Courtesy of Pam Martens.
There’s something big and scary going on behind the scenes but, as usual, the public isn’t reading about it on the front pages of the newspapers.
Yesterday, the broad stock market, as measured by the Standard and Poor’s 500 Index, declined a modest 0.29 percent while big Wall Street banks like Citigroup and JPMorgan Chase fell by triple that amount. Bank of America, which bought the big retail brokerage firm, Merrill Lynch, in the midst of the 2008 crash, fell by 8.6 times the rate of the decline in the S&P to give up 2.50 percent.
Equally noteworthy, two major insurers, MetLife and Prudential Financial, saw percentage market losses far in excess of the S&P. MetLife declined by 2.74 percent while Prudential Financial lost 1.68 percent. Prudential Financial has been named a Systemically Important Financial Institution (SIFI) by the Financial Stability Oversight Council. MetLife had received the same designation but won a court battle to rescind the designation. The U.S. government is appealing.
The vote of no confidence on down market days in the complex U.S. banks that hold both insured deposits from Mom and Pop savers while also making huge derivative gambles is a repeat of the action we saw earlier this year. On February 3, 2016, four big Wall Street banks (Bank of America, Citigroup, Goldman Sachs and Morgan Stanley) set 12-month lows in intraday trading – far outpacing the declines in the broader market index as measured by the S&P 500. The banks have recovered some since then but are nowhere near setting record highs as the broader market indices have of late.
These mega banks should be a barometer of the overall health of the stock market and the U.S. economy. After all, these are the banks that are making corporate loans, underwriting corporate stock and bond issues, and doling out credit to consumers. If the mega banks are experiencing air pockets of buying interest in declining markets, this does not bode well for either the market or the U.S. economy.
The price performance of MetLife should also be a red flag that perhaps the Financial Stability Oversight Council got it right when it designated the firm a SIFI.
…
