Financial Time Bombs Keep Ticking

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from Minyanville:



Financial Time Bombs Keep Ticking
Minyanville Staff Nov 30, 2009 8:40 am


Editor's Note: This article was written by Richard Suttmeier, chief market strategist at ValuEngine.com, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.


As I continue to dig deeper into the FDIC Quarterly Banking Profile, there are many ticking time bombs as many loan categories continue to deteriorate and no one knows the risks embedded in the $206.4 trillion in notional amount of derivative contracts. This is a new high for this category and is up 16.5% year over year. How many more $60 to $80 billion Dubai Bombs are there, and which US banks are exposed?

On Thanksgiving, investors around the world sold riskier assets, as the dollar stabilized and equities sold off. The situation stabilized over the weekend as the United Arab Emirates central bank provides additional liquidity to banks and branches to the Dubai area.

The dollar carry trade may still be alive, but losing members, as copper and crude oil lag. Most notably is the fact that crude oil has had a lower high in each of the last six weeks. Equities are weakening in a totem pole from the SOX as weakest at the bottom to the Dow as strongest at the top.

Now there's a report that finally agrees with my theme first presented in April 2006. The inspectors general of the US Treasury and Federal Reserve have criticized these banking regulators for being too slow to react to risky lending and should have been on top of the growing overexposures of the commercial real estate loans. Bank examiners looked the other way instead of following their own regulation with regard to exposures to C&D and CRE loans The FDIC has seized 124 banks so far in 2009 -- the most since 1992 -- leaving the Deposit Insurance Fund with an $8.2 billion deficit at the end of the third quarter and an estimated $10.4 billion at the end of November. ........(more)

The complete piece is at: http://www.minyanville.com/articles/dubai-fannie-overexposures-FDIC-banks-homeowners-homes-mortgages-dow-conservatorship-Suttmeier-notional-credit/index/a/25659