Bank Run Has Begun

[Cardboard]

"I disagree. The freefall in MS/JPM has to do with declining activity in the investment bank-principal transactions (of which operation twist simply worsens) and little to no M&A activity. You really think money is flowing out of JPM on solvency concerns? And what bank is the money going to if there are JPM solvency ("fear for survival") concerns?"

 

You are right with the fundamentals although, I will not agree that they explain the kind of declines and certainly rate of decline that we have seen and in some of the strongest banks. Some are trading well below book value which would equate to very low returns on equity or some bankruptcy risk.

 

IMO, the issue is 2008 all over again, except that now the U.S. is more on top of the pyramid. European banks would fail before with their current unadequate capitalization and higher exposure, but even JPM cannot survive a true domino contest with equity to assets still below 10%. That is still a huge amount of leverage leaving little room for error. Better than the 30 or 40 to 1 that we have seen, but still high. Then you have the notional amount of derivatives (and JPM is king of derivatives) that dwarf any capitalization ratio that you may use.

 

Global banking is made up of members that you simply cannot remove. They are all too big to fail. It all comes down to counterparty risk and trust. We are back to what El Erian described quite well before with an analogy.

 

When you pay your food at the first drive-tru counter at McDonald's, you trust that the food will be handed over to you at the second counter. If this trust disappears, then business is over. It is the same with your money being available at the ATM when you walk to it. If a majority even start to think that it may not be there, we have a huge problem.

 

Cardboard

[Guest Hester]

Call me crazy but I am quite happy. Happy as can be. I only have 8% cash, but am quite tired of this. Europe needs to do something, and it seems as though the can has been kicked into a wall.

 

When offered a fork in the road you cant keep going straight. I would prefer a down 20% blood bath to 6 more months of this BS.

 

Yah I agree.  Let's just crash and get it over with.

 

Reminds me of when one gets sick and just can't wait to throw up and feel better.

[fenris]

They are all too big to fail.

Just remember: 'too big to fail' does not mean 'too big to value of current equity'.

AIG didn't fail (technically) - but it's not like that made a real difference for shareholders.

[Myth465]

Call me crazy but I am quite happy. Happy as can be. I only have 8% cash, but am quite tired of this. Europe needs to do something, and it seems as though the can has been kicked into a wall.

 

When offered a fork in the road you cant keep going straight. I would prefer a down 20% blood bath to 6 more months of this BS.

 

Yah I agree.  Let's just crash and get it over with.

 

Yes, I wish my other wishes worked as well. A new car would be nice, I cant wait to wake up tomorrow lol.

 

Be careful what you wish for?  ;D

[given2invest]

The vol is just silly.  A 2% move is normal, a 3% move is once a week, and a 1% move is rare.  Meanwhile, we've been in a 10% trading range for weeks.  Will this be the time we break to the down side?  Probably.

 

 

[alertmeipp]

The vol is just silly.  A 2% move is normal, a 3% move is once a week, and a 1% move is rare.  Meanwhile, we've been in a 10% trading range for weeks.  Will this be the time we break to the down side?  Probably.

 

We need to big flush down to tell the Govs around the world that we are screwed, it's time to act.

[S2S]

i would say you will have a tarp plan in place before the open monday in Europe.

 

Someone who's much smarter than me has noted that Europe can't do a TARP till the EFSF is in place. Problem is, approval of the EFSF has just been pushed back to December, the new delayed date when Slovakia is voting on the proposal.

 

If he's right, we're screwed...