Skip to comments.Pop & Lock, Fool
Posted on 03/16/2013 1:13:58 AM PDT by Kaslin
So, maybe now banks will begin to lend money after getting the green light from the Federal Reserve to plow a bunch of dough into share buy backs and dividend hikes. Only two banks, Ally (yes the one that seems to have the most ads on television) and BBT (had to resubmit its documents to the Fed, which may have been the reason it failed based on a qualitative assessment, yet they did hike the dividend) fail the so-called Stress Test. Many say the test was too easy with respect to capital ratios and loses anticipated in the event of disaster.
I'm not sure if the Fed used super computers or took wild guesses, but I can say right now nobody involved ever took Psychology 101. If there was a classic meltdown, the American public would have to come to the rescue again. Yes, too big to fail only became more problematic as the bigger banks have only increased in size and risk to the general public. I think the government was more concerned with finding ways to siphon money from banks than anything else.
Of course, that's the same story with all the mean industries.
Here's the scenario over nine quarters ending in 4Q14:
> Stock market plunges 50%
> Housing freefalls 20%
> Banks losses mount to $462 billion
But, all would be well, there would be mild runs by depositors, but those institutions would hold like pillars.
Yeah ... right!
There would be mass chaos and blood on the street. Heck, in 2008, the Fed funneled $1.2 trillion in loans to banks on the sly and only came clean after losing a court decision. The banks would crumble under a repeat of 2008-2009.
It's too soon to worry about the banks failing, but that stress test is bogus, and after they finish lavishing themselves with billions in stock buybacks and dividend hikes, we might get some lending to Main Street. Perhaps, as that needle moves, we could then start to watch the building of a feeding frenzy.
This whole thing was an exercise in blowing smoke, and I don't think the public is buying it. Sure, we'll all play the game and act stupid or suspend disbelief for the sake of not missing out the run up that would have to proceed such a devastating correction (think Dow 16,000), but do us a favor and stop the games and lend some money!
Okay ... Maybe the Apocalypse is near
I know they've been around for a couple of years, but this spring they will be everywhere- open toe boots!
As Sherriff Bufford T Justice might ask: "What in the hell is going on here?"
This is the most contradictory clothing item this side of the sleeveless turtleneck. But brace for it if you live in a major city or anywhere Kim Kardashian has fans.
Ironically, I can handle that odd fashion statement. But, a piece in the Wall Street Journal yesterday said the popped collar is back. True, they had a photo of a guy in pink sneakers modeling the look, which makes me think it could be much ado about nothing but ... there are signs of frothiness that are reflected outside the market, and the popped collar look is when I begin to think about doubling up on gold. We'll see what happens; maybe I'm jumping the gun.
In either case, I now know how market bears and basic naysayers feel.
It just doesn't seem right and offends the sensibilities. But, the stock market rally keeps rolling on and doing so without a hint of mass hysteria. I know a lot of people are applying good old common sense to this thing and can't seem to make it work. Something just isn't right. Well, I still think the rally is real even if I'm among the multitude itching for a pullback. I still think the greatest risk to the rally is the US economy, which the pros say is driving this puppy (Yes, the same pros that were previously bears or agnostics).
For now, the market is clearly determined to move higher, so if you hate it, get out of the way. I for one will be hard pressed not to smack the neck of any dude with his collar popped and hope I don't step on any toes this spring.
But logic and reason dictates that the current monopoly game economy based on the buying and selling of debt will fail.
Production produces wealth.
debt and gambling produces nothing but more burden on the producers
almost took a job with ally a couple years ago recruiting loan officers and such. six figures, if you can believe it. was in pennsylvania though.
Central planning always fails. The simple rule of thumb in RE is for every 1% rise in interest rates you need to reduce the price of the house by 10% to keep the same payment.
What happens to RE prices when interest rates rise?
The stock market when QE ends?
The response of the banker elites who run America is to keep pumping financial barbituates in an already exhasted athlete. Had they simply allowed a wildfire or a rest the economy would have recovered.
For those who haven’t figured it out:
Ally Bank is the morphing of General Motors Acceptance Corp into Ally Bank. In the process of stealing General Motors from bond holders, stock holders, lenders, vendors and others, Obama created ‘Ally Bank’ with the assets of GMAC.
Many millions of USA citizens—including me—bought our GM vehicles using GMAC for our lender of choice.