The Credit Bubble Big Picture

Daryl MontgomeryJuly 9, 2008

Copyright 2008, All Rights Reserved

A Multi-Decade Summary

• Massive credit bubble starting in early 1990s is evident on charts of financial stocks. Bubble almost exactly overlaps Greenspan’s tenure asFed Chair (1987 to 2006).

• This bubble is far more extensive and will be far more damaging than the tech bubble in the late 1990s that got all the media attention (was really just a side show).

• Many financial stock prices will return to the level where the bubble began. Many financial firms will go under, unless propped up by the U.S. Govt. (Japan used this strategy in the 1990s).

International Banks: Citibank(C)21-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows

International Banks: Bank of America(BAC)37-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows

National Bank: Wachovia(WB)37-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows, 1991 Breakout

Regional Bank: National City(NCC)24-Year Quarterly Chart

Green Lines: 1998 and 2002 lows, 1992 breakout

Savings and Loan: Washington Mutual(WM)25-Year Monthly Chart

Green Lines: 1998 and 2002 Lows, 1991 Breakout

Mortgage Company: Countrywide23-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows

Big Broker: Lehman (LEH)13-Year Monthly Chart

Green Lines: 1998 and 2002 Lows; Arrow 1998 High

Big Broker: Merrill Lynch (MER)36-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows

Insurance: AIG (AIG)37-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows

Bond Insurance: Ambac (ABK)17-Year Monthly Chart

Green Lines: 1998 and 2002 Lows

GSE: Fannie Mae (FNM)37-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows

GSE: Freddie Mac (FRE)19-Year Monthly Chart

Green Line: 1998 and 2002 Low

GSE: Sallie Mae (SLM)23-Year Quarterly Chart

Green Lines: 1998 and 2002 Lows