FDIC Failed Banks

Every Friday night I find myself checking the FDIC Failed Bank List: http://www.fdic.gov/bank/individual/failed/banklist.html

Yea, I know. My Friday nights are not what they used to be. I like to think of it as maturity.

Anyway, I know that we tend to have short memories and become desensitized very easily these days, but do you remember how many banks were closed last November? Remember, it was a bad time for banks. Looking at the FDIC site and I guess I will have to trust the FDIC on this, in Nov 2008 the FDIC closed 5 banks! On November 21st, on just one day they closed 3! Three in one day! Remember how that affected the markets???

Well, if you are a bull, you may want to look at the FDIC Failed Bank List today. Last night the FDIC closed 5 banks in one night! This makes 89 YTD. During this time of supposed growth and green shoots (April-August) there have been 68 banks closed. Compare this to the 52 that closed between 2000 to 2008. That is right, during this record growing market we had more banks closed than during the previous 9 years. Shouldn’t this number be decreasing?

Below is a summary that I put together to help me put this into perspective.

Year # Banks Closed
2000 2
2001 4
2002 11
2003 3
2004 4
2005 0
2006 0
2007 4
2008 24
Through Sep 4, 2009 89 and it does not look to be slowing down.

Do we really have the worst behind us? I could be wrong and would like to see things improving, but based on what I see, I think the rest of 2009 will have more bank closings than what we have already seen this year. Why? Because unemployment is just starting to hit the double digits. Also, many of the people who have taken cuts in pay/hours are starting to work through their reserves and all of this will most probably lead to more defaults on credit cards, car and house payments leading to more trouble for the banks.

Sure it is great that the market has recovered so well since March, but for who exactly is it great for? The banks who have been able to raise equity to help offset their paper losses on the balance sheet, that’s who. Not long ago GS announced record bonuses and BoA has been justifying huge salary increases to offset the bonuses that their people won’t be getting any more. Well to me this sounds like the rats abandoning the ship. I may have the timing off, but sometime this year, I think we will see a plunge like never before.

I know that I can't go long in this market. Who knows, the markets may hold up and even advance through the start of 2010, but I will hold cash, SRS and be ready to short when the time comes. Right now I am strong short and looking at placing some stops, just in-case the market decides it wants to continue up for a while.

Do your own due diligence and GLTA!!!