Friday, March 27th. - Stock Trends, Charts, and Commentary
On Tuesday, we had brought up the issue about "toxic bank assets" being presented to the Treasury this afternoon.
Toxic bank assets and mark-to-market rules are hindering many banks from lending due to Regulatory Ratio requirements ... the problem is very circular, like a cat chasing its tail.
So, the process of fixing this particular problem is supposed to start today. The question is ... will the toxic asset buying program work?
The next few days should prove very interesting as we wait to see how much in toxic assets is brought to the Treasury. It may not be even close to the Treasury's expectations.
Why? Because many banks are sorry that they took TARP money, and resent the amount of control coming from the Gov. for taking the money. So, as fast as they can, banks are trying to return the TARP money and they are "running away from the Government".
Running away from the Government?
If you do a Google search on the News relative to "TARP Funds - return" you will see these kinds of headings:
1. Banks Return TARP Funds to Avoid Choking on Attached Strings.
2. Louisiana bank returns TARP funds - IBERIABANK Corp. said Friday it would be returning the $90 million in funds it received from the government in early December.
3. Sun Bancorp to return TARP funds, CEO says program ‘politicized'
4. Goldman Sachs may return its $10 billion of TARP money to the US government within the next month, The New York Times reported, ...
So, here is the question ...
How can the toxic asset buying program work if banks are now rejecting Government money and returning it? Why would we expect them to go back to the Government to sell their toxic assets when they are running from the attached Government controls?
Many analysts are now watching what happens in the next 5 days. A rejection of the Treasury's offer to buy toxic assets could mean that bank lending will remain tight, thereby hindering an economic recovery.
Here is what the Banking Index chart was saying this morning at 10 AM ...
What is it showing? That there was a nice run up in the beginning of March, but that it stalled in the past two weeks (note the double top just formed).
So now it is moving sideways, and will need good news and positive occurrences to move higher. Will banks returning TARP money make the Banking index break out to the upside? Will a rejection of the Treasury's toxic asset program cause the Banking index to break to the downside?
The data is out yet about the reaction to the toxic asset program. So, keeping a careful eye on the Banking Index ($BKX) will be important because financials represent over 13% of the S&P 500 index.
On Tuesday, we had brought up the issue about "toxic bank assets" being presented to the Treasury this afternoon.
Toxic bank assets and mark-to-market rules are hindering many banks from lending due to Regulatory Ratio requirements ... the problem is very circular, like a cat chasing its tail.
So, the process of fixing this particular problem is supposed to start today. The question is ... will the toxic asset buying program work?
The next few days should prove very interesting as we wait to see how much in toxic assets is brought to the Treasury. It may not be even close to the Treasury's expectations.
Why? Because many banks are sorry that they took TARP money, and resent the amount of control coming from the Gov. for taking the money. So, as fast as they can, banks are trying to return the TARP money and they are "running away from the Government".
Running away from the Government?
If you do a Google search on the News relative to "TARP Funds - return" you will see these kinds of headings:
1. Banks Return TARP Funds to Avoid Choking on Attached Strings.
2. Louisiana bank returns TARP funds - IBERIABANK Corp. said Friday it would be returning the $90 million in funds it received from the government in early December.
3. Sun Bancorp to return TARP funds, CEO says program ‘politicized'
4. Goldman Sachs may return its $10 billion of TARP money to the US government within the next month, The New York Times reported, ...
So, here is the question ...
How can the toxic asset buying program work if banks are now rejecting Government money and returning it? Why would we expect them to go back to the Government to sell their toxic assets when they are running from the attached Government controls?
Many analysts are now watching what happens in the next 5 days. A rejection of the Treasury's offer to buy toxic assets could mean that bank lending will remain tight, thereby hindering an economic recovery.
Here is what the Banking Index chart was saying this morning at 10 AM ...
What is it showing? That there was a nice run up in the beginning of March, but that it stalled in the past two weeks (note the double top just formed).
So now it is moving sideways, and will need good news and positive occurrences to move higher. Will banks returning TARP money make the Banking index break out to the upside? Will a rejection of the Treasury's toxic asset program cause the Banking index to break to the downside?
The data is out yet about the reaction to the toxic asset program. So, keeping a careful eye on the Banking Index ($BKX) will be important because financials represent over 13% of the S&P 500 index.
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