Fortis expects a complete collapse of the US financial markets within a few weeks. That explains, according to Fortis, the series of actions by the bank of last Thursday to raise €8 billion. "We have been saved just in time. The situation in the US is much worse than we had thought", says Fortis chairman Maurice Lippens. Fortis expects bankruptcies amongst 6000 American banks which have a small coverage currently. But also with Citigroup, General Motors, a complete meltdown in the US is beginning."As Jesse notes, Fortis may have its own reasons for this, er, fortissimo prediction. No one commenting on economics is ever purely disinterested and objective. Still, holy cow! That the board chairman of a big bank would make such an extreme statement for public consumption suggests how far into the danger zone the U.S. economy may have strayed.
Interestingly, today's Wall Street Journal carries an article about Fortis's casting the net for billions of Euros of new capital, but says nothing about the "financial meltdown" statement. A quick check of MarketWatch.com and TheStreet.com finds not a breath of it. What happens in Amsterdam, stays in Amsterdam?
Would you like a taste of pure nausea? Let's call again on financial newsletter writer (yes, he has his own vested interest) Jim Willie:
The stage is set for the next two to four months for a broader banking system deterioration, most likely the bankrupt collapse of a few big banks, and a good chance of lost control of portions of the credit derivative complex. A big broad powerful liquidation sequence is coming soon for the biggest of bloated money center and investment banks. They have tried in vain to sell most of their overpriced mortgage bonds and related financial securities. They cannot find truly stupid parties anymore to buy them. …I am in no position to know the ratio of truth to hot air in the above, but he is by no means the only commentator in the non-Establishment or "alternative" financial media who is talking like this. It seems like only common sense to get very defensive with your investments — precious metals, commodities, companies with a good secure dividend, perhaps a few strong currencies if you can find any. While the Senile Media are babbling on about the electoral contest between the False Messiah and the Masked Crackpot, the economy is probably far more important at the moment. If you haven't started performing your own due diligence, what are you waiting for?
Goldman Sachs on Thursday downgraded Citigroup with a short stock recommendation. Why would they do that? They put Citi on their ‘Americas Conviction Sell’ list, which just has to evoke laughter for its name. They expect another gigantic bond loss to be admitted by Citi, more cash to be raised as they sell capital and undermine stock equity value, and even more dividend cuts. Up to May, the total amount of cash they raised by selling off capital to foreign entities was a robust $42 billion, thus undermining US control of the biggest US bank. …
The smart guys out there have figured out the helpless and desperate situation that the USFed finds itself. It cannot raise rates, since that would harm the stock market, further cripple the mortgage and housing markets, and worsen the rapidly advancing USEconomic recession. Sure, it needs to raise rates in order to defend the USDollar, but the US$ is not defensible. It has been totally ruined by three decades of mismanagement, corruption, pork projects, sacred war budgets, socialist programs like Medicare, and reckless creation of bubbles in serial fashion.