06/04/10 Jacobus, Pennsylvania – Foreclosure activity is crucial to the outlook for bank earnings. Mortgage losses will continue to be a growing problem for bank stocks in 2010.
Since the suspension of mark-to-market accounting, banks have gained much more control over timing their credit losses, but they cannot get away with completely ignoring them when the evidence is overwhelming that credit losses are real.
From Mark Hanson Advisers:
- There were a record 92,500 bank repossessions in April
- At the same time, 29,400 new notices of default were issued
- So the pool of “distressed” housing fell by 63,100.
It’s fairly obvious that the backlog of foreclosures has built up like water behind a dam. Once the dam gives way, the market may be shocked at how quickly the headline foreclosure numbers accelerate. A saying you often hear in the banking business is: The first loss is the best loss.
Dan Amoss
for The Daily Reckoning
Dan Amoss
Dan Amoss, CFA, is a student of the Austrian school of economics, a discipline that he uses to identify imbalances in specific sectors of the market. He tracks aggressive accounting and other red flags that the market typically misses. Amoss is a Maryland native, a graduate of Loyola University Maryland, and earned his CFA charter in 2005. In spring 2008, he recommended Lehman Brothers puts, advising readers to hold the position as the stock fell from $45 to $12. Amoss is managing editor of the Strategic Short Report.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
