The headline consensus on Wall Street is that the banks are stable and no markets are melting down. In short, things are returning to normal.

But we've seen a $1.5 trillion reduction in consumer credit during the past 18 months, and another $1 trillion (at least) is likely to be pulled back in the coming year, according to uber-analyst Meredith Whitney -- someone I wouldn't bet against. And almost no one is getting a home equity line.

Continue reading Lie #6: The Credit Crunch Is Easing

Lie #6: The Credit Crunch Is Easing originally appeared on BloggingStocks on Sun, 27 Dec 2009 08:00:00 EST. Please see our terms for use of feeds.

Consumer borrowing fell for the eighth straight month in September. This record-setting streak is due largely to tightening by lenders, unemployment and the conservative preference to pay down debt rather than spend. This widespread fit of fiscal responsibility, economists fret, could prevent a recovery from taking root, since consumer spending is responsible for 70% of the U.S. economy. This conventional thinking, of course, overlooks the fact that an eventual increase in spending that isn't fueled by consumer spending will yield a recovery that's more likely to last.

According to the Federal Reserve, borrowing fell at an annual rate of $14.8 billion in September -- it's biggest drop since July and much larger than the $10 billion predicted by economists. The behavior is exactly what you'd find in people worried about losing their jobs or focused on rebuilding safety funds and investment portfolios. Those who want to borrow are finding banks won't be complicit this time, as they clamp down on lending practices.

Continue reading Consumer spending falls victim to debt repayment

Consumer spending falls victim to debt repayment originally appeared on BloggingStocks on Sat, 07 Nov 2009 11:20:00 EST. Please see our terms for use of feeds.

What happens when a bank has to accept the collateral posted for loans? Well, in Russia, it's like the punchline to a bad Yakov Smirnoff joke. "In Russia, when a bank takes collateral, it has to set up a pigpen!"

Well, this is exactly what happened to Alexander Lebedev's OAO National Reserve Bank. It wound up with 40,450 of them. As Russian banks are coping with the financial crisis, they are finding themselves with a variety of hard goods that they never expected to receive.

Continue reading Pigs and panties: Russian banks stuck with unexpected collateral

Pigs and panties: Russian banks stuck with unexpected collateral originally appeared on BloggingStocks on Tue, 27 Oct 2009 13:40:00 EST. Please see our terms for use of feeds.

Continue reading Do bond yields hint at another credit crisis?

Do bond yields hint at another credit crisis? originally appeared on BloggingStocks on Mon, 01 Jun 2009 14:40:00 EST. Please see our terms for use of feeds.

Wells Fargo

Continue reading Wells Fargo issues an early earnings surprise, boosting the market

Wells Fargo issues an early earnings surprise, boosting the market originally appeared on BloggingStocks on Thu, 09 Apr 2009 09:00:00 EST. Please see our terms for use of feeds.

Continue reading Doomsday Scenario: Craig's List is another nail in the news coffin

Doomsday Scenario: Craig's List is another nail in the news coffin originally appeared on BloggingStocks on Tue, 07 Apr 2009 17:06:00 EST. Please see our terms for use of feeds.

Continue reading Just call it U.S. Government AIG

Just call it U.S. Government AIG originally appeared on BloggingStocks on Fri, 06 Mar 2009 13:30:00 EST. Please see our terms for use of feeds.

Continue reading MBIA reports a Q4 loss thanks to mortgage problems

MBIA reports a Q4 loss thanks to mortgage problems originally appeared on BloggingStocks on Tue, 03 Mar 2009 11:00:00 EST. Please see our terms for use of feeds.

Continue reading John Deere: How bumpy a ride?

John Deere: How bumpy a ride? originally appeared on BloggingStocks on Mon, 16 Feb 2009 10:00:00 EST. Please see our terms for use of feeds.

Looking at the jobs and retail landscapes, it would make sense to assume that consumers are slow in paying credit card bills. In some cases, they are not paying at all.

The actual trends are getting much worse, and banks with consumer credit exposure may be in for a rougher time than expected. According to Reuters, one credit rating agency is getting more business. The news service reports, "And more lenders are requesting an Equifax product called 'bankruptcy scores' that expresses the probability that an individual will be bankrupt over the next one to two years."

Continue reading New credit card data bad for American Express and banks

New credit card data bad for American Express and banks originally appeared on BloggingStocks on Sat, 07 Feb 2009 12:10:00 EST. Please see our terms for use of feeds.

Continue reading Construction spending in 2008 falls by record amount

Construction spending in 2008 falls by record amount originally appeared on BloggingStocks on Mon, 02 Feb 2009 13:16:00 EST. Please see our terms for use of feeds.

Yes, you may hear that the corporate bond market is breathing again and the exotic "TED spread" -- the difference between T-Bill and LIBOR rates -- is shrinking, but no one is lending money to anyone and confidence is non-existent.

Recently the entire country of Spain (meaning Spanish national debt) was put on credit watch due to deteriorating economic conditions.

Remember, the Wall Street Crash of 1929 and the Great Depression (I am not forecasting either one, by the way) started at a medium-sized bank in Austria, not on Wall Street or in London.

Credit markets are not only frozen because we don't know what is on the banks' balance sheets; they are also frozen because banks are repairing their own balance sheets by hoarding capital.

Be sure to read all 7 reasons the stock market isn't going up any time soon.

Michael Shulman is a contributor to OptionsZone.com.

Seven reasons the market is not going up any time soon: #3 Credit markets remain frozen originally appeared on BloggingStocks on Sun, 25 Jan 2009 16:00:00 EST. Please see our terms for use of feeds.

The banks are a wreck and now the pieces are beginning to fly apart, with Citigroup (NYSE: C) struggling the most and beginning to dismember itself.

Meredith Whitney, the uber-analyst who has been right about everything in banking for more than two years, said there were $2.4 trillion in asset downgrades at the end of last year by the credit agencies. This will really whack the banks' critical Tier 1 capital.

And even if you forget earnings problems, the banks will continue to have no money to lend, which will strangle businesses and the economy.

Be sure to read all 7 reasons the stock market isn't going up any time soon.

Michael Shulman is a contributor to OptionsZone.com.

Seven reasons the market is not going up any time soon: #4 The banks are falling apart originally appeared on BloggingStocks on Sun, 25 Jan 2009 12:00:00 EST. Please see our terms for use of feeds.

Almost everyone who can get a quote in the newspaper or five minutes on TV has a solution to the global economic meltdown. These range from more financial regulation to stimulation of housing to government programs to create new jobs.

The head of the IMF put all of that into context with his opinion that spending by nations around the world to help get it out of a deeper and deeper recession has not been nearly enough. According to Reuters, "The IMF has called for fiscal stimulus -- higher government spending and temporary tax cuts -- worth $120 trillion, or 2 percent of global annual economic output, to fill the gap caused by slumping private demand following the credit crunch."

The view is, to a large extent, mirrored by the plan Obama has suggested. Spend money now even if it puts the government into a huge debt hole. But, does it make any sense?

Continue reading Putting $120 trillion into the global economy?

Putting $120 trillion into the global economy? originally appeared on BloggingStocks on Sun, 21 Dec 2008 15:10:00 EST. Please see our terms for use of feeds.

Recent studies indicate that in spite of popular thinking, there is no credit crunch.

Bank credit and bank lending are at all time highs. Companies with good balance sheets are having no problem in obtaining credit. The Libor Rate, which is a measure of lending activity, is down to 2%. Even economists at the Federal Reserve are baffled by widespread comments that the U.S. is having a credit crunch.

According to reports on the credit situation, it was only a few banks that got overextended and got into trouble, which then triggered the huge bailouts we have seen.

Now where do we go from here? There should be some kind of investigation as to the number of banks and which banks caused this mess. These bankers should be identified and asked to step down immediately. We no longer can tolerate such obvious misdeeds.

Credit crunch: Why not tell the truth? originally appeared on BloggingStocks on Fri, 12 Dec 2008 10:45:00 EST. Please see our terms for use of feeds.

Continue reading GAO says Fed, Treasury have authority to rescue Big 3

GAO says Fed, Treasury have authority to rescue Big 3 originally appeared on BloggingStocks on Thu, 04 Dec 2008 14:17:00 EST. Please see our terms for use of feeds.

Continue reading No bids for Port Authority of NY/NJ bond offering shows credit crisis far from over

No bids for Port Authority of NY/NJ bond offering shows credit crisis far from over originally appeared on BloggingStocks on Wed, 03 Dec 2008 17:34:00 EST. Please see our terms for use of feeds.

Last week, Bank of Montreal (NYSE: BMO), one of Canada's oldest and largest banks, reported growth in its fiscal fourth-quarter earnings. But it may be the only one that does, as at least two of the Canadian banks scheduled to report fourth-quarter numbers this week have already released preliminary results that warn of lower earnings due to debt write-downs and trading losses.

Analysts surveyed by Thomson Reuters expect Toronto-based Canadian Imperial Bank of Commerce (NYSE: CM) to post earnings 42.6% lower than a year ago, or $1.28 per share. CIBC beat estimates by a penny in the third quarter, but missed by a penny in the period before that. The bank faces a class-action lawsuit related to investments in collateralized debt obligations consisting of U.S. subprime mortgages. Shares have climbed 20.7% from a recent 52-week low of $39.52, but are down 37.8% in the past three months.

Toronto Dominion Bank (NYSE: TD), Bank of Nova Scotia (NYSE: BNS), and Royal Bank of Canada (NYSE: RY) are expected to report more modest earnings declines of $1.01 per share, $0.73 per share, and $0.83 per share, respectively. All three Toronto-based banks topped estimates in the third quarter. Toronto Dominion and RBC have recently announced plans to offer shares in order to raise capital. Toronto Dominion and Scotiabank have been trading near 52-week lows, and their share prices are down around 39% in the past three months. But only Toronto Dominion has a consensus buy recommendation from analysts.

Continue reading The week in preview: Canadian banks, homebuilders, Sears and food producers

The week in preview: Canadian banks, homebuilders, Sears and food producers originally appeared on BloggingStocks on Sun, 30 Nov 2008 12:30:00 EST. Please see our terms for use of feeds.

Continue reading Boeing, Airbus may end up 'storing' 200 new planes in the desert

Boeing, Airbus may end up 'storing' 200 new planes in the desert originally appeared on BloggingStocks on Wed, 12 Nov 2008 17:25:00 EST. Please see our terms for use of feeds.

Yesterday's election marks the end of a string of economy-destroying ideas that stretch back to 1980. America rejected the idea that it's right to run a government of the rich for the rich. It figured out that when you cut taxes for the top 1%, run record deficits, double the national debt, and eliminate regulation, you don't get trickle down, you get meltdown. Barack Obama's election means that these ideas are history.

What will replace them? Obama has already discussed economic stimulus, middle class tax cuts, mortgage modification, a moratorium on foreclosures, infrastructure spending, wider health care coverage, and investment in alternative energy.

But the 43rd president left Obama with a challenge -- to figure out the underlying problems with the current financial system and rebuild it in a way that will work in the short and longer term. Obama must come up with new ideas on which to rebuild the crumbling ruins he's inheriting.

To do that, he will create a team of experts from both parties. That team should analyze the sources of the problems that beset the economy and financial system. And it must agree on principles which can be used to craft legislation that will rebuild the financial system. As I've posted, I believe what they'll find is the need to create a system that ends securitization. limits leverage, delivers transparency, ties compensation not to deal size but to long-term profitability, and builds firewalls between markets around the world.

Continue reading President Obama and the economy

President Obama and the economy originally appeared on BloggingStocks on Wed, 05 Nov 2008 10:30:00 EST. Please see our terms for use of feeds.