Global stock market crash in progress

[financeguy]

Meredith Whitney, who is usually right, is saying don't buy financial stocks:

Meredith Whitney told CNBC in May that investors should "avoid financials at all costs," primarily because of the financial reform bill. But she said Tuesday that a bigger worry now is the revenue shortfalls caused by the still weak housing market and by a lack of deals on Wall Street. For that reason, she still expects financial stocks to do poorly.

In Europe, stress tests designed to measure the strength of bank balance sheets "were arguably negotiated," and didn't address the fact European banks are sitting on a lot of overvalued sovereign debt, Whitney said.

 

[Achtung11]

Why was Jamie Dimon not called to explain why he suddenly issued margin calls to Lehaman , causing it to fall, and essentially, Bear Stearns, who they ( JP Morgan ) "bought" for pennies on the dollar. Essentially wiping out the biggest competition. He should have been called.

The reason JP Morgan issued margin calls on Lehman was because, as per their derivative contracts, Lehman was under-collateralized by approximately $6 billion.

In retrospect, Bear Stearns has proved to be very profitable for JPM, so in that way, yes, they did buy them for a cheap price, but whats your point?

They paid a lot more then they could, and should, have. The deal was originally supposed to be $2/share, but because of shareholder revolts they agreed to pay $10/share. I think they should have forced $2, maybe even $1, or $.05/share.

 

[Achtung11]

Meredith Whitney, who is usually right, is saying don't buy financial stocks:

While she did make some great calls on the downfall of some of the big banks, there have been numerous times when she's been wrong. For example, I think she said Wells Fargo and American Express under $20/share were no good. Now WFC is $25 and AXP is $40.

I personally don't listen to her, or any analyst, for that matter. She may very well be right that the banking industry as a whole hasn't stabilized yet, etc., but I try to focus on the earnings power of individual companies and I find that is much more efficient and profitable.

In terms of earnings power, WFC is going to emerge out of this crisis much more powerful then ever. The financial crisis has net-net probably benefited WFC, more than hurt them. They acquired a huge banking operation, Wachovia, at an incredible price, and as our economy becomes stronger and housing comes out of the shit hole, they will reap some hefty rewards.

 

[AliEnvy]

Meredith Whitney, who is usually right, is saying don't buy financial stocks:

She may very well be right that the banking industry as a whole hasn't stabilized yet, etc.,

ForclosureGate. Here we go again.

I swear to God Almighty: Mortgage Backed Securities are America’s Herpes—the gift that keeps on oozing.

Last Friday, Bank of America announced that it was suspending all foreclosure proceedings, presumably until further notice. Other banks have already suspended foreclosures in a whole truckload of states. A nationwide moratorium on foreclosures might soon happen—which would be a big deal: Global Financial Crisis, Part II—Longer, Wider and Uncut.

So this is what happened, more or less—the short version:

In the crazed frenzy to get as many mortgages securitized during the Oughts, banks took shortcuts with the paperwork necessary for the Mortgage Backed Securities. The reason was because everyone in the chain of this securitization mania got a little piece of the action—a little slice of the MBS pie in the shape of commissions.

So in the name of “improved efficiencies” (and how many horror stories are we finding out, carried out in the name of “improved efficiencies”), banks digitized the mortgage notes—they didn’t physically endorse them, like they were supposed to by the various state and Federal laws.

Plus—once the wave of foreclosures broke, and the holes in this bureaucratic paperwork became evident and relevant—some of the big law firms handling the foreclosures for the banks started doing some document fabrication and signature forgery, in order to cover up the mistakes—which is definitely illegal.

Long story short (since this is the short version): A lot of the foreclosed properties might not have been foreclosed legally. The people evicted might still have a right to their old houses. The new buyers might not actually own the REO’s they bought off the banks. The banks could be on the hook for trillions of dollars, and in the sights of literally millions of lawsuits.

In short: This could become another massive oozing sore, complete with yellow-green pus drip-drip-dripping out of some unmentionable places on the Body Economic.

Gonzalo Lira: The Second Leg Down of America’s Death Spiral