Posts Tagged ‘balance sheets’

Banks Recruit Investors to Oppose Honest Valuation of Assets; Just how Unprepared are Banks for Major Losses?

Banks Recruit Investors to Oppose Honest Valuation of Assets; Just how Unprepared are Banks for Major Losses?

Courtesy of Mish 

Reader "Henry" has a question on the loan loss provision chart I posted in Former Fed Vice Chairman vs. Mish: Is the Fed Out of Ammo?

Henry writes …

Hello Mish,

Thanks for writing and sharing your wonderful column. It has been very informative and educational.

Could you please help us mere mortals decipher the ALLL/LLRNPT chart in a follow up post?

I have difficulty reconciling the units, and I suspect I’m not the only one. Exactly what does that chart depict?

Thanks.

Henry

From my previous post …

Assets at Banks whose ALLL Exceeds their Nonperforming Loans

The ALLL is a bank’s best estimate of the amount it will not be able to collect on its loans and leases based on current information and events. To fund the ALLL, the bank takes a periodic charge against earnings. Such a charge is called a provision for loan and lease losses.

One look at the above chart in light of an economy headed back into recession and a housing market already back in the toilet should be enough to convince anyone that banks already have insufficient loan loss provisions.

That is one of the reasons banks are reluctant to lend. Lack of creditworthy customers is a second. Quite frankly would be idiotic to force more lending in such an environment.

To further clarify, the chart depicts the ratio of loan loss provisions to nonperforming loans across the entire banking system (all banks). There are 33 ALLL charts by bank size and region for inquiring minds to consider. The above chart is the aggregate.

The implication what the chart suggests is that banks believe nonperforming loans are NOT a problem (or alternatively they are simply ignoring expected losses to goose earnings).

The implication what I suggest is banks earnings have been overstated. Why? Because provisions for loan losses are a hit to earnings. I believe losses are coming for which there are no provisions.

The chart depicts a form of "extend and pretend" and overvaluation of assets on bank balance sheets. The Fed and the accounting board ignore this happening (encourage is probably a better word), hoping the problem will get better. With more foreclosures and bankruptcies on the horizon, I suggest it won’t.

Magnitude of the Problem

The above…
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All You Need To Know About Bank Balance-Sheet Fraud

All You Need To Know About Bank Balance-Sheet Fraud

Courtesy of Karl Denninger at The Market Ticker 

Cash Card Fraud

I am constantly amused by those people who claim there is some vast "conspiracy" in this country when it comes to banks, balance sheets, and fraudulent lending and accounting.

There is no conspiracy.

It is, in fact, "in your face" fraud.

The FDIC does us the courtesy of explaining it virtually every Friday night, right on their web page.

I am simply going to take last night’s bank closures, which numbered four.  One of them has no "deposit insurance fund" estimated loss available, because they didn’t find someone to take the assets – they’re just mailing checks.  But the other three do.

  • Waterford Bank, Germantown MD: $155.6 million in assets, $156.4 in insured deposits.  They were "underwater" by $800,000, right?  Wrong: Estimated loss, $51 million.  That is, the assets of $155.6 million were overvalued by approximately 30% at the time of seizure.
     
  • Bank of Illinois, Normal IL: $211.7 million in assets, $198.5 million in deposits.  They were "underwater" by $13.2 million (which is why they were seized), right?  Wrong: Estimated loss $53.7 million.  That is, the the assets of $211.7 million were overvalued by more than 25% at the time of seizure.
     
  • Sun American Bank, Boca Raton FL:  $535.7 million in assets (so they claimed anyway), $443.5 million in total deposits.  Heh, why did you seize them – they have more assets than liabilities?  Oh wait: Estimated loss: $103.8 million, so the actual assets are worth $443.5 – $103.8, or $339.7 million.  That is, the assets of $535.7 million were overvalued by a whopping 37% at the time of seizure.

This isn’t new, by the way.  In August of 2009 I went through Colonial Bank’s failure based on BB&T’s presentation to its shareholders on the "merger" – and gift it was given by the FDIC.  It too showed that Colonial had been carrying assets on their books at a ridiculous 37% above where BB&T ultimately marked them as a whole.

Folks, your bank is being assessed deposit insurance premiums to pay for these losses.  You are paying these losses through increased fees and interest expense on your credit cards and all other manner of borrowing.

You are paying for outrageous, pernicious and endemic balance sheet fraud.

There is no conspiracy.  It is right under your nose.  One of these three banks, based on their balance sheet, wasn’t…
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Another Day, Another Bail-Out

Another Day, Another Bail-Out

Courtesy of John Rubino at Dollar Collapse

Basket Case

With a bail-out of Greece apparently imminent and everyone drawing parallels between the PIGS countries and the Wall Street firms that nearly cratered the global economy in 2008, this might be a good time to ask why each year seems to bring a new set of financial basket cases requiring taxpayer cash.

The answer, of course, is easy money. When governments create too much credit, borrowing gets easier at the margins and the less intelligent, moral, and wise end up borrowing far more than they would normally be able to. When they inevitably implode, the world gets another chance to behave rationally by letting them go, accepting the resulting short-term pain, and learning the relevant lessons. But beginning in the 1990s with the Mexican and Russian defaults and the self-destruction of Long Term Capital Management, the strong economies have chosen to avoid the pain and bail out the losers.

This lack of adult supervision produces two results:

First, the credit created by each new bail-out finds its way into other weak hands, further impairing their balance sheets and requiring more bail-outs. Now we’ve graduated from banks to governments, and apparently a borrower as inconsequential as Greece (with foreign debt of less than $400 billion) can bring down the entire global financial system.

Second, the balance sheets of the strong countries get progressively weaker. As the U.S. took on Fannie and Freddie’s trillions, so will Germany absorb Greece’s billions. And the new wave is just getting started. Greece is the worst case, but just barely. Portugal, Spain, California and Illinois all owe more than they can ever hope to pay, and will, by the current standard of everything being too big to fail, have to be bailed out in the coming year. Their debts won’t be wiped out, but will migrate to Germany, France, or Washington. At some point those countries’ rock-solid bond ratings, already fictitious, will start to drop, making future bail-outs both harder and more necessary.

So 2010 will be the year of sovereign bail-outs at the periphery, which is bad enough. But next year, once several trillion more dollars and euros have been loaded onto large country balance sheets, the bailout profile will ratchet up to the next level, with one of the superpowers finding it impossible…
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We’re Speaking Japanese Without Knowing It

We’re Speaking Japanese Without Knowing It

Courtesy of John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy

Anna Karenina, stage production“Tolstoy famously begins his classic novel Anna Karenina with “Every happy family is alike, but every unhappy family is unhappy in their own way.” While each financial crisis no doubt is distinct, they also share striking similarities, in the run-up of asset prices, in debt accumulation, in growth patterns, and in current account deficits. The majority of historical crises are preceded by financial liberalization. Perhaps the United States will prove a different kind of happy family. Despite many superficial similarities to a typical crisis country, it may yet suffer a growth lapse comparable only to the mildest cases. Perhaps this time will be different as so many argue. Nevertheless, the quantitative and qualitative parallels in run-ups to earlier postwar industrialized-country financial crises are worthy of note. For the five most catastrophic cases (which include episodes in Finland, Japan, Norway, Spain and Sweden), the drop in annual output growth from peak to trough is over 5 percent, and growth remained well below pre-crisis trend even after three years. The United States looks like the archetypical crisis country, only more so.”

Reinhart C. and Rogoff K., NBER Working Paper 13761, January 2008
[As of the second quarter of 2009, the cumulative drop in GDP during the recent downturn has been -3.9%.]

If one seeks analysis about the recent financial crisis, and what most probably lies ahead, it would be wise to place particular weight on the views of economists who saw it coming (and ideally those who provided careful analysis rather than hyperbole). I’ve cited a paper by Reinhart and Rogoff above, which was published by the National Bureau of Economic Research in January of 2008. At a speech at the Princeton Club last week, economist Carmen Reinhart reiterated that by propping up unhealthy banks, the U.S. is unwittingly committing the same mistakes as the Japanese did in their decade-long stagnation, saying, “These are not zombie loans. They’re just non-performing. We’re speaking Japanese without knowing it.”

Kenneth Rogoff, a Harvard economist and former chief of the IMF, noted elsewhere “The banks have been allowed to take these huge gambles, particularly problematic is their very short-term borrowing. And they always have to roll it over all the time and any time they can’t…
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Phil's Favorites

Does 'deplatforming' work to curb hate speech and calls for violence? 3 experts in online communications weigh in

 

Does 'deplatforming' work to curb hate speech and calls for violence? 3 experts in online communications weigh in

Twitter’s suspension of Donald Trump’s account took away his preferred means of communicating with millions of his followers. AP Photo/Tali Arbel

Courtesy of Jeremy Blackburn, Binghamton University, State University of New York; ...



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Biotech/COVID-19

The simple reason West Virginia leads the nation in vaccinating nursing home residents

 

The simple reason West Virginia leads the nation in vaccinating nursing home residents

By mid-January, only about a quarter of the COVID-19 vaccines distributed for U.S. nursing homes through the federal program had reached people’s arms. Paul Bersebach/MediaNews Group/Orange County Register via Getty Images

Courtesy of Tinglong Dai, Johns Hopkins University School of Nursing

The urgency of vaccinating nursing home residents is evident in the numbers. The COVID-19 pandemic has claimed the lives of mo...



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Politics

Trump supporters seeking more violence could target state capitols during inauguration - here's how cities can prepare

 

Trump supporters seeking more violence could target state capitols during inauguration – here's how cities can prepare

The FBI says armed protests are planned at all 50 state capitols ahead of President-elect Joe Biden’s inauguration. Paul Weaver/SOPA Images/LightRocket via Getty Images

Courtesy of Jennifer Earl, University of Arizona

Americans witnessed an alarming and deadly failure in planning and policing at ...



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Zero Hedge

Millions Of Workers Are Still Calling Out Sick Or Taking Leaves Of Absence Due To COVID

Courtesy of ZeroHedge

One of the biggest hits to supply chains across the country hasn't just been business shut downs, but rather the residual effect of employees calling out sick.

In addition to calling out sick when employees have Covid-19 or similar symptoms, some employees have been calling out because they are still simply too fearful of returning to work. 

This was the case at Smithfield Foods, Bloomberg notes, where 50 of the company's 2,300 employees have still not returned to work. One worker told Businessweek: “We work so close together. It’s like pulling teet...



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ValueWalk

US Consumer Confidence Increases At Start Of 2021

By Refinitiv. Originally published at ValueWalk.

WASHINGTON, DC ‐ According to the Refinitiv/Ipsos Primary Consumer Sentiment Index, American consumer confidence for January 2021 is at 50.9, up 2.8 points from last month. The index fielded from December 25, 2020, to January 8, 2021.

Q3 2020 hedge fund letters, conferences and more

American Consumer Confidence Is Back Up In 2021

After a sharp 4‐point decline in December, American consumer confidence has returned to levels seen in September 2020 (50.6). The Current, Expectations, Investment, and Jobs sub‐indices all experienced ...



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Kimble Charting Solutions

Treasury Bond Yields At Make-Or-Break Decision Point Says Joe Friday

Courtesy of Chris Kimble

Treasury bond yields (and interest rates) have been falling for so long now that investors have taken it for granted.

But bond yields have been rising for the past several months and perhaps investors should pay attention, especially as we grapple with questions about inflation and the broader economy (and prospects for recovery).

Today we ask Joe Friday to deliver us the facts! Below is a long-term “monthly” chart of the 30 Year US Treasury Bond Yield.

Counter-Trend Rally In Yields Facing Strong Resistance!

As you can see, treasury bond yields have spent much of the past 25 years trading in a falling channel… but the coronavirus crash sent yields...



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Mapping The Market

The Countries With The Most COVID-19 Cases

 

The Countries With The Most COVID-19 Cases

By Martin Armstrong, Statista, Jan 12, 2021

This regularly updated infographic keeps track of the countries with the most confirmed Covid-19 cases. The United States is still at the top of the list, with a total now exceeding the 22 million mark, according to Johns Hopkins University figures. The total global figure is now over 85 million, while there have been more than 1.9 million deaths.

You will find more infographics at ...



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Chart School

Best Wyckoff Accumulation for 2020

Courtesy of Read the Ticker

Yes folks there has to be a winner. Price and volume in the right place. Very nice eye candy!


Introduction ...

Ethereum was posted on RTT Wyckoff Campaign blog for monitory and trade entry. To watch the RTT Wyckoff Campaign blog is part of the RTT Plus service. After all you only need one to two great accumulations in a year and returns will be fantastic.






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Digital Currencies

Bitcoin: why the price has exploded - and where it goes from here

 

Bitcoin: why the price has exploded – and where it goes from here

B is for blast-off (but also bubble). 3DJustincase

Courtesy of Andrew Urquhart, University of Reading

Bitcoin achieved a remarkable rise in 2020 in spite of many things that would normally make investors wary, including US-China tensions, Brexit and, of course, an international pandemic. From a year-low on the daily charts of US$4,748 (£3,490) in the middle of March as pandemic fears took hold, bitcoin rose to ju...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
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  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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