I need to tell you about the guy who really threw a cat among the pigeons yesterday. In fact, he single-handedly caused a BIG scare and sell-off of risky assets in the markets yesterday, including foreign currencies...
His name is Mike Mayo, and he used to work at Deutsche Bank, and now works as a banking analyst at Caylon Securities. And brother, can he ever move a market!
To make a long story short, Mr. Mayo basically said yesterday in a report that, "Bank Loan Losses Will Exceed Depression Levels."
With that one sentence, Mr. Mayo basically erased all that James Brown, feeling good times, that started last week with the G-20.
The Wall Street Journal printed the following...
"One reason why he (Mayo) believes the banks will face more pressure is because the legacy loans they hold on their balance sheets have not been marked to market – he estimates the marks at about 98 cents on the dollar, a much higher estimate than what others would come up with.
“We see more downside with government programs regarding those bank stocks with more traditional banking since this business – aside from when involving an acquisition – is not marked to market," he writes.
“As a result, he believes the government's help will either result in rosier-than-expected projections that allow the banks to maintain their unwanted assets on their balance sheets, or hammer them with demands for more capital, which will "hurt traditional banking more."
Okay, back to me... I want to make perfectly clear that Mr. Mayo isn't talking about all banks. There are a handful of banks that did NOT get caught up in this "fee income mania," as the big money center banks did.
But no matter who he’s pointing fingers at, the market did sell-off. More importantly, foreign currencies were caught up in the tidal wave of selling. The euro, which was trading at 1.35 when I wrote you yesterday morning, dropped all the way down to 1.3365 at the end of the day. And in the overnight market, Forex traders sold off the euro even further – all the way down to 1.3275.
Of course, the news this morning about the deepening Eurozone recession didn’t help matters. An unexpected downward revision to Eurozone fourth quarter GDP put additional pressure on the euro. Final data showed GDP contracting 1.6% in the fourth quarter.
His name is Mike Mayo, and he used to work at Deutsche Bank, and now works as a banking analyst at Caylon Securities. And brother, can he ever move a market!
To make a long story short, Mr. Mayo basically said yesterday in a report that, "Bank Loan Losses Will Exceed Depression Levels."
With that one sentence, Mr. Mayo basically erased all that James Brown, feeling good times, that started last week with the G-20.
The Wall Street Journal printed the following...
"One reason why he (Mayo) believes the banks will face more pressure is because the legacy loans they hold on their balance sheets have not been marked to market – he estimates the marks at about 98 cents on the dollar, a much higher estimate than what others would come up with.
“We see more downside with government programs regarding those bank stocks with more traditional banking since this business – aside from when involving an acquisition – is not marked to market," he writes.
“As a result, he believes the government's help will either result in rosier-than-expected projections that allow the banks to maintain their unwanted assets on their balance sheets, or hammer them with demands for more capital, which will "hurt traditional banking more."
Okay, back to me... I want to make perfectly clear that Mr. Mayo isn't talking about all banks. There are a handful of banks that did NOT get caught up in this "fee income mania," as the big money center banks did.
But no matter who he’s pointing fingers at, the market did sell-off. More importantly, foreign currencies were caught up in the tidal wave of selling. The euro, which was trading at 1.35 when I wrote you yesterday morning, dropped all the way down to 1.3365 at the end of the day. And in the overnight market, Forex traders sold off the euro even further – all the way down to 1.3275.
Of course, the news this morning about the deepening Eurozone recession didn’t help matters. An unexpected downward revision to Eurozone fourth quarter GDP put additional pressure on the euro. Final data showed GDP contracting 1.6% in the fourth quarter.
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