Is Huntington Bank The Next National City Bank? Plus updated Downside Targets For The S&P 500.
We have talked about Huntington Bank on here before. Not in a good way either. It is a super regional with banking operations concentrated in the midwest. The industrial midwest has been in a depression for the last ten years. Of course, much of that was hidden from plain view because of the Wall Street bubble. That is, until this past year. This last year has been very unkind to many banks that had weak or nonexistent risk management practices.
Yesterday Huntington's stock price broke through the $2 level. The stock was down over 30% yesterday at its lowest price level. This was on very heavy selling. That's not a good sign. I'm not sure if insider knowledge has leaked onto Wall Street but regardless the company looks to be following the fate of another midwest super regional, National City Bank. National City was for all practical purposes purchased with taxpayer TARP money. Otherwise it would have failed. In other words, Huntington is in very bad financial shape and without a suitor, nationalization or some bailout, there is little reason to believe it is long for this world. Given the state of its balance sheet and the state of other banks, I would not expect a suitor without government playing the role of matchmaker.
Notice how Huntington was repelled substantially higher off of the 1995 price pivot in its collapse last fall. But, this year it has plowed through that level with ease.
Huntington's price action crystallizes a broader concern I have. There are simply too many macro problems that remain unattended to and equity prices have moved down much too rapidly. The economic & political communities are not embracing the changes needed to pull us out of this economic crisis. So, I am broadening my potential downside target for the S&P 500 from our original 1995 pivot of 400-450 to a new target range of 200-450. Of course, any worst case downside for the S&P in coming months should be contained to the 600-724 levels we have discussed over the last handful of months. Any upside in a potential rally we discussed as possibly developing in the first few months of 2009 should be contained below the 1100-1200 level.
If any long time followers of this blog have lost even a nickel in banking stocks, I'm going to personally give you a frontal lobotomy. We have ranted over and over and over that bank liquidity continued to deteriorate and that the bottom was not in.
We have now reached a point where I am about ready to throw in the towel. When major banks are down 90% and trading for a few dollars a share, it's more than obvious to everyone they are insolvent. So, what's the point in doing future analysis? We are at a critical juncture for many of these large banks. Something must give. Either they are nationalized or the government is going to waste trillions of taxpayer dollars saving these edifices of bloat or some exogenous and unpredictable event of some type is going to occur. In other words, management has dealt many of these firms a fatal blow and their fate is out of their hands. External events are unpredictable so any future analysis has very limited value.
In closing, I would like to warn anyone from becoming too wedded to any future view of equities over the intermediate term. ie, The next six months. That is, unless you are an adept trader. As we have written over the last few months, the seeds of a rally were starting to show but that it was too early for those seeds to develop. Additionally, exogenous events could easily flip the direction of the market and/or drive violent moves in more than one direction.
Yesterday Huntington's stock price broke through the $2 level. The stock was down over 30% yesterday at its lowest price level. This was on very heavy selling. That's not a good sign. I'm not sure if insider knowledge has leaked onto Wall Street but regardless the company looks to be following the fate of another midwest super regional, National City Bank. National City was for all practical purposes purchased with taxpayer TARP money. Otherwise it would have failed. In other words, Huntington is in very bad financial shape and without a suitor, nationalization or some bailout, there is little reason to believe it is long for this world. Given the state of its balance sheet and the state of other banks, I would not expect a suitor without government playing the role of matchmaker.
Notice how Huntington was repelled substantially higher off of the 1995 price pivot in its collapse last fall. But, this year it has plowed through that level with ease.
Huntington's price action crystallizes a broader concern I have. There are simply too many macro problems that remain unattended to and equity prices have moved down much too rapidly. The economic & political communities are not embracing the changes needed to pull us out of this economic crisis. So, I am broadening my potential downside target for the S&P 500 from our original 1995 pivot of 400-450 to a new target range of 200-450. Of course, any worst case downside for the S&P in coming months should be contained to the 600-724 levels we have discussed over the last handful of months. Any upside in a potential rally we discussed as possibly developing in the first few months of 2009 should be contained below the 1100-1200 level.
If any long time followers of this blog have lost even a nickel in banking stocks, I'm going to personally give you a frontal lobotomy. We have ranted over and over and over that bank liquidity continued to deteriorate and that the bottom was not in.
We have now reached a point where I am about ready to throw in the towel. When major banks are down 90% and trading for a few dollars a share, it's more than obvious to everyone they are insolvent. So, what's the point in doing future analysis? We are at a critical juncture for many of these large banks. Something must give. Either they are nationalized or the government is going to waste trillions of taxpayer dollars saving these edifices of bloat or some exogenous and unpredictable event of some type is going to occur. In other words, management has dealt many of these firms a fatal blow and their fate is out of their hands. External events are unpredictable so any future analysis has very limited value.
In closing, I would like to warn anyone from becoming too wedded to any future view of equities over the intermediate term. ie, The next six months. That is, unless you are an adept trader. As we have written over the last few months, the seeds of a rally were starting to show but that it was too early for those seeds to develop. Additionally, exogenous events could easily flip the direction of the market and/or drive violent moves in more than one direction.
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