Blog on the Run: Reloaded

Wednesday, May 26, 2010 10:05 pm

Scary

Filed under: We're so screwed — Lex @ 10:05 pm
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Spain’s central bank is doing to that country’s banks what the U.S. government should have done long ago to U.S. banks: making them write down the value of bad loans on their books:

The staggered loss provision schedule will call for a 10% loss assumption for real estate acquired in foreclosures, 20% for real estate held for more than a year, and 30% for anything held for more than 2 years.

Any future acquisitions have to be appropriately accounted for within 12 months; previously, banks had up to 6 years to make stuff down. Also, foreclosed raw land gets marked down even more — 50%.
Paul Farrell, who accurately predicted the 2009 market boom, says it’s “game over,” that Great Depression II is coming, possibly by year’s end:

Earlier economist Gary Shilling said price-to-earnings ratios are at a “nosebleed 22.5 level.” The Dow was around 11,000. Money manager Jeremy Grantham recently said the market’s overvalued 40%. That could mean a collapse to 6,600. Last week in Reuters’ “Markets Could Be Derailed Again,” George Soros echoed a “game over” warning with a “stark warning … that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis.”

Now Dow Theory’s Richard Russell is warning the public of an imminent crash: “Sell … get liquid … by the end of this year they won’t recognize the country.” … This may not be a correction. Not even a bear. What’s coming could be worse than the 2000 dot-com crash and the 2008 meltdown combined, a “Super-Bubble” says [George] Soros. And the biggest reason, Nouriel Roubini and Stephen Mihm tell Newsweek, is that “the president’s half-measures won’t fix our failed financial system” because he refuses to “bust up the too-big-to-fail banks.”

OK, well, you can rock me to sleep tonight.

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