, will be the end of Fiat Paper money".

Welcome to the 21st century Weimar revolution: Ironically, in the EU Bank guarantees for customers deposits have become a marketing joke! As there are no restraints on the creation of fiat paper money, why then would authorities and the banks make their life more complicated than it already is? With the blip of a computer, they can create as much money as they want at any time they need it.

In order to keep the system alive, Money was and is given away for nothing: the problem however is NOT liquidity, it is INSOLVENCY! We are about to see a fiat currency  graveyard and what the authorities do now in order to save the system will make it all worse. Don't accept they will admit the Banks have the slightest problem: a run on the banks would be disastrous!

Quantitative easing: The open affirmation that the EU will cover 'all bank deposits and even commercial bonds' is a clear indication that a Weimar/Zimbabwe style hyperinflation sits just around the corner.

Banking is GLOBAL. All Western banks use Fractional Reserve Banking and suffer from similar problems. We think it is better to AVOID the sector all together and only consider it again once the system has been cleansed.

Wells Fargo and the Stress Test are nothing but a big joke. One day all banks are in trouble and need to be bailed out [or taken over]. Next day they publish "excellent figures" and stand the stress test. One has to be an idiot to believe these stories.


I am amazed to see all this so-called experts who zoom in on every short-term optimism while explaining away the reality.  What we are going to see, won't be a walk through the park.

  • Earnings will melt down

  • We shall see hundreds of bank failures over the next years (July 2009 we had 55 in the USA)

  • Even more Hedge funds will blow up

  • Brace for soaring corporate defaults and a growing junk bond market.

  • The Real Estate bubble will continue to deflate.

  • The Dow Jones will fall to 10,000 and lower

  • Somewhere down the line, we shall see hyperinflation, soaring interest rates and a global depression.

  • We expect 15 million foreclosures by 2016 and several defaults by US cities

  • We expect to see a pension crisis

  • Brace for further bankruptcies and/or bailouts for banks, airlines (Alitalia) and autos (GM)

  • One can almost guarantee that soon, Gold, Oil, Silver and inflation will be at new highs and the Dollar at new lows.

Good luck!     September 2008

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