Monday, February 09, 2009
I just noticed that the several banks when under last Friday and I decided to go to the FDIC home page and get a total count for the year. While I was there I decided to look at other years failures to point out the trend and this is what I found
2007 1 lone failure
2008 24 failures
2009 9 already and its only Feb 9th
If this trend continues at only the average of 4.5 every month we could be heading for over twice last years failures, however if we go with the higher number of 1.5 banks a week so far this year we are looking at 78 failed banks.
From the existing 9 bank failures there is total cost to the FDIC of somewhere just over $1.2 Billion or $133 Million for each bank. Multiply that by 78 expected bank failures and the total losses for the FDIC would be about $10 billion which is actually not that high considering one of last years biggies like Indy Mac was estimated to cost the FDIC from between $4-8 billion alone.
Of course our 9 bank sample for this year is small and so far and does not reflect the presence of some of the larger banks that failed last year. My estimate for last year puts total cost to the FDIC at over 6.5 billion or 271 million per bank which extrapolated forward to our 78 bank target this year could put us at about $21 Billion.
NOTE, Last years numbers from the FDIC reports do not give an estimate FDIC cost for the WaMu failure, so real numbers could even be higher
So my quick and amateurish look at the FDIC liabilities for this year could range anywhere from about $10 billion to over $20 Billion.
I guess compared to TARP and the stimulus packages its pretty insignificant but it does show that FDIC will probably need a bailout next year if not later this year.
Just something else to consider.
One of the few high points in the last couple of weeks is the strength in metals and especially Silvers out performance of gold. I’m also happy to see a great bit of volatility in the silver Nymex stocks as well as what appears to a constant draw down. I think it’s going to take a few months to see if how supply/demand destruction is going to play out for the year but with recent deposits not keeping up with deliveries I think it’s looking good for silver holders and certainly offer incentives to make that one last big purchase while you can to both secure your own future but to crush the Nymex.
I did finally receive my First Majestic silver rounds and I was pleased with the rounds themselves and the packaging and shipping. Of course my pleasure was tempered by the difficulty I had with my first lost order and the subsequent snooty response when I wrote asking for confirmation immediately after placing the second order. The business rounds and the various small bars have sold out and been restocked several times now so it looks like they are getting their act in gear and moving a fair bit of bullion. I’d really like to know how much they’ve delivered.
The only smart thing I’ve seen recently is a program by Freddie Mac that will allow foreclosed home owners and existing renters in foreclosed properties to stay in their homes and rent. While I’ve not seen full details the plans numbers seem awfully low which would indicate that they either have far too stringent criteria for remaining in the houses or a far too optimistic estimate of how many houses will be in default this year, I suspect both!
I certainly home other lenders make similar plans to keep people in houses. I’ve been harping on this issue for 2 year at least and it makes sense to keep people in their houses for a number of reasons. It stops communities from becoming dysfunctional ghost towns, it keeps people off the street or from living in their cars, it is good for the banks to generate some cash flow rather than sit on an empty house for who knows how long, and finally it allows the house to retain more value than if it was left empty, unmaintained and potentially squatted in or vandalized.
Unemployment contiunes to excellerate in the U.S. while Canada took a sharp kick to the groin with 126,000 job loses in January, taking the market by surprise. So much for the claims of strong fundamentals and no threat to Canada. It's obvious we cant trust these shitheads who lead our country. Tweedledum 1 and Tweedledumer 2
There are a couple of must read articles from last week I would ask you to glance at that deal with the coming crisis rather than just reporting the current symptoms, Ambrose Evans-Prichard’s piece WILL CHINA LEAD THE WORLD INTO DEPRESSION Is quite an eye opener as was a SPIEGEL ONLINE article Can countries really go bankrupt
It seems pretty obvious to me that nearly every major country will be floating a stimulus package or 8 in the next year and with the exception of China they will need to do it on credit. China will be hoarding their reserves to either maintain their own stimulus plans or to buy up bargain basement resource assets. They will not have the desire, ability, nor the suicidal tendency to buy up all the western debt that will soon be offered on the market. The Gulf states income is down on soft oil prices and they've already been abused on their banking investments, so it's doubtful they will come riding to the rescue this time either.
Also, look at those yields! Why the hell would anybody buy debt at today’s interest rates? The U.S. having such low rates will have stiff competition from the Europeans, Canada, Australia, and a host of corporate paper that is offer extremely attractive yields in comparison. Also at such low yields you may as well buy metals since gov bonds will give you next to nothing and be backed by nothing. Metals offer no yield but are real and undilutable , I know which I would buy.
If Government debt cannot be sold the central banks will just deposit T-bills and issue money as pure monetized debt. This is scenario we’ve been dreading for years but knew would ultimately happen, straightforward devaluation of most major currencies and inflation. I think these bond offerings and their failure to be fully subscribed will be one of the most important issue this year. Watch the MSM ignore it totally!!!!!!
Can the U.S. dollar collapse? Some seem to think so .
As does Willem Buiter,
Marc Faber is also in the collapse camp as is Peter Schiff who in defending himself from recent criticisms reiterates his position that a USD index of 40 is likely which would be a 50% hair cut for the dollar
The important question is, how do you measure the value of your currency if all your major trading partners are following the same dangerous path of monetization and devaluation?
The Zimbabwe dollar looks like a piece of crap these days but if you compared it to the Hungarian pengő of 1946 you’d consider yourself lucky to be holding it. If all currencies monetize debt and print money the only firm measure of value has to be something you cannot forge or create more of at reckless rates such as gold, silver , less liquid assets like land, art, machines, or very hard to store assets like tons of grain or a million barrels of oil.
There is a lot of shit coming down the pipe these days and despite our financial preparations we cannot know exactly how things will unfurl or whether they will spurn civil unrest, revolution or wars.
When it comes down to it the things that are most important are shelter, food and personal safety of you and your family and in case you wish to broaden your horizons to another issue that may leave you hurting, have a look here
and if that tweaks your interest, there is also my take on personal food security.
I know I've been slow posting of late I seem to be having a crisis of faith. Its not that I don't believe what I'm saying but I am starting to believe that most people are not worthy of the warning or it's simply too late to save them. The Crisis is no longer off in the distance but right at our feet. I don't know exactly when the financial crisis,the food crisis or the energy crisis crests over us washing away the status quo but the time to warn and prepare people is surely fading.
I thank you for staying tuned and I hope you will make one last attempt to convince those around you to prepare, even if its just getting them to buy a little extra food for an "emergency". You don't need to frame it like the end of the world, rather simply remind them that Governments and FEMA suggest you do these things and considering what a crappy job FEMA does you should really take responsibility for your own security, food and otherwise.