Barney Frank is introducing his “too big to fail” bill this week, which will help assist the government to regulate and control the financial industry, it also empowers them to fire board members. Bank of America hit a snag this morning with its plan to pay back TARP. I guess it will cost a tad more than they thought. The stock looks broken to me.
Medicare fraud has replaced drug trafficking in South Florida, if you want to be in with the in crowd go set up an empty store front and get to work. Seems like a gret time to introduce a trillion dollar health care plan. Grifters and con men must have a bigger lobby on the Hill than I though.
Oil is hanging around $80 and the dollar is a bit week, it did after all uptick twice last week. We report GDP this week and that should indeed be an interesting data point to keep our eye on.
The financials are sending mixed signals and it will be interesting to see how they play out this week, State Street got hammered last week, but other names did well.
The banks have no incentive to lend. Most of them still have a significant amount of bad loans sitting on their books that they don’t want to recognize as nonperforming. If the banks recognize these bad loans, all the write-offs may force them into bankruptcy. Instead, they hope that over time renegotiated loan terms will eventually allow the borrowers to make their payments. This ordeal could last at least a decade if this cycle is similar to other crises, like Japan’s lost decade of the 1990s. As the fed funds rate goes to zero and existing loans in technical default continue to sit in bank portfolios, why should banks make new loans when they can make money for free with the government? There is no longer a stigma associated with borrowing from the Fed, so banks can earn a huge spread by borrowing virtually unlimited amounts for nothing and lending that same money back to the Treasury.
Around the Horn:
Capmark Financial Group as expected files for bankruptcy protection as speculated last week with total debts of $21B
– China should increase its reserves in euro and yen, and although it pointed out that the U.S. dollar should remain the principle reserve currency
– South Korea Q3 GDP exceeds expectations; YoY GDP positive for the first time in a year
***Looking Ahead:
– 8:30 (US) Sep Chicago Fed National Activity Index: No estimates v -0.9 prior
– 10:00 (UK) BoE reverse auction
– 10:30 (US) Dallas Fed National Activity Index: -0.5%e v -6.4% prior
– 11:30 (IS) Israeli Central Bank Base Rate Announcement: No change expected, current rate is 0.75%
– 13:00 (FR) French Sept Total Jobseekers (25.5K last), Jobseekers – Net change (18.1K last)
Earnings
Before the Open: ACV, AAWW, BOH, BWP, CRNT, CYOU, GLW, BGC, LO, MHP, MNRO, NOV, ONB, PVTB, RSH, ROC, ROP, SOHU, TLAB, VZ, WRI. After the Close: ALB, AFG, ARRS, BIDU, BLDP, COG, CF, CVTI, CR, DTG, DRYS, EPIQ, EXTR, FLEX, FELE, HGR, HMA, HTLF, HXL, PODD, ININ, IVAC, KRC, MAS, MTH, MSPD, OLN, OMI, PRE, PCL, PCH, RGA, RCII, SGMS, SLG, TCO, TGI, VFC, VECO, VRTX, WRB, WCN, WSH, WINN, WMS, ZRAN.