Last Friday I had the pleasure of attending a Minyanville Festivus at the Hill Country Barbecue in New York City. A tip of the hat to Todd Harrison, the Minyanville professors, and the entire Minyanville crew for another fine outing.
While at the Barbecue I taped a couple of videos with Aaron Task at Yahoo!Finance. Please have a listen.
"It's a Good Thing Banks Aren't Lending"
For additional written insights from Aaron Task please see "It's a Good Thing Banks Aren't Lending," Says Mike 'Mish' Shedlock
After a year of record profits on Wall Street and with Bank of America set to repay its TARP funds, there's a growing sense the banking sector has healed, or at least on the road to recovery.That segment was taped with Minyan Peter, now revealed as Peter Atwater, President and CEO of Financial Insyghts LLC, a twenty-five year veteran in the financial services industry.
But the Fed says the banking sector is currently sitting on more than $1 trillion of excess reserves, defined as capital above what regulators require. If the sector is really healthy again, shouldn't they be lending more aggressively, to help get the "real economy" moving again?
"It's a good thing banks aren't lending," says Mike Shedlock, author of Mish's Global Economic Trend Analysis. "If they did lend, we'd have more defaults and more bailouts."
With unemployment to remain high and mounting problems in the commercial real estate market, more lending would lead to "more defaults and more bailouts," says Shedlock, an investment advisor at SitkaPacific Capital Management.
Industry veteran Peter Atwater, former Treasurer of Banc One among other titles, agrees the banks are not in a position to lend aggressively - even if demand for loans among creditworthy borrowers were to revive from its current stupor.
"The banking industry is really liquid right now," says Atwater, currently President and CEO of consulting firm Financial Insyghts LLC. "There's a huge difference between being liquid and being prepared for what's ahead."
As with Shedlock, Atwater foresees more defaults and more loan losses ahead for the industry, which he believes has already seen its peak profits for the cycle. In other words, there won't be any "windfall profits" to be taxed in 2010.....
Atwater's experience includes thirteen years at JPMorgan, as Head of the Asset Finance Group (responsible for non-mortgage securitization), an Executive Vice President and Treasurer of credit card issuer First USA, Treasurer of Banc One, Chief Operating Officer of Banc One Investment Advisors, and CEO of Bank One Private Client Services.
Kevin Depew has a 20+ minute video Unmasking Minyan Peter that inquiring minds will want to listen to when they have a spare half-hour. For additional insights click to See What Peter Atwater Has Written.
Among my favorite "Minyan Peter" posts is a set on bank balance sheets from August and September 2007.
- Minyan Mailbag: A Bird's-Eye View of the Credit Conundrum
- Minyan Mailbag: Bank Earnings 101
- Bank Earnings 102: The Best of Times, The Worst of Times
- Bank Earnings 103: Reading Bank Balance Sheets
- Coming Bank Themes: Whispers From the Confessional
My favorite snip is from Bank Earnings 102:
The income statement is the past. The balance sheet is the future. Let me repeat it again. The income statement is the past and the balance sheet is the future, especially now.If you take a look at those posts you will see how timely they were.
At the top of a credit cycle, the income statement for a financial institution shows “the best of times”, but buried in the balance sheet is “the worst of times” to come.
2010 Forecast - The Great Retrace
That segment with Aaron Task is from Mish: Nov. Jobs Report "Looked Fabricated", Expect Harder Times in 2010
From President Obama on down, Americans are hoping Friday's stronger-than-expected November jobs report marked the beginning of the end of our national unemployment nightmare. Looking beyond the November jobs data, Shedlock says the odds of the unemployment rate coming down anytime soon are remote.Thanks Todd, Peter, Aaron, Nancy Sedacca and everyone who attended for making Festivus 2009 a special event.
As confident as he is about the grim outlook for jobs, Shedlock was very reticent to make market predictions in the accompanying video, taped Friday evening at Minyanville's annual Holiday Festivus in New York City.
In a subsequent email, Shedlock was more willing to take a position, as is more typical of the opinionated blogger:
"In the absence of a war outbreak in the Middle East or Pakistan -- and/or Congress going completely insane with more stimulus efforts -- I think oil prices are likely to drop, the dollar will strengthen or at least hold its own, and the best opportunities are likely to be on the short side," he writes. "2010 is highly likely to retrace most if not all of the ‘reflation' efforts of 2009. If things play out as I suspect, 2010 will be the year of the great retrace as the economic recovery disappoints."
Mike "Mish" Shedlock
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