Greek Bank Face Downgrade

Greek Banks: Could Downgrade to BBB Lead to a Downward Spiral?

Fitch's downgrade of Greece's four largest banks to BBB from BBB+ on February 24 comes at a very sensitive time, when the ECB is starting to withdraw its liquidity support and tightening its credit standards. Moreover, the ratings outlook is negative, which points to the risk of further downgrades ahead. Expanding on its decision, Fitch cites the negative repercussions the austerity program will likely have on credit quality and loan demand. Fitch also notes limited access to wholesale funding and interbank markets at reasonable prices due to sovereign rating pressures. Fears of a self-fulfilling prophecy are justified given that the eligibility of Greek collateral might be at risk when the ECB tightens its collateral requirements to an A- rating (by at least one ratings agency) at the end of 2010. On the positive side, Fitch notes that Greek banks are mostly deposit-funded.

Source: RGE Monitor 2-25-2010

Bob Prechter Interview

Bob thinks we are at a top. I to am very concerned. But in the end no one truly knows where the market is heading.

The first 5 to e-mail me will receive a copy of the book. You will need to provide complete contact information for me to send a copy of the book.

Wealthtrack Asset Allocation Question

This week on Wealthtrack, Consuelo Mack poses the question: What place do U.S. Treasuries, bonds in general, stocks and alternative investments have in an investment portfolio in today’s markets?

Round Two on Real Estate - Commercial RE

Analysts warn of foreclosure crisis in commercial real estate. Analysts said a wave of foreclosure on commercial properties in the U.S. likely will hit community banks especially hard. "There's been an enormous bubble in commercial real estate, and it has to come down," said Elizabeth Warren, chairwoman of the Congressional Oversight Panel. "There will be significant bankruptcies among developers and significant failures among community banks." The Washington Post (19 Feb.)

Article Link

Muni Crisis - The Next Hurrdle

The logic here is quite simple:

Lower wages + higher unemployment= lower tax revenues.

Lower tax revenues + greater government spending= greater deficits.

Greater deficits eventually = insolvency or default.

Article Link

Greece Melt Down - Who is Next???

Eurozone gives Greece 1 month to make progress on cutting deficit. Finance ministers from the eurozone took a get-tough approach with Greece, warning the country of additional spending cuts and taxes if a report due March 16 shows that the Greek government is not making progress in slashing its budget deficit. They told Greece it must stick with an austerity plan presented to the EU that promises to cut this year's budget deficit from 12.7% to 8.7% of GDP. "Greece has to actually deliver and is beginning to deliver," said French Finance Minister Christine Lagarde. Google/The Associated Press (15 Feb.) , Financial Times (tiered subscription model) (16 Feb.)

Google/The AP Article Link

In addition, EU wants details of Wall Street deals related to Greek debt: The European Commission wants an explanation from Greece regarding reports that Wall Street banks put together derivatives deals that allowed the country to hide billions in debt. Statistics agency Eurostat told the Greek government to provide details of the transactions by the end of this month, said the commission's Amadeu Altafaj Tardio. EUObserver (Brussels) (15 Feb.) , Financial Times (tiered subscription model) (15 Feb.)

Euobserver Link

Good News for Homeowners

Homeowners are building up equity again, Fed says. After three years of homeowners' equity contracting in the U.S., the longest ever, the trend has reversed. The Federal Reserve's "flow of funds" survey shows that between the first and third quarters of 2009, homeowners' net equity increased almost $1 trillion. Los Angeles Times (14 Feb.)

LA Times Article