Financial Regulations do not end “The Great Credit Crunch”

8/9/2019 Financial Regulations do not end The Great Credit Crunch

1/5

Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,and commentary can be found HERE.

July 16, 2010 Financia l Regulat ions do not end The Great Credi t Crunch

The 10-Year yield is just below 3%. Gold continues to trade below my semiannual pivot at$1218.7. Crude oil continues to trade around my annual pivot at $77.05. Todays pivot for theeuro is 1.2900. My annual pivot at 10,379 for the Dow was tested yet again on Thursday, and aclose today above continues strength for another week. The Financial Regulation Bill does notend too big to fail and ignores the problems among community banks.

10-Year Note (2.974) After holding my daily pivot at 3.111 the 10-Year yield is back between myannual pivot at 2.999 and my annual risky level at 2.813. Todays neutral zone is between my dailypivot at 3.110 and my semiannual pivot at 2.999. Semiannual and quarterly value levels are 3.479 and3.486 with annual, quarterly and semiannual risky levels at 2.813, 2.495 and 2.249. The low yield forthe move was 2.879 set on July 1st, and was a failed test of my 2.999 and 2.813 annual riskylevels.

Courtesy of Thomson / Reuters


2/5

Comex Gold ($1209.0) Strength this week has stayed shy of my semiannual pivot at $1218.7. Thislevel needs to be cleared to target my semiannual risky level at $1260.8. The downside is to myquarterly risky level at $1140.9. Todays value level is $1196.9 with my semiannual pivot at $1218.7.

The all time high of $1266.5 set on June 21st

was a test of Junes monthly resistance, as asignificant top for gold.


Nymex Crude Oil ($76.71) Its amazing how strong my annual pivot has been at $77.05. The charttrading range has been $67.15 to $87.15 with $77.05 right in the middle. My quarterly value level is$56.63 with my annual pivot at $77.05, and monthly and semiannual risky levels at $79.36 and $83.94.



3/5

The Euro (1.2932) The euro is stronger than I expected and todays pivot is 1.2900. My weekly valuelevel is 1.2422 with a daily pivot at 1.2900, and the 200-day simple moving average at 1.3691. Monthlyand quarterly value levels are 1.2035 and 1.1424.


Daily Dow - (10,359) The Dow traded above my annual pivot Tuesday through Thursday without adaily close above. Weakness on Thursday held the 50-day simple moving average at 10,244. My

weekly value level is 9,635 with my annual pivot at 10,379, and semiannual, daily and monthly riskylevels at 10,558, 10705 and 10,891. My annual risky level at 11,235 was tested at the April 26th high at11,258, which marked the end of the bear market rally that began in March 2009. We are in the secondleg of the multi-year bear market that began in October 2007 targeting 8,500 before 11,500.



4/5

The S&P 500 (SPX) (1096.5) Tuesdays high was just below my semiannual risky level at 1100.7after the July 1st low held my annual value level at 1014.2. This volatility enabled ValuTraderSubscribers to employ my Buy and Trade Strategy by shorting SPY at $120.49 on May 3rd and

covering the short at $101.84 on July 2nd

for a gain of 15.5%.


The NASDAQ (2249) A bearish cross-over where the 50-day simple moving average crossed below

the 200-day was confirmed and tested at 2251 and 2254 on Wednesday as my semiannual and annualpivots provide magnets at 2223, 2242 and 2250. All of these levels could not be taken out even withIntel reporting its best quarter in a decade. Todays risky level is 2311.



5/5

The Dodd-Frank Wall Street Reform and Consumer Protection Act - The bill touts that it ends toobig to fail but in my opinion does not. The big banks are bigger and if a problem arises where is thefunding to break up a big bank in trouble?

Its now up to the banking regulators to implement this law, but how can they be trusted when they didnot see The Great Credit Crunch coming. Remember that the US Treasury, Federal Reserve andFDIC ignored their own guidelines set in December 2006 with regard to concentrations by communitybanks to Construction & Development Loans and Non-farm Non-residential real estate loans, with thecombo called Commercial Real Estate loans. Community banks are failing today because of this lack ofregulation. Resolving this dilemma is a problem and is being hidden by fancy accounting foot work.

The FDIC has new powers among a still to be determined Systemic Risk Council. If they think that atoo big to fail institution such as AIG can be unwound using the FDIC broad authority to usereceivership powers start now! AIG owes US tax payers $47.5 billion. How about unwinding Fannie

Mae and Freddie Mac which owe taxpayers $144.9 and counting through the end of 2012 at least.If the FDIC provided a macro view back in 2003 and 2004 they would have identified the heavyconcentration of C&D and CRE loans before community banks became overly concentrated to thesereal estate loans. If they did we would not have more than half or them at risk today.

Regulators will provide much needed oversight of the derivatives markets. If the FDIC was concernedabout that Notional Amount of Derivative Contracts why would they allow them to continue to increasethroughout The Great Credit Crunch? They total $218 trillion today, up 32.3% since the end of 2007.

The FinReg Bill strengthens the capital requirements of the US banking system with bank holdingcompanies subject to the same standards as insured banks for Tier 1 capital. Too much leverage and

thin capital cushions were a factor during the financial crisis, but unfortunately for community banks thisstress has intensified while Wall Street was bailed-out. Jobs will not be created on Main Street until theproblems among Main Street community banks are cleaned up.

Perhaps the FDIC will put pressures on the too big to fail to pay higher deposit insurance fees to bringthe Deposit Insurance Fund back to regulatory ratios by mid-2013. This will require banks with assetsabove $50 billion to raise capital, which could slow lending and result in higher rates for consumer andsmall business loans.As I have been saying; you cant prevent another credit crunch until TheGreat Credit Crunch ends and the FinReg bill just makes it more difficult to end The GreatCredit Crunch.

Thats todays Four in Four. Have a great day.

Richard SuttmeierChief Market Strategistwww.ValuEngine.com(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. Ihave daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters aswell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as theValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sampleissues of my research.

I Hold No Positions in the Stocks I Cover.

Documents

Financial Regulations do not end “The Great Credit Crunch”