From ‘De Telegraaf’ newspaper in Amsterdam, Holland today we have this (rough translation from Dutch)
Fortis expects within the next few days to weeks to complete the collapse of the US financial markets. That explains the bank insurers interventions of the series Thursday at dealing with 8 Billion Euors. "We are ready at the last minute. It goes in the United States much worse than thought", said Fortis Chairman Maurice Lippens, who maintains that CEO Votron to live. Fortis expects bankruptcies among 6000 US banks that now lack coverage. "But Citigroup, General Motors, there begins a complete meltdown in the United States"
Well, now there is something to make the Sunday morning breakfast scary. We expect that there will be bankruptcies among banks and other financial institutions in the months ahead, let’s hope it is not as bad as Fortis is expecting. But, one can’t live with their head in the sand. Problems are numerous in the US financial sectors and anything is possible.
As I wrote recently, the markets are trading as if there is something very ominous about to happen. The "big shoe" is about to drop somewhere. Will it be a bank, brokerage, or some other financial institution? We can’t say, but confidence in anything related to the US financial system appears to be evaporating. Who will be the first to report they need more capital this week?
XLF (multi year chart)
Bank Index - BKX (multi year chart)
Broker / Dealer Index (XBD) - multi year chart
The market remains oversold with respect to technical indicators, a bounce can not be ruled out due to the oversold nature of these indicators, however the pessimism remains quite high and that may have more of an impact than anything at this time.
It was said by one financial analyst a few months ago (our long time readers know who we are talking about) that he viewed financial stocks as a "generational buy". Unfortunately, my view is that the markets as a whole may be in a "generation shift" from bull market to a completely different reality for a long time to come.
More later…
5 Comments
June 29th, 2008 at 6:15 pm
You guys know Dutch?
June 29th, 2008 at 6:18 pm
It looks like all sectors in the U.S. have started to roll over except the XLE. I just cannot see this sector holding up much longer and when this sells off its going to drive the overall market down further, and then I think we will get the bounce (bear market rally). Just my 2 cents.
June 29th, 2008 at 6:26 pm
Great work Chuck (and Lisa).
We will see what the EOQ trade looks like tomorrow. Will we see more of the “dump the winners” as window dressing?
(I was thinking about adding a little more AU/AG and perhaps some SFK on the next dip). .
June 29th, 2008 at 9:46 pm
Scary. Yes there are major problems in the US financial system. But USÁs $11 trillion GNP is about 30% of the world. It is not in any country’s, in the free world, to see a collaspe in the USA banking system. Everyone suffers greatly.
When push comes to shove, the world banking system will likely come together and support the US dollar and banks.
I expect the big event will be intervention by the FED and other central banks to support the dollar. This will send oil prices and interest rates lower.
When everyone seems to anticipate the depression, then its not likely to occur.
June 29th, 2008 at 11:32 pm
Please, please, please, more intervention from the FED so I can set up all my shorts again.
The faster the markets adjust without intervention the faster we can move fwd.
The FED and all the world bankers can’t fix the problems that they made in the first place.