Coming home to roost - bank bubbles
The problems with the banking system are manifesting in a lot of different places these days. I am not an economist (nor do I play one on TV) but the signs are strong that we are in for a bumpy ride.
The news about IndyMac (and FannieMae and FreddieMac) is widely circulated but other establishments are in trouble as well including common "big" banks.
My Dad has a lot of his money at Washington Mutual and after hearing that they were in a spot of trouble with some bad loans, I checked their stock prices and was surprised at what I saw. Here is the five year chart:
(ed. note: I a shrinking the charts to cut filesize. Full charts and additional data can be found at BigCharts WM is the stock code for Washington Mutual and BAC is the code for Bank of America)
Moribund performance until a sharp downward plunge.
Here is the six months ago to present version:
Note that in the last 2 1/2 months, the stock price lost 300% from $12 to under $4.
Jen and I bank at Bank of America and we were thinking that since WaMu did a lot of home and construction loans, they were especially vulnerable and that our bank, big old BofA would not be in such bad shape. Hooo Boy!
BofA five year:
BofA didn't do as badly as WaMu in the earliest years -- they showed a nice deliberate rise from $40 in 2004 to $55 in 2007 but they started declining then and the pitch towards the bottom happened right at the beginning of 2008 with the same shaped curve as WaMu -- a nice spike in the first few weeks and then down, down, down...
The six-month chart is almost as bad with a 200% loss for the last 2 1/2 months:
And of course, everyone was so pleased to get the risky loans but now they want the Federal government to bail them out...
Like I said, we are going to be in for an interesting ride. Stock up on non-perishable foods, close out any high-yield investments as these have the highest risks involved and prepare for an interesting ride.
Posted by DaveH at July 15, 2008 7:25 PM