Banks Have Hit Their 1995 Pivot - Quick Remarks On The Banksters And Global Banking Losses
Equity markets are the most oversold in probably the history of mankind right now. We are so many standard deviations out of bounds in the banking sector that in any normal situation, we would have had an explosive rally this week. Normal is defined as anything up until a month or so ago. Obviously normal is becoming less and less normal as time progresses.
It may also be of interest to note that the Banking Index has reached its 1995 pivot with the bloody massacre on Wednesday. In fact, we could be near a temporary washout in many banks. That doesn't necessarily have any implications other than the fear of nationalization, the fear of losses, the fear of defaults, the fear of the unknown and the fear of fear has forced everyone and their brother to throw banks out the window. Doesn't mean they won't go bankrupt. Doesn't mean they will go up by any appreciable amount. In fact, it doesn't necessarily mean anything other than some banks have been literally puked out of portfolios. If I sound like someone who now finds banks appealing, I wouldn't get too excited. Most mega banks aren't likely to survive longer term without some involvement by government.
Now that banks have actually reached a price level (1995) that would generally have been classified as insanity just six months ago, let's revisit what this could potentially mean. I know we have talked about this first point before but I want to state is again. One way to look at what has happened in the banking system is that the markets have effectively discounted all banking activity in the mega banks since 1995. Thirteen years gone. Given the tens of trillions of dollars in global wealth loss, there is little doubt to some validity of this statement. If we accept this statement of economic discounting as a potential baseline, total banking losses could very well amount to $5 trillion in the U.S. and $15 trillion outside of the U.S. Total wealth loss including paper assets, bank losses, bankruptcies and asset price declines could be as much as $100 trillion globally by the time this crisis has passed. Now, what I am stating is simply a guesstimate but we are likely closing in on $50 trillion already. Think central bankers can inflate their way out of this type of wealth destruction?
It may also be of interest to note that the Banking Index has reached its 1995 pivot with the bloody massacre on Wednesday. In fact, we could be near a temporary washout in many banks. That doesn't necessarily have any implications other than the fear of nationalization, the fear of losses, the fear of defaults, the fear of the unknown and the fear of fear has forced everyone and their brother to throw banks out the window. Doesn't mean they won't go bankrupt. Doesn't mean they will go up by any appreciable amount. In fact, it doesn't necessarily mean anything other than some banks have been literally puked out of portfolios. If I sound like someone who now finds banks appealing, I wouldn't get too excited. Most mega banks aren't likely to survive longer term without some involvement by government.
Now that banks have actually reached a price level (1995) that would generally have been classified as insanity just six months ago, let's revisit what this could potentially mean. I know we have talked about this first point before but I want to state is again. One way to look at what has happened in the banking system is that the markets have effectively discounted all banking activity in the mega banks since 1995. Thirteen years gone. Given the tens of trillions of dollars in global wealth loss, there is little doubt to some validity of this statement. If we accept this statement of economic discounting as a potential baseline, total banking losses could very well amount to $5 trillion in the U.S. and $15 trillion outside of the U.S. Total wealth loss including paper assets, bank losses, bankruptcies and asset price declines could be as much as $100 trillion globally by the time this crisis has passed. Now, what I am stating is simply a guesstimate but we are likely closing in on $50 trillion already. Think central bankers can inflate their way out of this type of wealth destruction?
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