Friday, July 17, 2009
Economic melt down II
This is banker beaver (killing two beavers with one stone so to speak)
I was watching the Frontline program on the financial crisis of 08. Then was reading the great news from Bank of America and Citi. I think you want to keep a close eye on those two companies. While both posted record profits as of late you need to dig a little deeper to see the storm brewing. Citi just made it's big profits by selling off Smith Barney. A good move but there are still underlying factors at work there that still make Citi a bad investment. One is that they still haven't dealt with the underlying problem they face those bad loans and defaults in the credit markets. I see where housing starts have surged ahead as builders seem more confident. On the face of it that would be good news but I just read yesterday that foreclosures have also surged ahead. I haven't checked as of late about the supply of housing that's still on the books but around here I'm not seeing houses selling in short order and I live in one of the better markets.
Then ther's the 800lb Gorilla hiding in the wings that nobody talks about. That would be the Alt-A loans that are about ready to hit in force come fall and early next year. And if you think the sub-prime thing was a mess you ain't seen nothin yet. So as I said keep your eyes peeled on BofA because they have their tentacles in so many parts of American business. They are the largest bank in the U.S. and if they fail they could well bring the whole thing crashing down.
All I can say is Obama must have a real love for crisis management because we know McCain could never have been able to handle this and god forbid Palin ever got her hands on the reigns. Just be a good girl and keep catchin the fish.