and neither do I.
Watch about 1 minute into the interview:
"The underlying core earnings power of these banks is negligible."
"Its a crazy positive momentum based on zero fundamentals."
Guess when? Two months ago.
And Merideth, you haven't changed your macro forecast one iota; you still expect much higher unemployment (13% U3 .vs. in the mid 9s now) and yet you start talking about write-ups, issuing buy calls into stocks that have more than doubled in price with, in your own words, zero fundamentals and negligible earnings power?
Are you insane? To take a write-up you must first have taken a write-down! Yet that's the problem with all these OptionARMs and other exotic mortgages in particular - they are being carried at insane valuations; the lowest I could find was in the low 80 cent range, and that was at Wells Fargo.
This is pure fantasy; these loans are at best worth 50 cents on the dollar and some are in fact worth zero, as I noted (with math, thank you very little) in the other Ticker. Silent seconds and HELOCs behind these are worth essentially zero as they're subordinate and when they're getting anything in a reorganization its in the range of a nickel to a dime on the dollar, and then only as a sop to get the second holder to sign off.
This entire rally off the 666 lows was fueled by nothing more than accounting fraud writ large. Banks are not modifying mortgages or foreclosing because they have to take the marks if they do. In addition most of the time the outcome for the bank is worse if they modify, given that half the time the homeowner re-defaults! Now they get to eat the loss and the effort and time put into the modification.
At the end of the day the fact remains that the consumer is 70% of the economy and until consumers have de-leveraged and gotten rid of the excessive debt it is mathematically impossible for consumer spending to return to a normal level.
Our government's policy of looking the other way on blatant accounting farces through FASB changes, refusing to force banks to mark defaulted loans at the current market value of the underlying asset and outright handouts of taxpayer money through AIG as a conduit is outrageous, and worse, it guarantees that the economy will not and cannot recover as the debt still remains in the system!
Yes, I know, your comments this morning were made in such a fashion that whether the market goes up or down you can claim to be right - never mind that you got 1/3rd of your claimed move in the financials in one day. Congratulations.
Oh, one final question, given this chart as context, from today:
Was your commentary on CNBC disseminated to your clients before your appearance aired?
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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