US investment bank fears!

Just read the news from yahoo, and the title said, "Analysts Suggest New Investment Bank Writedowns of More Than $10 Billion Are Coming Soon"

Well, it seems to me the bad mortgage debt do hurt some degree of the sector!

do you think so?

propro1234 said:

Just read the news from yahoo, and the title said, "Analysts Suggest New Investment Bank Writedowns of More Than $10 Billion Are Coming Soon"

Well, it seems to me the bad mortgage debt do hurt some degree of the sector!

do you think so?

Click to expand...

Well that is small change, the Fed Reserve put in 41 Billion Thursday to prop them up and some analysts say that too is chicken feed and wont' help either

All of the financial sector is best avoided until this sub-prime problem works itself out. This may take up to 3 years.

The small Mortgage Bank in the U.K., Northern Rock has now borrowed A$54 billion from the Bank of England and this is expected to rise to A$85 billion by the end of the year. This works out at A$1,600 for every citizen in the U.K.
Barclays Bank stock hit a 2.5 year low as rumours of liquidity problems hit the markets. Mortgage Banks Alliance & Leicester and Bradford & Bingley are also having problems.

U.S. writedowns may well hit US$1 trillion before the mess is finally sorted.

Can we really believe that Aussie Financial Institutions have no problems...?

Part of a thread posted in Imminent and Severe Market Correction yesterday.

"The Fed pumped $41 billion into the financial system yesterday…and that’s
probably a terrible thing.

The Fed does not toss out $41 billion lifelines unless someone is actually
drowning. And if our suspicions are correct, a few big financial institutions
might be at risk of slipping under the waves.

As detailed in several recent editions of the Rude Awakening – (in
particular, the October 26 edition, “SIV Positive“ and the October
17 edition “Bail Out Nation“) many large financial institutions are gazing
around desperately for lifelines, but the financial markets stubbornly refuse
to provide them.

The vast community of investors worldwide is refusing to finance mortgage-
backed-securities of any size or description or credit-rating. That’s why the
Federal Reserve is in bail-out mode. The Fed’s $41 billion of repo activity
yesterday was the largest such injection since September 2001 (think 9-11).
Tellingly, the Fed’s maneuver yesterday occurred amidst rumors that Citigroup
might cut its dividend to preserve capital. And – oh by the way – the Dow
tumbled 362 points on the back of a brand new interest rate cut that was
supposed to make everything all better.

But the rate cut did not make everything all better. It did not make anything
better…because it can’t. A rate cut cannot convert a defaulted subprime
mortgage into a valuable asset. It cannot convert a AAA-rated CDO full of
toxic, overpriced garbage into an actual AAA security…and most of all, a rate
cut cannot convert liars into truth-tellers.

We don’t know where all the liars might be; but we’re pretty sure that many
of them draw paychecks from the financial institutions that hold lots of
mortgage-backed securities. As the mortgage market proceeds from bad to worse
to catastrophe, we’re pretty sure that many officers of financial
institutions are not telling the whole truth and nothing but the truth about
the value of their mortgage-backed securities.

Rather than fessing up to massive mark-to-market losses, many finance
companies are resorting to desperate rescue plans of one sort or another.
Citigroup’s “crisis management” strategy, for example, seems to consist of
showing up on the Treasury Secretary’s doorstep with a bouquet, a box of
chocolates and puppy-dog eyes.

Secretary Paulson has responded with sympathy and billion-dollar rescue
plans. But these efforts cannot possibly replace the entire capital markets.
Not even the U.S. Treasury and the Fed combined can replace the capital
markets. (Some folks in Russia tried that tactic a few years back and it did
not work very well). For as long as Treasury and the big banks continue to
play “Hide the CDO,” the capital markets will remain on strike. As long as
governmental agencies and major finance companies collude to conceal the
fair-market value of mortgage-backed securities, the market for these
securities will continue to spiral toward disaster.

In this context, Citibank’s prospective dividend cut assumes a mock-heroic
stature. The dividend assumes a seeming importance much greater than its
actual importance. Citi’s dividend is more symbol than substance. Why?
Because Citigroup is probably facing a crisis far more serious than whether
to pay its shareholders 5.6% per year or 4.6% or zero percent. All totaled,
Citigroup dispenses almost $10 billion per year in dividends. So a modest
dividend cut would only yield two or three billion dollars. That’s real
money. But the big bank might need even “realer” money – the kind that only a
complete elimination of the dividend would yield.

Best case, Citibank will not be extending vast amounts of credit any time
soon, nor will Bank of America or Countrywide Financial or any other major
American lending institution. Worst case? Don’t even ask.

This is where the real problems begin.

Without fresh credit, what will become of the American consumer? How will the
American consumer continue to over-leverage himself? And what will become of
the American economy without millions of over-leveraged consumers?

Play is safe, dear investor. Play it safe. These are not the days that will
reward investment heroism."

sassa said:

Part of a thread posted in Imminent and Severe Market Correction yesterday.

"The Fed pumped $41 billion into the financial system yesterday…and that’s
probably a terrible thing.

Click to expand...

http://www.dailyreckoning.com.au/citigroup-bailout/2007/11/02/

Another article here as well.

I was a little surprised to see it yesterday as well.

Well, got gold anyone?

Something else that has popped up recently... still trying to interpret it me..
Cheers
.........Kauri

November 04: Marketwatch is predicting a rough ride ahead this week for Wall Street. Marketwatch states that the market will fall due to concern over poor earnings, oil heading to 100 dollars per barrel and more turmoil in the banking and broking industries. The article states that Citigroup will be at the centre of the turmoil on Monday after an emergency weekend board meeting reportedly ousted Citigroup CEO Charles Prince. The WSJ reported after the market closed on Friday that besides asking for Prince's resignation at the weekend emergency meeting, Citigroup may report further losses on Monday, reflecting continued declines in the value of some mortgage-linked securities since the third quarter ended Sept. 30, people familiar with the matter said.
The article also notes that "The SEC is reviewing how Citigroup accounted for certain off-balance-sheet transactions that are at the heart of a banking- industry rescue plan, according to people familiar with the matter. The review is looking at whether Citigroup appropriately accounted for 80 BLN USD in structured investment vehicles, or SIVs, these people said. SIVs are off- balance-sheet entities that have invested heavily in mortgage-backed securities. A plan pushed by Citigroup and other banks would set up a new "superconduit" to buy assets from SIVs."
Citigroup shares flew higher in after-hours trading and made back more than it lost when the WSJ originally reported that Prince was likely to resign at the emergency board meeting on Sunday. But that was before this second WSJ report.
The worsening state of quarterly results from Corporate America may pull stocks lower as well, with a 1.6% decline in earnings, down from a 1% decline last week,

Click to expand...

Just breaking now via WSJ...
Cheers
.........Kauri

Citigroup to Take 8 to 11 BLN USD In Additional Writedowns- WSJ

Click to expand...

Kauri said:

Just breaking now via WSJ...
Cheers
.........Kauri

Click to expand...

So the truth is finally coming out or appears to be.Citigroup's Prince made misleading statements at 3rd.Q reporting by saying that the 4th.Q would be back to .....There are plenty of reports on financial sites today about the misleading of the markets.Here is one link.
http://money.cnn.com/2007/11/03/news/newsmakers/Citi_Prince.fortune/index.htm
No wonder our market is falling again.What other institutions have to report further bad news that wasn't forecast in their 3rd.Q results?

Rumours that U.K's Alliance & Leicester may be in a bit of strife...
Cheers
........Kauri

The homefront has a few obstacles to encounter yet .

Credit growth here at home is nearing 16% , this surely has the Reserve Bank well behind the inflation curve , with ore prices already in a frenzy , the result I see is 25 basis point rise now and another to follow , or they could bite the bullet and go the whole hog and jump straight into a 50 basis point hike . That's too scary a contemplation , so I'm deferring to fear and hoping for a muted 25 point rise , in the feint hope that the board decides not to fill emergency wards with heart attack victims . In the meantime I expect the market to whipsaw until the shudders have been dealt with enough to restore some form of confidence , within the market sectors affected by interest rate changes .

sassa said:

So the truth is finally coming out or appears to be.Citigroup's Prince made misleading statements at 3rd.Q reporting by saying that the 4th.Q would be back to .....There are plenty of reports on financial sites today about the misleading of the markets.Here is one link.
http://money.cnn.com/2007/11/03/news/newsmakers/Citi_Prince.fortune/index.htm
No wonder our market is falling again.What other institutions have to report further bad news that wasn't forecast in their 3rd.Q results?

Click to expand...

They'll hide it as long as they can get away with it. Looks like time is running out a bit though. Markets are still nervous. If we get 2 or more big downgrades/write down announcements close together a bit of panic may set in again. I'll be ironing my shorts, ready to get them on when needed.

Not really anything to do with US banks but has ramifications none the less..?
Cheers
..........Kauri

November 07:

Comments made by a top Chinese adviser saying that China should diversify more
of their 1.4 TLN USD reserves into the Euro sparked a huge jump in the EUR/USD
from 1.4565 to 1.4665 in very quick time. The comments have weighed on the US
dollar across the board and helped push gold ever higher.

Click to expand...

Kauri said:

Not really anything to do with US banks but has ramifications none the less..?
Cheers
..........Kauri

November 07:

Click to expand...

I see...
Cheers
.........Kauri

November
07: The EUR/USD hit a fresh all-time high at 1.4665 and quickly retreated back
to 1.4620 in a very whippy fashion after Chinese official Chieng said his
comments were misinterpreted and that he didn"t mean that more Euro should be
purchased. Stops were triggered above 1.4600, 1.4625 and 1.4650 in the move
higher with most of the stops being option related.

Click to expand...

A video on subprime and investments banks
http://uk.youtube.com/watch?v=SJ_qK4g6ntM

Jim Rogers Interview on Bloomberg 2nd November 2007

Talks about the weak dollar etc.

Part 1 - http://www.liveleak.com/view?i=e68_1194351704

Part 2 - http://www.liveleak.com/view?i=a9e_1194352374

I love the last part when she asks Jim what he want the Fed to do going forward.

He says "If he was Ben Bernanke he would abolish the Fed and Resign. That would be the best thing for the country."

According to Mish Shedlock's analysis, Citigroup is effectively insolvent.

http://globaleconomicanalysis.blogspot.com/2007/11/citigroup-fighting-for-its-financial.html

of some interest..


http://www.contraryinvestorscafe.com/guest_article.php?id=125&aid=427

ac

This may be of interest to Etrade clients...

http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=ETFC:US&sid=a.6FztQryIRo

ETrade USA and ETrade Australia are different companies.

ETrade Australia is now owned by ANZ

It seems that liquidity is still needed... please excuse the "cut and paste".

Nov. 15. USD/JPY and JPY crosses have bounced sharply off their lows as stocks pared losses but the DJIA is still down 111 pts and this is capping any bounce with USD/JPY at 110.32 currently. Traders are paying more attention to the cash injections made by central banks today with the BoC making a second add this afternoon totaling $C1.57 bln into the financial system. Similarly, the Fed injected over $47 bln today and the largest since September 2001. Also, the Bank of England data showed that Northern Rock may have increased borrowings from the bank by GBP2 bln to over GBP25 bln in the week to Sept 14th. This is fuelling more risk aversion and the rumors of a spike in Libor rates tomorrow.
Also seen weighing on sentiment are the comments from Fed"s Hoenig which showed much more concern over the US economy.

Click to expand...

Every week we hear the same crap from the media. This is just poor journalistic reporting. There were NO new injections of money pumped into the system, what the $47 billion injected by the Fed represents are rollovers of repos of different durations. Repeat there is no new liquidity being added to the system. John Hussman of Hussman Funds explains it best. Below relates last week's so-called massive injection of liquidity.

Pump it up

Last week, the Associated Press reported: “The Federal Reserve pumped $41 billion into the U.S. financial system Thursday, the largest cash infusion since September 2001, to help companies get through a credit crunch… it was the largest single day of operations since $50.35 billion was pumped into the system on Sept. 19, 2001, following the terror strikes on New York and Washington. Since August, the Fed has been pumping cash into the financial system to help ease strains from the credit crunch.”

Wow. You can almost hear the pumps. That sounds like an impressive and calculated example of the Fed moving to intervene in order to ensure the solvency of our markets. Various reports said the injection was intended “to help stem the deepening crisis in the mortgage markets.” Some even suggested it was a “Citigroup bailout.”

The truth is that the entire $41 billion was nothing more than a predictable rollover of existing repurchases to maintain a stagnant $40-$45 billion pool of bank reserves – a pool that experiences almost no variation over time and has no material relationship with the volume of bank lending.

If you examine the NY Fed's releases on open market operations, you'll find that in fact, the Fed drained $1.5 billion in reserves on Thursday. Specifically, a total of $42.5 billion of temporary repurchase agreements came due on November 1, only $41 billion which were rolled over. The expiring repos were: a $5.5 billion 1-day repo from October 31, a $12 billion 2-day repo from October 30, a $19 billion 7-day repo from October 25, and a $6 billion 14-day repo from October 18. Those repos, in turn, were rollovers of prior repos, and so on.

Fed Open Market Operations: http://www.ny.frb.org/markets/openmarket.html
Total Discount Window Borrowings: http://research.stlouisfed.org/fred2/data/TOTBORR.txt
Total Bank Reserves: http://research.stlouisfed.org/fred2/data/TRARR.txt

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