Hedge Expert Says Most Banks Now Insolvent

kathaksung

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HEDGE EXPERT SAYS MOST BANKS NOW INSOLVENT
FINANCIAL TIMES:
A Californian hedge fund has made more than 1,000 per cent return this year by betting against US subprime home loans, making it one of the world's best-performing funds of all time....
...However, Mr Lahde, whose fund is one of the smallest specialists shorting subprime, has now begun to return money to investors, telling them in a letter: "The risk/return characteristics are far less attractive than in the past."

In his letter, Mr Lahde said he expected the collapse in value of subprime mortgage-linked securities to be repeated for bonds backed by commercial property loans in a deep recession � which he also predicts.

"Our entire banking system is a complete disaster," he wrote. "In my opinion, nearly every major bank would be insolvent if they marked their assets to market." He also said he would be putting some of his own profits into gold and other precious metals...
[*] <http://www.ft.com/cms/s/0/7b6160be-9b80-11dc-8aad-0000779fd2ac.html?nclick_check=1>

Of course, gold has already spiked to $825/oz so it may not go too much higher... but we know one thing, that unlike the dollar, it is unlikely to go down, or even worse, unlike some banks, disappear altogether.
Are the banks next?

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDdJ4GDZ6eao&refer=home
 

burrow_owl

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This guy must be a charlatan. Banks are, practically by definition, insolvent. Institutional insolvency is how they operate, and how they make the economy go. It wouldn't surprise me at all if this loon talked about "fiat money" and blamed various crises on the Illuminati.
 
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simplicity

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I'm not worried. Our bank deposits are insured. Or at least they are supposed to be. If he is arguing that the loan-loss provisions are not adequate, he probably has a fair point. Yet a bank is not merely an investment arm. The thing is, given the huge amount of debt in the world, banks aren't really wired up as savings institutions but rather places to borrow money. That hasn't changed. Their ability to process my cheques and let me pay bills on the internet - that's all still the same. Last week I used my bank card to pay for some McNuggets. That's a seriously high level of convenience. I almost never use cash anymore. So to me what I recognize as the banking system is actually working really well.
 
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wpiman2

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I'm not worried. Our bank deposits are insured. Or at least they are supposed to be. If he is arguing that the loan-loss provisions are not adequate, he probably has a fair point. Yet a bank is not merely an investment arm. The thing is, given the huge amount of debt in the world, banks aren't really wired up as savings institutions but rather places to borrow money. That hasn't changed. Their ability to process my cheques and let me pay bills on the internet - that's all still the same. Last week I used my bank card to pay for some McNuggets. That's a seriously high level of convenience. I almost never use cash anymore. So to me what I recognize as the banking system is actually working really well.

Yeah, they are insured only up to $100,000. Then what?
 
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