Bank Failures Top 100 - But Troubles Are Over?

bank failuresSeven more banks joined the failure list this past weekend, which puts our grand total to 106 just for the year. This is the most that the US has experienced since the Great Depression. There is no doubt that such a discouraging fact will have grave consequences for our economy for years to come. Luckily, the Government has somehow been able to convince consumers that all troubles are over. In fact, the biggest difference that we are seeing from now compared to the Great Depression is consumer sentiment. Mass bank failures brought serious doubt to consumers, which in turn spawned a "run on banks", forcing hundreds of banks to be closed down. Thanks to trillions of "off balance sheet" transactions from the Fed, most big banks have been able to maintain a disguise of profitability, which in turn, has helped consumers to maintain confidence, at least for now.

Such confidence is important in slowing the damage done in Wall Street. However, as we have seen throughout this recession, that confidence can switch like the flip of a coin. I have always stated that I felt that a market crash would most likely come when people least expected it. Eventually banks will have to face their balance sheets and recognize the massive losses that most have suffered, especially in the commercial real estate sector. Also, sooner or later (probably later) The Fed will have to increase interest rates. Remember, at the moment, banks are taking advantage of being able to borrow money from the Fed at essentially 0%! Then, they are able to turn around and issue loans to you and I (for those that are lucky enough to get a loan) for 5-6%(which is also secured by the government). Next, they are able to take your deposit cash, and invest them in US Treasuries for a 1% guaranteed return. There's no wonder why some of these banks are having fun and taking bonuses! The only problem is what happens when bonds start to go down in price? Yikes.

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We have now seen a couple days of negative trading. Not only that, but gold got crushed today, which is very much in line with my expectations. I plan on picking up some put options on GDX tomorrow. Also, I would like to go long on UUP here shortly, as I feel the dollar is due for a bit of a recovery after its recent slaughtering. Also, can Apple really stay over $200? I'm not too confident, especially when the next round begins. Happy Trading.


  1. Lin Lin Says:

    How much more of a beating do you think gold will take before the deflation stops FF? I am a big fan of Crude oil.

    Peter Schiff really scares the hell out of me.

  2. Finance Fanatic Says:

    Well if deflation becomes as big of a problem as I believe it to, and if the dollar begins to strengthen, I definitely could see it going below $1000 again, even lower.