Over the last few months, the mainstream financial experts repeatedly went on the record to say that the end of the global banking crisis was here. To wit:
- "Beyond stock movements, there is other evidence that the banking industry is back on its feet." (Forbes)
- "Banks are returning to profit. The assumption is banks have seen the worst of losses. Since they were the ones to lead us into this crisis, they will be the ones to lead us out." (Bloomberg)
- "Happy days are here again. The panic's over. Gloom is gone. We have emerged from the fleeting shadows on to the sunlit uplands of optimism once more." (Associated Press)
Yet -- a December 19 report revealed the total number of bank failures for 2009 had now reached 140 -- versus 25 in 2008, and a measly three in 2007. Also, the number of banks on the Federal Deposit Insurance Corporations (FDIC) list of "problem institutions" soared to 552, the highest figure since 1993. In the words of one Wall Street Journal:
"When you get these failing banks, they're much more like a fresh-caught-fish than a fine wine. They don't get better with age."
Fact: Since the very start of the financial crisis, the talking heads have glided down a slope of unwavering hope. At so many fleeting lows, they called the absolute "end" to the rout -- only to watch in horror as banking shares were battered even further.
To illustrate this phenomenon is the following close-up of the Philadelphia/KBW Bank Index since 2006 alongside some of the most blatantly misguided mainstream insights.
Contrary to popular belief, the alternative -- seeing the crisis unfold before it occurred -- was quite possible. Here, Elliott Wave International's team of analysts provided a clear blue-print for the destabilization and deterioration of the U.S. banking sector. On this is the following archive of our publications:
September 2005 Elliott Wave Financial Forecast:
“Banks seem to be blind to the danger of overpriced collateral as they continue to stuff their balance sheets with mortgage-backed assets… Lenders are still behind the curve, but once they see the writing on the wall, the rug will get pulled out from under the economy in a hurry.”
The "blindness" continued, as participant’s invented riskier and riskier ways for U.S. banks to bundle the $600 billion mortgage securities market. Then, in the rise up to the peak in the KBW index, the December 2006 Elliott Wave Financialwrote:
"The Philadelphia Bank Index is headed for something much more serious than a brief correction."
Finally, the January 2007 Elliott Wave Financial Forecast saw that the point of no return had been reached. “2007,” we wrote. This would be “The Year of the Financial Flameout.”
Fact: The majority of signs out there today point not to a sector in the early stages of recovery; but rather, one headed for a dramatic relapse. To wit: The "stinking fish" of failed banks fall on the shoulders of the FDIC, which itself just recorded its first quarterly deficit since 1992.
Also, as the November 19 Elliott Wave Theorist revealed: today's banks are 95% invested in the mortgage industry. In other words: Your deposits are now backed by IOU's that use homes as collateral.