Over
the weekend I noticed the following: As reported by Bloomberg (http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html)
“Bank of America, hit by a credit downgrade last month,
has moved derivatives from its Merrill Lynch unit to a subsidiary flush with
insured deposits, according to people with direct knowledge of the situation. The Federal Reserve and Federal Deposit Insurance Corp. disagree
over the transfers, which are being requested by counterparties…”
A blog I read pointed out that this could signal that Bank of
America was near collapse. I don’t know
the background of the Blog (and I didn’t keep the link), but this issue was egregious
enough to draw the interest of John Hussman, PhD, of Hussman Funds in his weekly comment today.
Mr. Hussman said in his weekly Market Commentary this was
“outrageous” and implied that B of A was transferring bad debt to its Bank
subsidiary in order to get Taxpayers to pick up the tab if the derivatives go
south. He also said it was illegal under
the Federal Reserve Act, but that has not stopped the Fed in the past since “…the Fed can
make an exemption whether the FDIC likes it or not . And that's what we've come
to - government of the banks, by the banks, and for the banks…” - from John Hussman, PhD, Weekly Market
Comment (24 Oct 2011) http://www.hussman.net/wmc/wmc111024.htm
For
its part the bank said, “The moves by Bank of
America are part of “the normal course of dealings that we’ve had with
counterparties since Merrill Lynch and BofA came together." That’s exactly why I have
never been a fan of combining the assets of Banks (where we regular people keep
our money) and Investment Banks. This
combination was a big cause of the last banking crisis. This report is very troubling.
Regarding this market, I am beginning to get the feeling that Greece
may be a “Buy-the-rumor; sell-the-news” story. It is not likely that the US economy will get
out of the Greek/Euro-crisis without impacts.
The rumors and market expectation seems to be that all will be OK since
Europe will “fix” Greece. When/if they
do, we will have already priced it into the market and there will be no where
for the market to go but down. (Good
news is powering us up; but when the news is over, there is no more good news
to keep the market moving up.) If we get
any bad news at all, the market reaction may be down fast.
That’s what I think; what I am seeing is far more optimistic.
The NTSM market analysis remains BUY
today.
I bought back into the stock market at S&P 500 1155 on 7 Oct
after the 6 Oct NTSM buy signal. I remain
100% long in the long term portfolio (100% stocks in the 401k.). (See the page
“How to Use the NTSM System” – the link is on the right side of this page).
