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This guest blog entry by Tristan Yates is a follow-up to “Are America’s banks really insolvent? Buy lamisil cream without prescription, ” and is part of the important effort to understand and evaluate the depth and breadth of the financial crisis. Lamisil cream buy online, For The Curious Investor's take and to leave your own thoughts check out this post's comments thread.

What kind of losses is the banking industry facing. And are all of the banks really insolvent, lamisil cream alternative. Cheap price lamisil cream, Although the answers are critical inputs for any economic decisions, it has been far easier to find dire predictions than real analysis and evidence, cheap lamisil cream pill. Purchase lamisil cream overnight delivery, But for anyone looking for hard numbers, the FDIC’s Q42008 Quarterly Banking Profile is perhaps the most useful report published to date, lamisil cream approved. Just in the first paragraph, the agency reveals the following:

The total loss to the insured institutions sector this quarter was $26.2B, the worst on record, buy lamisil cream without prescription. Lamisil cream generic, Losses were due to high expenses for loan loss provisions, losses in trading accounts, lamisil cream no online prescription, Lamisil cream online sale, and writedowns of goodwill and other assets

Earnings problems were widespread, but just four institutions accounted for half of the industry’s total loss, buy lamisil cream us. Cheapest generic lamisil cream, Yet in this difficult quarter, 68% of institutions were profitable and more than a third reported year-over-year increases in RoA.

Both of these findings run counter to conventional wisdom, order lamisil cream without prescription. Find discount lamisil cream online, $26B of total net losses for the quarter isn’t good, but it is light years away from the multi-trillion financial apocalypse that’s being predicted by economics pundits such as Krugman, buy lamisil cream online, Lamisil cream online without a prescription, Roubini, and Grantham, lamisil cream order. Lamisil cream buy drug, And a concentration of losses in four institutions suggests that perhaps just a handful are in danger rather than the banking system as a whole. Buy lamisil cream without prescription, Alas, the identities of the “FDIC four”, i.e. the four institutions that accounted for half the loss, canadian pharmacy lamisil cream, Lamisil cream without prescription, were not provided in the report. But I have access to not only the FDIC’s publicly available data, lamisil cream cheap, Buy cheap lamisil cream, but a star analyst and my former Director at Price Waterhouse Coopers, Jim Boswell, order lamisil cream. Lamisil cream us, Jim managed risk for the $600B Ginnie Mae portfolio in the aftermath of the Savings & Loan crisis and wrote their guarantee fee study, and is now a fellow consultant, cheap lamisil cream internet. Order discount lamisil cream, Jim forwarded me three spreadsheets that I’ve combined into one (download here -> FDIC Bank Stats). The first shows clearly the deterioration of the banking sector as a whole, with loan loss allowances, loan delinquencies, and chargeoffs all essentially doubling in about the past fifteen months, buy lamisil cream without prescription.

click to enlarge

Yet, discount lamisil cream without prescription, Lamisil cream tablets, total non-accrual loans (essentially non-performing loans) are just $158B. Under the assumption that every single one goes to foreclosure – and history says that they won’t – and that the bank can only recover 50% from the sale of the property – and house prices haven’t fallen that far – the losses would only be about $80B, order generic lamisil cream. Certified lamisil cream, Thus although we definitely haven’t seen the end of the trendline, one would still have to make extremely dire assumptions about future delinquency and recovery rates just to arrive at a $300B or $400B total loss for a banking sector which still has $1.3T of equity available, order discount lamisil cream online. Order lamisil cream without prescription, And Jim also pointed out that either lower interest rates or higher inflation could be mitigating factors. Buy lamisil cream without prescription, Both effects boost the value of the underlying asset (the home) and improve recovery rates. He is an advocate for the 4% mortgage as a recovery tool, cost of lamisil cream, Buy lamisil cream no prescription required, and may soon get his wish as rates are falling fast.

The second spreadsheet shows the losses for large institutions and identifies the “FDIC four” as Regions, buying lamisil cream online, Buy lamisil cream online australia, Merrill Lynch, Indymac, lamisil cream canada, Best price for lamisil cream, and RBS Citizens. However net losses don’t take into account the amount of existing equity and assets, buy lamisil cream, so it’s not quite accurate to use this as a health measure. Also, IndyMac is old news, a ward of the state taken over by the FDIC in late June and just resold.

click to enlarge

The third spreadsheet is a more detailed ratio analysis of large banks and compares the results to two years ago, buy lamisil cream without prescription. While virtually every bank is worse off, the differences are still significant. For example, fully 4.4% of Citi’s loans and 5.1% of Countrywide’s are non-current or REO, as compared to 3.0% for Bank of America, 2.6% for Chase, 2.1% for PNC, and 1.3% for Capital One.

ROE, Net Interest Margin, and Equity to Assets ratios also vary widely, and this helps support the argument that while every institution has been impacted to some extent, not all banks are in trouble and some have been much more successful in anticipating and/or navigating this current environment than others.

Note that just about every institution that has been rescued or shut down recently reports numbers significantly worse than its peers, and this past usefulness gives us some reason to be confident about the data. Buy lamisil cream without prescription, And of course the FDIC itself has performed well during this crisis.

Let’s be clear where this report and data leaves us. If someone has evidence that this banking crisis is a one or two trillion dollar problem and that most or all of the banks are insolvent, then let’s see it. Better yet, let’s have them testify in front of Congress and show their work. Because this FDIC data & report isn’t that evidence.

While there’s no question that it points to a worsening situation, the cumulative dollar amounts of net losses, non-accrual loans, and net chargeoffs only sum to $220B, as compared to $1.3T of industry equity, buy lamisil cream without prescription. And the individual situations vary immensely - some banks will face the guillotine, and others will get away with but a haircut.

Tristan Yates is the author of Enhanced Indexing Strategies and his articles and research have been published in Yahoo. Finance, Futures & Options Trader, Globe & Mail, and the Wall Street Journal. He can be reached at tristan@indexroll.com..

Curious Investments, Market Commentary

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Buy diclofenac without prescription, In October of last year, Warren Buffett wrote an op-ed in the New York Times announcing his intention to buy U.S. equities, low price diclofenac. Diclofenac sale, In the months since, we've seen the markets oscillate wildly but ultimately head only further down into its trough, generic diclofenac, Buy diclofenac pills, sparing no one in its path. Was he wrong, cheap diclofenac in uk. Is it still not safe to get your money back into the stock market?

For those that follow Warren Buffett, his recommendation is not just a far out attempt to be contrarian as his op-ed piece makes it sound, buy diclofenac without prescription. Free diclofenac, Yes, the general tenet to be "fearful when others are greedy and greedy when others are fearful" will serve most investors well, buy cheap diclofenac online. Buy diclofenac cheap, But, Mr, drug diclofenac. Cheapest diclofenac online, Buffett has backed up this tenet with a very interesting bit of theory based on the total market cap of U.S. stocks versus its gross national product as outlined in a 2001 talk given by Buffett, diclofenac medicine, Price of diclofenac, himself.

Today, we see that the market has only continued correct as he predicted in 2001.

TMC to GNP Chart courtesy of GuruFocus.com

It seems that the market has finally returned to long run equilibrium values, diclofenac no rx required. Buy diclofenac without prescription, This, too, is mirrored by overall P/E valuations in the S&P 500.

S&P 500 Historical P/E Chart courtesy of FinancialSense.com

In fact, according to the S&P, the index reached a valuation of just 13.7x 2008 earnings by December 31 and currently trades at 11x projected 2009 earnings. Diclofenac generic, Unfortunately, some people out there believe that there's even more for us to fall, diclofenac overnight delivery. Drug diclofenac online purchase, Last Friday, Barry Ritholz claimed that his analysis lead him to believe that the S&P's fair value would be just 440 given equilibrium P/E and trailing reported EPS, buy cheapest diclofenac on line. Order diclofenac in us, As far fetched as this sounds, we can't forget that in the last few major recessions, compare diclofenac prices, Buy discount diclofenac, market lows gave rise to valuations with high single digit P/Es (1919-1923, 1931-1932, cheap diclofenac from uk, No rx diclofenac, 1942, 1977-1982, low cost diclofenac, Best price for diclofenac, etc.)

All these conflicting analyses is likely confusing especially for investors who have been burned by the recent market slide and may be wary of committing new capital. It can be tempting to try to sit and wait for the bottom, diclofenac malaysia. It is very difficult, however, to be successful in such a tact, buy diclofenac without prescription. Buying generic diclofenac, A recent study by the Charles Schwab Chief Investment Strategist, Liz Ann Sonders, buy diclofenac generic, Free diclofenac, found that over the last 10 years the 40 best market return days accounted for would have meant the difference between an annualized 8.4% return and an annualized 6.4% loss. Not only that, price of diclofenac, Buy cheap diclofenac internet, but 75% of these top 40 days came within two weeks of a market worst day.

Given the difficulties of timing the market, there must be a way to capitalize on depressed market values, discount diclofenac online. Canada diclofenac, We've established that the markets are currently trading just below long-term equilibrium values implying significant upside. And, buy diclofenac in us, Order no rx diclofenac, knowing that the last year has been equally severe to nearly every equity class, a strategy of broadly entering U.S, buy diclofenac canada. Diclofenac pill, equities through a modest and tempered commitment (taking advantage of the phenomenon of dollar cost averaging) of new capital will likely yield better than average results for anyone with a long term horizon.

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2008-2009-returns Buy diclofenac topical gel without prescription, The above chart represents the return for nearly every combination of equity investments you could have made over the last year. Cheapest diclofenac topical gel online, No sector, style, diclofenac topical gel overnight shipping, Order diclofenac topical gel from us, world region or market cap escaped devaluing more than 25%. Compare this to the start of our last recession between 2000 and 2001.

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Just within U.S, get diclofenac topical gel. Buying diclofenac topical gel online, equities, proper diversification likely could have avoided 40% losses caused mainly by one sector, discount diclofenac topical gel no rx. Real diclofenac topical gel without prescription, And, in fact, low cost diclofenac topical gel, Diclofenac topical gel buy drug, it was eminently possible to find a safe haven sector (ironically, financials) to hide from the carnage.

While The Curious Investor and most investing blogs our there focus mainly on equity investments, buy diclofenac topical gel, Cheap diclofenac topical gel no rx, the past year has taught us that the old adage, "There's always a bull market somewhere, diclofenac topical gel no rx, Find cheap diclofenac topical gel online, " is not always the case for the equity markets. Or, is it?

Diversification is more than buying stocks in different industries and geographies
Risk comes in many types, buy diclofenac topical gel without prescription. Diversification through different companies and industries can help to insulate you only a few unsystematic risks namely industry risk, diclofenac topical gel in malaysia, Diclofenac topical gel vendors, company specific event risk, and geopolitical risk, find cheap diclofenac topical gel. Pharmacy diclofenac topical gel, To properly diversify, you need to consider investments outside of equity markets - asset allocation, cheap diclofenac topical gel in uk. Low price diclofenac topical gel, Asset Allocation with a Brokerage Account
It can be difficult for retail investors to access non-equity assets. Most brokerages offer some access to U.S, buy diclofenac topical gel on line. Buy diclofenac topical gel without prescription, Treasuries and other government or municipal bonds as well as a small amount of corporate bond placements. Diclofenac topical gel in australia, But, these can often come with significant fees or minimum investments, no prescription diclofenac topical gel. Generic diclofenac topical gel, There is a more cost effective route. Ironically, diclofenac topical gel sales, Order diclofenac topical gel no prescription required, these investment vehicles trade through typical stock exchanges. Just as The Curious Investor has previously discussed using ETFs and ETNs to create hedges and passive indexing, buy diclofenac topical gel from canada, Buy diclofenac topical gel overnight delivery, it's possible to use ETFs and ETNs to gain access to assets outside of the markets.

For me personally, given the state of our economy and the likely pressures on the U.S, buy diclofenac topical gel without prescription. dollar as a result of policy actions to remedy the situation, diclofenac topical gel sale, Buy diclofenac topical gel cheap, I'm interested in adding commodity exposure (click to check out my rationale on gold and oil) and foreign bond exposure. It just so happens that there's an ETF for all these purposes - IAU, cheap generic diclofenac topical gel, Diclofenac topical gel for sale, OIL, and IGOV (and more if you look around), cost of diclofenac topical gel. Diclofenac topical gel pharmacy, While the IGOV was brought to market less than a month ago, data for IAU and OIL show correlation of .20 and .33, find no rx diclofenac topical gel, Diclofenac topical gel in uk, respectively. About as uncorrelated as a risk asset can get and exactly what you're looking for when properly diversified, cost diclofenac topical gel. Diclofenac topical gel cost. Order cheap diclofenac topical gel. Diclofenac topical gel free delivery. Order diclofenac topical gel.

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at February 12, 2009

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Buy flonase without prescription, A lot of well respected economists have gone on record over the last few weeks and discussed the likelihood that our country's financial institutions are all insolvent. Order flonase in canada, Two particularly heavy hitters - Paul Krugman and Nouriel Roubini - have gone as far as to advocate nationalizations on a wide scale. It seems that just about everyone and their moms has jumped on this idea as the perfect way to "punish irresponsible shareholders" and "hold management teams accountable." Interestingly enough, cheap price flonase, Flonase no prescription, very few of these people ever acknowledge two very important questions that must be answered before we as a nation embark on a campaign to nationalize our financial institutions and radically alter change the course of American economic policy. Is our financial system truly insolvent, buy flonase online cheap. Buy flonase online, How will nationalizing solve our financial woes. After all, are we looking for a scapegoat for the current recession or are we trying to get our economy back on solid footing?

What exactly is insolvency?
Insolvency is when a business has insufficient assets to cover liabilities, buy flonase without prescription. When CNBC refers to banks not having enough of an equity cushion, order flonase in us, Lowest price flonase, it refers natural equality set up by a balance sheet - assets = liabilities + shareholders' equity. Thus, sale flonase, Buy generic flonase online, assets - liabilities = equity cushion. A business uses its assets to pay back liabilities as they come due, buy flonase us. Buy generic flonase, When this is not the case, the business becomes "insolvent", approved flonase pharmacy. Buy flonase without prescription, In a normal environment, businesses can increase assets by raising new debt (liabilities) or equity. Order flonase no rx, Given the frozen credit markets and the number of firms licking their wounds from asset deflation, new debt (known as refinancing) is not an option and, find flonase, Buy flonase from us, as a result, we see the increased focus on equity capital.

Equity capital can be generated in a few ways, discount flonase. Flonase cheap drug, A lot has been made of preferred and common equity capital raises this year. Many of the nations banks have received TARP money in exchange for preferred equity, flonase drug. Buy flonase on internet, Goldman Sachs gave a sweetheart deal to Warren Buffett in exchange for preferred equity and warrants. Morgan Stanley recently sold $9 billion in common equity to Mitsubishi, buy flonase without prescription. These capital raises were all made in hopes of shoring up the asset base in order to cover potential liabilities, flonase generic. Flonase online pharmacy, In addition to equity raises, assets themselves can also generate return, flonase online review. Flonase buy online, In fact, the bank business model is predicated exactly on this oft-ignored phenomenon, flonase purchase. Find flonase on internet, Banks take on liabilities at low interest rates and then lend these assets out at higher interest rates. Buy flonase without prescription, This means that strictly speaking having less assets than liabilities is not necessarily insolvency. Provided assets generate a reasonably fast return and liabilities mature slowly, flonase cheapest price, Certified flonase, it's possible that the simple passage of time could rectify such a mismatch. A quick check on big banks (Bank of America, fda approved flonase, Flonase for order, Citigroup, Wells Fargo, canadian pharmacy flonase, Flonase in us, and JP Morgan) on Yahoo. Finance shows that they all remain significantly free cash flow positive despite accounting losses due to asset writedowns, flonase uk. Discount flonase without prescription, Are banks insolvent today?
It's hard to say whether or not the likes of Bank of America, Citigroup, flonase tablets, Order cheap flonase online, or Wells Fargo are truly insolvent. The arguments of Krugman and Roubini are predicated on the likelihood that many banks have not properly "marked to market" their assets, buy flonase without prescription. So, flonase discount, Flonase pharmacy online, even if they are showing positive asset-to-liability coverage, it's likely not reality given how illiquid most assets are these days, cheapest generic flonase online. Find flonase no prescription required, Taken to its logical extension, Krugman and Roubini basically make the point that most banks would be insolvent if there were a run on the bank - depositors demanding money back, online pharmacy flonase, debt holders accelerating amortization, etc. Truthfully, all banks would be insolvent in such a situation. That's why we created the federal reserve system and it's why the Fed and Treasury have worked so hard to prevent a Great Depression style run on our banks. Buy flonase without prescription, It is also why the Fed operates as a lender of last resort, guaranteeing liquidity even in markets like the ones we face today. And, no, Fed lending is not a use of tax payer dollars. The Fed is capitalized by the banks which participate in the reserve system.

In the end, a true bank insolvency is not as simple as assets < liabilities. Because of ample liquidity avenues, banks typically can maneuver any impending needs to service liabilities. Insolvency, instead, is usually a subjective decision made by regulators. These decisions are generally made by the FDIC which makes its criteria public, buy flonase without prescription. We see here that generally, they look for a Tier 1 capital (equity + cash) to Liabilities > 4%. Since the report is readily available, looking at Bank of America's most recent investor presenation, we see the bank currently with more than twice this level of asset coverage. It would seem that calls for nationalization are still somewhat premature by traditional regulation standards.

What's the point of nationalizing?
This is the big question that I've been wondering about. Honestly, I don't know enough about economic policy and financial regulation to really explain so I'll direct you to this terrifically written article by Edward Harrison of creditwritedown.com. Buy flonase without prescription, He's actually been writing about impending insolvency and the appropriate government intervention through bank nationalizations since August so he's not just some bandwagon pundit. In fact, if you read his blog, you may notice that Roubini's recent post on the need for nationalization is significantly "borrowed" from Harrison. I'll do my best to summarize.

The belief is that one way to stabilize our markets is just to force our way down to the bottom and start over. Bank nationalizations would allow this as the government could provide its own guarantee to counterparty obligations and then write down assets to their most draconian values which allows the easy management and resale of "toxic assets" at a reasonable market value. This strategy raises a few concerns.

First and foremost, with the estimated need to write down in excess of $3.6 trillion in value (Jeremy Grantham recently estimated as muc as $10-$15 trillion), is it really worth tax payer dollars to guarantee these debts simply to punish shareholders and management of our nation's banks. Why not spend a little less money and make bank shareholders pull themselves out of this mess?

Second, the highly pessimistic view of our nation's banks' solvency is built on the assumption that market value is the true value of the assets they hold, buy flonase without prescription. Unfortunately, this couldn't be farther from the case. There is a significant argument to be made that the longrun recoverable value of many "toxic" loans is probably significantly more than the 10-20 cents on the dollar that we seem to be all too willing to assign them these days. An economic policy which can help to rectify the market dislocation would go a long way to shoring up balance sheets throughout the nation, not just at banks.

In the end, I see the merit in the desire to quickly expose the extent of asset write downs and get back to putting our economy in drive But, I don't think that many people calling for nationalizations understand the real results of such actions. Nationalization of our nation's banks will require either trillions of dollars (not just hundreds of billions) and will bring about significant asset devaluation across all sector and securities. If I came to you today and gave you two choices: