Sunday, March 29, 2009

Emory memories - Goodbye Omni National

When I was a student at Emory in Atlanta I used to bank with what is now Omni National. What a shock to discover that the FDIC has closed it - the 21st bank to be closed this year.

Am still looking for the upside as a sign to move out of cash and put my 401k to work but so far all I see is false dawns. Am betting Q1 will be worse than Q4 '08. If I take European plane maker EADS as a guide then I have to assume that capital investment has come to a halt - this will hit all those German family companies and US mid-west machine tool manufacturers. My guess is we'll be down 7% and I'm betting equity markets won't like the multiple that the S&P is trading on. Italy's central bank thinks the economy will ease by 2.5% this year - I'm betting 4.2% is more likely as all those sub-component orders from Germany evaporate.

This week all eyes will be on London. The Germans ,French and Italians are coming over all conservative. They haven't yet got the message that if the Brits and Americans aren't buying then there is much worse to come for their economies. Paris may like protectionism but I'm not sure Germany ultimately will.

Remain a bull on Geithner's latest package but he will need to force some of those 'too big to fail' institutions to take the balance sheet hit of selling toxic assets at 50 cents on the $. Too many bankers have their heads in the sand and still think they are worth the full buck. As credit card and commercial real estate defaults start to hit bank balance sheets nationalisation will remain a very real option.

Key issue in London thsi week will be the body language between the Americans and the Chinese. The Chinese need to boost consumption and the Americans need to promise to keep the greenback strong. Europe is a sideshow .What does a strong dollar do to all those commodity and precious metal trades ?.

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