CHESSNOID

Back in February, I blogged about the coming “Global Recession started and financial meltdown brewing on the horizon” which at the time probably seemed insane. All the signs were already there. The previous 12 months showed many companies worldwide already slowing down.

***From my February post***:

Here is a list of the major financial institutions affected around the world announcing major losses in the last 12 months according to Reuters:

2007

Feb. 8 – HSBC (HSBA.L: Quote, Profile, Research) – Europe’s biggest bank HSBC Holdings blames soured U.S. subprime loans for its first-ever profit warning.

April 2 – NEW CENTURY (NEWCQ.PK: Quote, Profile, Research) – The U.S. subprime lender files for Chapter 11 bankruptcy protection in the biggest collapse of a mortgage lender in the U.S. housing downturn.

July – IKB & SACHSENLB – Two banks in Germany, IKB (IKBG.DE: Quote, Profile, Research) and state bank SachsenLB suffer exposure to the U.S. subprime market. The German banking industry bails out IKB but SachsenLB almost goes under and is quickly sold to state-backed Landesbank Baden-Wuerttemberg (LBBW).

Aug. 9 – BNP PARIBAS (BNPP.PA: Quote, Profile, Research) – The French bank bars investors from redeeming cash in $2.2 billion worth of funds, telling the markets it is unable to calculate the value of the three funds due to turmoil in the subprime market.

Aug. 9 – NIBC – The Dutch merchant bank discloses 137 million euros ($189 million) of losses on U.S. asset-backed securities in the first half, and shelves plans indefinitely for an initial public offering.

Sept. 13 – NORTHERN ROCK (NRK.L: Quote, Profile, Research) – The British mortgage lender has a run on the bank after the government reveals it has stepped in to rescue the firm.

Oct. 1 – CREDIT SUISSE (CSGN.VX: Quote, Profile, Research) says its results will be “adversely impacted” by the market turmoil but it will remain profitable in the third quarter of 2007.

Oct. 15 – CITIGROUP (C.N: Quote, Profile, Research), the largest U.S. bank by market value, says third-quarter profit fell 57 percent due to sub prime losses.

Oct. 19 – WACHOVIA CORP (WB.N: Quote, Profile, Research) – The fourth-largest U.S. bank posts a 10 percent decline in third-quarter profit, having suffered $1.3 billion of write-downs resulting from credit market turmoil.

Oct. 24 – MERRILL LYNCH (MER.N: Quote, Profile, Research) stuns Wall Street after writing down $8.4 billion, mostly from bad investments related to risky subprime mortgages.

Oct. 26 – COUNTRYWIDE – U.S. mortgage lender Countrywide Financial Corp (CFC.N: Quote, Profile, Research) posts a $1.2 billion third-quarter loss after writing down $1 billion in subprime lending losses.

Oct. 29 – MITSUBISHI UFJ FINANCIAL GROUP INC (8306.T: Quote, Profile, Research), Japan’s largest bank, says it will write down subprime-related investments by as much as 30 billion yen ($260 million) — six times more than previously announced.

Oct. 30 – UBS – Swiss bank UBS (UBSN.VX: Quote, Profile, Research) reports a third-quarter pre-tax loss of 726 million Swiss francs ($624.8 million) after a 4.2 billion franc charge on subprime-related losses.

Nov. 4 – CITIGROUP says it may write off $8 billion to $11 billion of subprime mortgage losses, on top of a $6.5 billion write-down in its third quarter.

Dec. 19 – MORGAN STANLEY (MS.N: Quote, Profile, Research) posts a $3.59 billion fourth quarter loss and $9.4 billion of mortgage-related writedowns.

2008

Jan 17. MERRILL LYNCH reports its worst ever quarter, revealing around $16 billion in mortgage-related write-downs and adjustments.

Jan. 24 – French bank SOCIETE GENERALE (SOGN.PA: Quote, Profile, Research) says fraud by a single trader has cost it over $7 billion.

Feb. 13 – Germany agrees a 1.5 billion euro rescue package for IKB, the third bailout for the stricken lender, saying a collapse of the bank would have “incalculable” consequences.

Feb. 14 – UBS (UBSN.VX: Quote, Profile, Research) says it will have to write down $18 billion in bad loans. Analysts warn its writedowns could yet double.

Feb. 17 – The British government says it will nationalise NORTHERN ROCK for a temporary period, abandoning efforts to find a private sector buyer for the ailing lender.

***click here for entire post***

I personally think most of these companies were lying about what was going on in there balance sheet. They had massive write offs all of a sudden in the billions of dollars but kept re-assuring investors that it was a one quarter event. Then of course the following quarter came and the loss was even bigger. It was obvious to me they were spoon feeding the bad news out to avoid a massive sell off on their stock. In the end, it wouldn’t prevent the actions but would rather cause a panic. I think most of the companies I mentioned back then have gone bankrupt or are trading near their historical lows.

Now the question is when will the economy pick back up. That is a bit tougher to predict than the downturn. We do have a couple of exceptional companies reporting better than expected earnings like Google and IBM, but they seem more of the exception than the rule. I also think today’s economic recovery is tied into the housing bust. There is a second wave of massive foreclosures on the horizon which no Congressional bill deals with.

That is why the recent Trillion Dollar Fraud Bailout Bill irritates me. The bill doesn’t deal with the cause of the recession. It seems to me that the 3 stooges Bush, Bernanke, and Paulson are just more interested in propping up stock and house prices for appearance’s sake. The problem is their solutions are temporary and doesn’t deal with the real issues. The economy is bad now, but when OBAMA or MCCAIN take over, it will get worse. Yes, worse than what it is now. Hard to believe but you must remember both Senators voted for that bill. This exemplifies their financial ignorance when it comes to the economy. Name dropping that you know Warren Buffett and Meg Whitman is nice, but neither have shown an understanding of the economy and the pillars that need to be fixed. I am not impressed that they know these people because they are smart people who will stay away from politics.
We do have people in Congress like RON PAUL who does understand the economy and they should use guys like him in their cabinet to help fix it. They called him crazy before the mess, but now he looks like a genius. He is very consistent and still preaching the same financial and economic advise from a few years ago.