Just as Wall Street breathes a sigh of relief thanks to better-than-feared stress test results, a perfect storm is brewing for banks and the economy:
-
A continuing surge in U.S. home foreclosures — up 32 percent in April — implies a further pile-up of toxic assets at the nation’s major banks.
-
The greater-than-expected decline in retail sales announced this morning will cause further retail firm failures and still more losses for the nation’s major banks.
-
Mass layoffs at Chrysler, General Motors, auto parts suppliers and dealerships will drive unemployment sharply higher. Rising unemployment rates, in turn, are closely correlated with rising delinquency rates on consumer loan portfolios at major banks.
-
Exposure to systemic risk — a chain reaction of defaults in the derivatives market — is the elephant in the room. In 59 pages of white papers on the stress tests, the banking regulators never mentioned the term. In an era when systemic risk is an ongoing serious concern, this is an omission that’s both deliberate and unforgivable.
Finally, with this news, Wall Street is slowly but decisively waking up to a simple reality: The bank stress tests will go down in history as the world’s largest effort to paint lipstick on a pig.
For details, including an analysis of the risks at JPMorgan Chase, see “Five Economic Storms Raging Now” at http://blogs.moneyandmarkets.com/martin-weiss/five-economic-storms-raging-now/
{ 2 comments… read them below or add one }
My Father & Mother always told me that when GM goes down so will our country. They were right! They both lived during the great depression of the 1930’s. This DEPRESSION will make all others miniscule. The “DPRESSION of 2007-2012″ will be with us for the next few years. You’ll see cruption like no other as, water will become the new standard of wealth. Gold & Silver will fall to 2nd & 3rd places, as the effects of “Global Warming” take on a new twist. The mid-west will dry up & turn to a dust bowl. Food will be in short supply. 55-60 million persons will perish in natural disasters. Our gov’t will be bankrupt and won’t be able to support anyone as the world will become a free for all, as only the strongest will survive. The weak, the old, the sick & dieased will die. This is what I see for us in the coming years. The U.S.A. becomes a third world country, with no manufacturing left on its own soil, it was all sold for $$$’s by the CEO’s of the U.S.A., for their fat profits.
Dear Mr. Weiss:
I would like to know, with additional instability in the Middle East,
and the cold shoulder Israel is getting from the U.S., what impact
on the commodities and general market
can you anticipated may result from Israel attacking Iran in the near future??