Richard Suttmeier is the Chief Market Strategist atwww.ValuEngine.com.
ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEnginecovers over 5,000 stocks every day.A variety of newsletters and portfolios containing Suttmeier's detailed research, stockpicks, and commentary can be foundHERE. Suttmeier's Four in Four video can be watched on the webHERE.
October 16, 2009 –
The FDIC sees more bad loans and bank failuresThe FDIC finally admits to C&D and CRE loan problems.I have been warning about overexposures to C&D and CRE loans posing the biggestthreat to community and regional banks since April 2006.
This week FDIC Chair Sheila Bair finally bought these risks to the public eye. What took solong?Even with the warnings Ms Bair in making a statement on Capital Hill incorrectly stated thatbank performance lags behind economic recovery. My proof against this thesis is the simplefact that as the FDIC ignored the regulatory guidelines for exposures to C&D and CRE loanswhile I warning that the FDIC Quarterly Banking Profile was a leading economic indicator.This data led me to forecast in March 2007 that a multi-year bear market would begin by theend of 2007. FDIC data led me to predict Recession in 2008 / 2009 in March 2007.
Data from banks are a leading indicator not a lagging one.
The FDIC expects it’s non-list of problem banks to increase and for bank failures to remainhigh for the next several quarters.
The FDIC is projecting bank problems to occur at least into 2011. I have been predicting using FDIC data as a leading indicator.
The ValuEngine List of Problem Banks exceeds 750 and we predict 500 to 800 by thetime “The Great Credit Crunch” ends in 2011 / 2012 at the earliest.
According to the FDIC “household financial distress has been exacerbated by highunemployment. Employers have cut some 7.2 million jobs since the start of the recession,leaving over 15 million people unemployed and pushing even more people out of the officiallabor force. The unemployment rate now stands at a 26-year high of 9.8 percent, and may gohigher, even in an expanding economy, while discouraged workers re-enter the labor force.”
Hard to sustain growth without job creation and the NBER the arbiter of Recession calls knows this.
CRE loans headlines problems for community and regional banks.
As of the end of June,CRE loans backed by nonfarm, nonresidential properties totaled almost $1.1 trillion, or 14.2%