Financial Giants Are Turning Into 'Zombie Banks': Whitney

The top US financial institutions have become zombie banks that will need a decade to adjust their businesses to the new realities in the industry, analyst Meredith Whitney told CNBC.

 

 

 

Dow Slumps at Opening, Down More Than 300 Points

Dow Falls Over 300 Points (Click for Story)...Wholesale Inventories Post Smallest Rise in Seven Months (Story Developing)

The Run On SocGen Begins? Bank Down 17% On Rumors It Is On The Verge

Following earlier news that French CDS hit a record high on a rumor of an imminent French downgrade, the bloodbath in financials, first started in Italy, with 3 consecutive halts in Intesa causing endless headaches for Italin investors, the red tide has now shifted over to France, where SocGen, three years after fooling the Chairsatan that the world was ending and pushing him to cut rates by an unprecedented 0.75% on what was a trader error, now succeeded in getting the chairsatan to extend  ZIRP for two years... And still that is not helping. SocGen was down 17%21% as recently as minutes ago, on a repeat rumor that SocGen is indeed on the verge of insolvency, and that it participated in an extraordinary meeting convened by Sarkozy this morning. We are following the story and will let you know if we see any halt in the relentless selling of the bank which is rapidly becoming the next Lehman. Elsewgere, BNP was down over 8%, and CA about -7.5%. "If credit default swaps on France are under attack that’s not a good sign,” said Yves Marcais, a sales trader at Global Equities in Paris. “That means that France is under attack and that’s worrisome. French banks hold a lot of French bonds." Translated: another vicious and quite toxic catch 22, stemming from the blow out in French CDS. When will they ever learn?

Italy Bank Update As Dow Jones Wipes Out Entire Post-FOMC Surge

Below is a a chart of Italian bank equity performance. Countrywide bank run next? Whether the reason for the sell off is due to a typoed GOFO 12M SocGen print or there is a fundamental reason, remains to be seen, but US equities are not taking the risk. US stocks have wiped out all of yesterday's last minute gains.

 

 

I Think We Will Test The July Lows Of Last Year, The S&P At 1,010. After That, Probably We’ll Get Probably A QE3 Announcement.

Admin at Marc Faber Blog - 3 hours ago

I think they did the right thing that they didn’t allow QE3. They can watch the reaction of assets, whether they will go lower. I think the market is more likely to move still lower. We are very oversold. We can have a rebound like we did today, maybe we’ll have a rebound next week or so, but in general I think we will test the July lows of last year, the S&P at 1,010. After that, probably we’ll get probably a QE3 announcement. - in Bloomberg *Related ETFs: SPDR S&P 500 ETF (NYSE:SPY), iShares MSCI Emerging Markets Indx (ETF) (NYSE:EEM), PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:... more » 

Goldman Goes Short The Dollar On QE3

Yesterday Goldman finally made it clear that Bill Dudley's marching orders are given: QE3 or no soup for you. Well, it didn't take long for the order from top to hit Goldman's FX desk, which has just issued this logical note: "Going short the USD on additional Fed easing." Odd, no easing has yet been announced, and according to so many none will come. But Goldman said so. So it must be.

Goldman Sachs: "QE3 Is Now Our Base Case"

While there is speculation whether today's historic announcement by the Fed in which it dated the beginning of the end of ZIRP, and in reality just the beginning of the beginning, is some form of shadow QE3, what is certain is that there is no Large Scale Asset Purchasing component to it yet. As such while the market immediately discounted the impact of 2 years of duration risk elimination (roughly 70 ES point equivalent), this has now been priced in, and the market must now look to mechanisms by which the it will have to absorb ~ $2.0 trillion in debt issuance over the next year without Fed help (and to those sticking to some modified version of MMT, keep in mind there is only $1.6 trillion in excess reserves so even a full recycling thereof would be insufficient to match demand of funds). Enter Goldman Sachs which puts the argument to bed: "We now see a greater-than-even chance that the FOMC will resume quantitative easing later this year or in early 2012." Why? Because what was lost in the noise today is that the US economy is contracting and the unemployment rate is rising: i.e., we are reentering a recession. And what the Fed did today is absolutely powerless to change this even from the Fed's point of view. Quote Hatzius: "This would probably mean more QE if their forecast converged to our own modal view of a flat-to-higher unemployment rate through the end of 2012, let alone our downside risk case of a renewed recession." But what about the historic dissent? Ah, therein lies the rub: "We view Chairman Bernanke's willingness to live with the dissents as a strong signal that he and the rest of the Fed leadership view the need for renewed easing as more important than the institutional norm of consensus decisionmaking." So there you go. The market will wake up tomorrow with a hangover, and say the one word it always does: "More." Absent that, the slide will, as predicted, resume, and it is none other than Goldman Sachs who has once again, just like back in 2010, set the strawman up for the Fed doing simply more of the same which does nothing to actually fix the economy, but bring us all closer to that epic meltdown discussed by Andy Lees earlier, and by Zero Hedge over the past two and a half years.

Latest SNB Intervention Half Life - One Hour 15 Minutes

As expected, after the USDCHF and EURCHF has been reaching new all time lows again and again, day after day, the SNB, a week after its latest doomed intervention, intervened again, by doing more of the same, this time increasing banks’ sight deposits at the SNB from currently CHF 80 billion to CHF 120 billion. End result: a 150 pip spike... which was fully retraced in one hour. The trend is unmissable - every single intervention (that of the Fed included) has progressively little impact as these desperate measures, traditionally reserved for life or death situations, and which are supposed to bring the element of surprise with them, are now not only not surprising, but demanded every single day, and if absent, cause asset sell offs. Pretty soon the battlefield will be central planners vs HFTs, with the money printers issuing money at first on a monthly, then weekly, daily, hourly, then lastly millisecond-ly, and ultimately constant basis, at which point it will truly be too late to buy gold.

Today's Economic Data Docket - Inventories, JOLTS, Budget And 10 Year Bond

Submitted by Tyler Durden on 08/10/2011 - 07:51 Several B-grade economic developments on the docket, as well as the first post-downgrade 10 Year bond issuance. Latest monthly QE Lite POMO schedule released today.

Grantham's Latest: "The S&P Is Worth No More Than 950"

Submitted by Tyler Durden on 08/10/2011 - 08:16 Back in May, when the market was once again trading purely on hopium and everyone's head was in the sand of denial, (or worse), Jeremy Grantham released his second quarter letter which was so bearish, it literally moved the market lower briefly (at which point visions of Ben Bernanke pushing CTRL-P repeatedly restored the levitation). Anyone who took his advice then, about 15% higher, to get out, has saved substantial capital: "whether [the market] will reach 1500 or not, the environment has simply become too risky to justify prudent investors hanging around, hoping to get lucky. So now is not the time to float along with the Fed, but to fight it." Well, to anyone hoping that the latest letter from the GMO manager has anything more optimistic after an epic rout in the past week, we have bad news: "as for global equities, they range from unattractive (August 2) to very unattractive. The S&P 500, for example, is worth no more than 950 on our estimates. In general, risk avoidance looks like a good idea. Cash – despite its manipulated low rate, deliberately designed to make us reach for risk – should be seen as a safe haven replete with important optionality: dry powder to take advantage of possible opportunities." Grantham adds that it is recommended to "keep your head down" for the last two months of a President's third year, and to also "keep it down for the foreseeable future."He adds that GMO is modestly underweight equities in asset-allocation    accounts, partly due to "desperately unattractive" yields on fixed income. As for those who pray to the altar of St. Ben, he says that "the main long-term risk is that after two massive bubbles and two equally massive resurrection programs, the Fed may be out of ammunition. Should more building blocks fall (government bond downgrade and further market declines have missed my deadline) and a serious global double-dip develop, then the pattern of market behavior this time may be more historically typical." In other words, and in keeping with his previous letter, the time to continue fighting the Fed is now more than ever.

Intesa Sanpaolo Halted Twice On French Downgrade Rumor, Euro Drops

Submitted by Tyler Durden on 08/10/2011 - 08:47 Update: Unicredit halted
As we predicted yesterday, the Italian market is hating its life right now, with traditional whipping boy Intesa Sanpaolo being halted half an hour ago, resuming trading, dropping 8.2%, and then getting halted again. Same thing with Banco Popolare which was halted down 6.02%, and we expect Unicredit is due for a halt next. The catalyst: a fresh new rumor that France is about to be downgraded, which would send all of Europe into a risk flaring tailspin as it would obviate the EFSF even before it has been launched. The rumor is also rattling the EURUSD, which has dropped about 50 pips from the highs. As a reminder, this is not the first time the French downgrade rumor has emerged, however it is the first time since a rumor about a major AAA-rated country downgrade was proven to be true (ref: last Friday).

Why Launching The EFSF Means Career Suicide For Merkel And A German Political Crisis

After disclosing first that the EFSF could end up amounting to anywhere between 36% and 133% of German GDP in the form of contingent liabilities, depending on whether or not France is downgraded from AAA and whether the EFSF is raised to its proper size of €3.5 trillion, we speculated that life for German chancellor is about to become a living hell as the realization that Germany is forced to rescue all of europe permeates political discussions. The FT now confirms that this is indeed the case, and could be coming to a head much faster than expected. From the FT: "Battle lines are being rapidly drawn up in the German Bundestag for what promises to be a bruising debate over the crisis measures to stabilise debt markets in the eurozone. Angela Merkel, the chancellor, and her finance minister Wolfgang Schäuble face a revolt among their own supporters in both the Christian Democratic Union and the Free Democratic Party, junior partner in the ruling coalition in Berlin, over the deal they agreed last month with their 16 eurozone partners in Brussels." Add this latest political uncertainty to the possibility of the EFSF being scuttled before it even launches in September to concerns over just how bad the reality in Italy is, and one can see why French CDS just hit a record, and Italian banks are being serially halted.

Rule 48 Invoked

Buy me a cup of coffee

I'm PayPal Verified