Whalen: Q4 “Going to Be a Bank Bloodbath”
Why is liquidity going into the financial sector? It’s because the real economy is dying [and] everyone is fleeing into the stocks and bonds because they’re liquid at the moment,” Whalen says. “That’s not a good sign.”
The banking sector’s assets shrunk by about $300 billion per quarter in the first half of 2009, a sign of banks hoarding cash in anticipation of additional future losses, according to Whalen. “The real economy is shrinking because of a lack of credit.”
The shrinkage will continue into 2010, Whalen predicts, suggesting the banking sector hasn’t yet seen the peak in loan losses. Institutional Risk Analytics forecasts the FDIC will ultimately need $300 billion to $400 billion to recoup losses to its bank insurance fund. (In other words, the $45 billion the FDIC sought to raise last week by asking banks to prepay fees is just a drop in the bucket.)
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October 6th, 2009 at 2:55 pm
Awfully mild mannered to have such a radical message.
October 6th, 2009 at 3:00 pm
Hope you’re right Chris, those criminals have gamed the system pretty well so far. Without mark-t0-market how can we possibly prevent them simply lying their ass off for years?
October 6th, 2009 at 3:40 pm
I hope (and believe) you’re right Chris. Q3 numbers will be VERY interesting, and could very well lead to continued run up in bank shares if the news is “less bad”.
October 7th, 2009 at 12:37 am
The salient point in the video is that money has no place to go but the equity market. This is further confirmation that we have a liquidity rally because people and institutions must put money somewhere.
October 7th, 2009 at 5:26 pm
[...] Whalen, from Institutional Risk Analytics, offers a must see interview (courtesy of the Big Picture) on where the banking industry is today and what the next 15 months [...]