John P. Dubots

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More Bank Failures – I Told You So

An article published on “Market Watch” on February 23, 2010 stated (emphasis mine):

The number of distressed banks in the U.S. rose to 702 in the fourth quarter, the highest level in sixteen years, according to a report released by the Federal Deposit Insurance Corp. Tuesday. That number is up from 552 at the end of September and 416 at the end of June. This is the largest number of banks on its “problem list” since June 1993. Banks insured by the FDIC dropped to a total quarterly profit of $914 million in the fourth quarter, compared with $2.8 billion in the third quarter. However, the result was significantly better than the $37.8 billion loss for insured institutions during the fourth quarter of 2008. Insured deposits reported full-year net income of $12.5 billion. The FDIC reported that its’ Deposit Insurance Fund dropped further into negative territory, reporting a $20.9 billion loss in the fourth quarter, worse than its $8.2 billion loss in the third quarter. The agency hopes to make up that loss through advance payments by banks of $45 billion in fees.

Let’s do some math. Read the rest of this post »

March 9, 2010   Posted in: Uncategorized  No Comments

Borrowing Against Future Production – Confirmed?

I’ve been making this argument for a whole year now. Government attempts to prop up the sick US Economy will likely make the eventual landing harder and more painful than it would be if government simply did nothing. I know that’s probably not a popular opinion, particularly with those who are really hurting as a result of the current economy and with whom I empathize, but you’d probably have to agree with my opinion if you gave it some thought – that the almost $1.5 trillion that we added to the national debt last year to try to solve our economic woes was not a very good investment given the current level of unemployment is a full 2% higher than President Obama stated it would be if the stimulus package was passed. Read the rest of this post »

February 22, 2010   Posted in: Uncategorized  No Comments

Has the Decline in the Equity Markets Begun?

The equity market decline that I have been anticipating for the past couple of months may have begun. While markets typically don’t go straight up or straight down, it’s my view that we’ve seen the peak in the major US stock market indexes for the near term.

Take a look at the S&P 500 chart below. Note not only the significant decline but also the recent break below the support line represented by the blue line that I drew on the chart. Read the rest of this post »

February 19, 2010   Posted in: Uncategorized  No Comments

Economic Recovery Should Mean Higher Tax Collections

In a ‘normal’ recovery, one would expect tax collections at every level to increase. If folks are spending money, sales tax revenues should increase. If economic growth is really occurring, other tax revenues should be increasing - but that’s not what is happening.

To find evidence of declining tax revenues, one needs to look at a level of government lower than the federal level. State governments for example, need to operate in balance – spending only what is received in the form of tax revenues. While there are many examples of states whose budgets are in trouble, there are a couple of states that have recently made headlines – Illinois and California. Read the rest of this post »

February 17, 2010   Posted in: Uncategorized  No Comments

Is This a Step in the Right Direction

Last week, the White House web site posted a news release that proposed new regulations on banks. (http://www.whitehouse.gov/the-press-office/president-obama-calls-new-restrictions-size-and-scope-financial-institutions-rein-e)

Here’s an excerpt:

The proposal would:

1. Limit the Scope - The President and his economic team will work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.

2. Limit the Size - The President also announced a new proposal to limit the consolidation of our financial sector. The President’s proposal will place broader limits on the excessive growth of the market share of liabilities at the largest financial firms, to supplement existing caps on the market share of deposits. Read the rest of this post »