bernanke prices in qe2, as the decline in yields stalls

8/8/2019 Bernanke prices in QE2, as the decline in yields stalls.

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Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Newtown, PA. ValuEnginecovers over 7,000 stocks every day.

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Oct ober 18, 2010 Bernank e pr ic es in QE2, as the decl ine in y ie lds st a l ls .

The yield on the 10-Year note ended last week cheaper than my monthly pivot at 2.555 with this

weeks value level at 2.620 and my quarterly and semiannual risky levels at 2.265 and 2.249.Gold appears ready to consolidate the Fed-induced parabolic with this weeks risky level at$1373.6 with my monthly pivot at $1343.7. Crude oil is no longer overbought as strength failedlast week between my semiannual pivot at $83.94 and my monthly risky level at $84.74. For theeuro my quarterly value level is 1.3318 with this weeks risky level at 1.4074. The Dow remainsbelow my annual risky level at 11,235 with weekly and semiannual risky levels at 11,229 and11,296. Bank Failure Friday! We need to stop Bernankes Madness. The foreclosure mess ishurting banks stocks.

10-Year Note (2.569) Weekly, annual and annual value levels are 2.620, 2.813 and 2.999 with amonthly pivot at 2.555, and daily, quarterly and semiannual risky levels at 2.442, 2.265 and 2.249.

Courtesy of Thomson / Reuters


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Comex Gold ($1368.4) Monthly, quarterly, semiannual and annual value levels are $1343.7,$1306.4, $1260.8, $1218.7 and $1115.2 with weekly and daily risky levels at $1373.6 and $1375.3.


Nymex Crude Oil ($81.46) My annual value level is $77.05 with daily and weekly pivots at $81.91and $82.38, and semiannual and monthly risky levels at $83.94 and $84.74.



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The Euro (1.3969) My quarterly value level is 1.3318 with daily and weekly pivots at 1.4060 and1.4074. My monthly value level is 1.2342 with semiannual risky level at 1.4733.


Daily Dow: (11,063) Monthly, semiannual, annual and quarterly value levels are 10,857, 10,558,10,379 and 8,523 with daily, weekly, annual and semiannual risky levels at 11,115, 11,229, 11,235,11,290 and 11,296. My annual risky level at 11,235 was tested at the April 26thhigh of 11,258.01.



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Bank Failure Friday The FDIC closed three more community banks last Friday. The total number ofailures for 2010 is now up to 132 on the way to my predicted range of 150 to 200 for 2010. There are

the five failures so far in the fourth quarter. The FDIC Deposit Insurance fund has now been drained b$3.0 billion in the second half of the year to date, which brings the DIF Deficit to $18.3 billion. TheFDIC has already burned through the assessments for 2010. The assessments for 2011 and 2012have been pre-paid at $15.33 billion per year.

During The Great Credit Crunch the FDIC only closed 25 banks during all of 2008. In 2009 the FDICpicked up the pace with 140 bank failures with a peak of 50 in the third quarter of 2009. So far in 2010the FDIC closed 41 banks in the first quarter, another 45 in the second quarter, 41 for the third quarterand 5 for the fourth quarter. The total for The Great Credit Crunch is up to 297 continuing its path tomy predicted 500 to 800 by the end of 2012 into 2013.

The three failed banks last Friday were private banks with extreme overexposures to C&D and CRE

loans. C&D exposures were 366%, 849% and 1109% versus the 100% regulatory guideline. The CREexposures were 1186%, 1824% and 2097% versus the 300% of risk-based capital regulatoryguideline. These banks had CRE loan pipelines that were 100%, 96% and 96% funded versus ahealthy pipeline of 60%. The FDIC List of Problem Banks remains 829.

Here are some statistics from the FDIC for the Second Quarter 2010: We ended the secondquarter with 7,893 FDIC-insured financial institutions, of which 1306 are publicly-traded.

1172 of all community banks (14.8%) are overexposed to Construction & Development Loans 1432 or 18.1% are overexposed to Nonfarm / Nonresidential real estate loans. 2504 or 31.7% are thus overexposed to Commercial Real Estate loans. 1317 or 16.7% have a real estate loan pipeline thats 100% funded.

2622 or 33.2% have a pipeline thats between 80% and 100% funded. 3939 of 49.9% of all banks have a pipeline thats 80% or more funded. So half the

community banks in America remain overleveraged to Commercial Real Estate and thepossible losses remain about $1.5 trillion.

We Need to Stop Ben Bernankes Madness - The Federal Reserve will take new action called QE2to boost the economy, because inflation is too low and unemployment is coming down too slowly.

The US is lucky to have an inflation rate of just 1%. What the Fed is doing is fueling commodityspeculation, which leads to inflation, when Main Street USA struggles with reduced incomes and ahigher cost of living. The Fed is helping Wall Street get record bonuses, while not helping theforeclosure mess on Main Street. Let me re-iterate my opinion that the Federal Funds rate should

never be taken below 3%, as when it does bubbles are created, which filters down to problems onMain Street.

The Foreclosure Mess is Hurting Bank Stocks and will slow an already depressed housing market.Way back in March 2007 I stated that you cannot have a bull market for stocks with a bear market infinancials. Housing stocks peaked in July 2005, community banks peaked at the end of 2006 andregional banks peaked in March 2007. The Dow peaked above 14K in October 2007.

With 50 state attorneys general investigating the mortgage servicing industry and foreclosureprocedures the foreclosure mess will be with us most likely through 2012. Keep in mind that most of


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the mortgages involved in the foreclosure issues are sliced and diced into mortgage backed securitiesand as investors see performance deteriorate will look for Wall Street to buy them back. What atangled web this phase of The Great Credit Crunch will be. Fannie and Freddie may line up to sell

mortgage securities back to Wall Street.

Thats todays Four in Four. Have a great day.

Richard SuttmeierChief Market StrategistValuEngine.com(800) 381-5576

Send your comments and questions to [email protected]. For more information on our productsand services visit www.ValuEngine.com

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.comI have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters awell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the

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I Hold No Positions in the Stocks I Cover.

bernanke prices in qe2, as the decline in yields stalls

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