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Saturday, October 17, 2009

Lets Talk Big Banks

The BKX's 15 minute chart made a small 5 wave move down from the top. Also the move to the top appears to count best as an ending diagonal. Looking at the XLF, which has a differing pool of financial stocks makeup, the same 15 minute chart (not shown) has yet to confirm a 5 wave move down so the jury is out near term. Its close though.

JPM reported better than expected earnings. I think its safe to say that whatever JPM deems as level 3 assets, that determines their profits margin. Its a big shell game and no one has more murky dark pool stuff on their books than JPM. JPM was the king of MBS. JPM bought toxic Washinton Mutual and of course Bear Stearns, but only did so through a "cleansing" by the FED first. However, both WM and BS were so radioactive (along with all the fraud on JPM's own books) that they no doubt have the biggest undisclosed toxic pile of dark pool crap in the entire world. And the US government probably wishes it to remain so. There is a reason that JPM cannot repay the government in full: they can't afford too. JPM is a dangerous entity though. They must remain under the radar and so far they have.

JPM is under the radar, their stock reflects it, and everyone wants to keep it that way.

C is a government entity, lets face it. They are like AIG. C''s dark pool is exposed and has taken on light. With some $300B being backstopped, its the only reason its stock isn't zero. Everyone knows it. They have been deemed a "save at all costs" and its probably due to the CDS markets just like AIG was. Simply put, if C fails, it all comes down. The government pretty much stated as much.

GS blew it out but they didn't hit the whisper numbers. Regardless their competition is eliminated so if they cannot make money as a virtual monopoly on Wall Street, who can? I have so much more to say but I'll leave it at that. There are better blogs covering the GS connections and stuff including the mainstream media. That alone, will be a roadblock in the future.

But that monopoly status makes them a huge bullseye and the single biggest target of ill social mood which is gathering storm. Simply put, GS = Wall Street, and every "Mom and Pop" and "Joe Six Pack" knows it. And they don't like Wall Street.

Bank Of America lost a lot of money. One can only guess that they have a huge shadow inventory of housing. They are the mortgage kings having swallowed up Countrywide at its peak. Someone has to bite the bullet. In the investment banking business it was Lehman and the big banking world it may be BoA. BoA's problems are simple: Cash flow. Eventually all those non-performing assets come shining through like cream rising to the top. Except its not cream its sludge.

In reality the government knows it cannot backstop every one of the big banks so probably if someone has to be sacrificed its BoA. Ken Lewis wasn't exactly thrilling anyone in the same vein that John Thain of Merrill Lynch didn't of whom BoA was forced to buy. Somehow they are slowly filling the "villian role". America will demand heads to roll and slowly BoA is somehow moving into that slot.

Here is the deal: Pile all the toxic crap into one bank and offer it up for sacrifice. And BoA is loaded.

The wildcard in the bunch is WFC. This bank is also loaded with as much toxic junk as BoA (having been forced to eat Wachovia) and non-performing assets. It too will have a cash flow problem. But WFC is Buffet's baby and Buffett is still a huge cog in the wheel of the public's consciousness. And Buffet played hardball with GS and undoubtedly some serious backroom deals were made, likely involving Wachovia. So how much is WFC being leaned on is anyone's guess. As long as they can hide their crap and the regulators turn a blind eye, they will trudge along.

But WFC is probably very vulnerable. Their "reporting" numbers this Wednesday are a wildcard.

So overall, the big boys are now few and bigger than ever before. "Too big to fail" had no chocice but to become "Too bigger to fail". It was predictable.

And yet one of them will fall in the coming P3. Which one first? Will investors push C's price back into danger range of 99 cents? Will BoA get thrashed? Will it unexpectantly be Buffett's baby WFC that bites the bullet? JPM and its dark murky pools?

Or will the social mood demand GS just simply because its GS and they = Wall Street?

The machinations behind the scenes are a constant drama no doubt. Oh to be a fly on the wall!

Its like some Shakespearean play we are watching. Stay tuned. Except the outcomes will impact us all. And it won't be good.

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