Monday, May 24, 2010

Bearish News Weighing Heavily

The markets got sold hard in the last few minutes today and are down hard overnight.

Some news items that could have impacted stock prices since right before the close today –

Spanish Banks
Spain has a network of enormous savings banks. These banks are run by local politicians and dole out money to their cronies. As one can imagine, these banks ended up making ill-advised loans and are now going insolvent.

Spain took over one this weekend with something like $16 billion in assets. Tonight, 4 others are merging in some sort of bailout. This new bank will have $135 billion in assets!

http://www.nytimes.com/2010/05/25/business/global/25peseta.html?src=busln

The German banks are the least capitalized banks in Euro. Are they next?

Congress
The Collins Amendment to the Financial Reform bill would remove Preferred Bank Stock from Tier One Capital. This asset class represents 13% of the assets for Citibank, B of A, JPM Chase and Wells Fargo (over $108 billion).

This amendment would destroy the banking system in one shot, because so many little banks have loaded with this stuff on their balance sheets. I know I wrote about this in late 2008, because the truth was that if any of the large banks went under, they would take down a huge block of small banks whose balance sheets were loaded up with the Preferred Shares.

Who are these idiots running our country? Can’t they read a 10-K or a Balance Sheet?

http://www.zerohedge.com/article/collins-amendment-will-eliminate-108-billion-bank-holdco-regulatory-capital-will-reduce-big-

They now want to quadruple the tax on a barrel of oil.

http://www.breitbart.com/article.php?id=D9FTDV7O1&show_article=1

They also are proposing having the US Taxpayer bail out Union pension Plans to the tune of $165 billion. It is bad enough that we just got stuck with their Healthcare expenses…

http://www.foxbusiness.com/personal-finance/2010/05/24/lawmaker-introduces-b-union-pension-bailout/

California wants to raise taxes by $4.9 billion.

http://www.reuters.com/assets/print?aid=USN2427330520100524

Korea
Kim Jung II is threatening war.


http://globaleconomicanalysis.blogspot.com/

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