The FDIC is requiring banks to prepay their deposit insurance for the next three years in one premium payment next month. The FDIC is doing the special invoicing to raise funds to cover all the bank failures that have taken place in the last 18 months.
As should be the case, the premium rates are based upon the bank’s risk/stability rating by the FDIC. Thus, a financially unstable or higher risk bank will pay dramatically higher premiums than a more prudent or healthy bank. Ironically, this move will only accelerate bank failures in the near term. Banks that are struggling to survive will not be able to pay the premiums and will be taken over.
Is this a good move by the FDIC? I’m not sure. However, if it brings all the bank and bad loan problems to a head quicker, then yes it is. So, be prepared to hear about a surge in bank failures in the upcoming months. From what I have heard from banking professionals and read in various publications, there are banks, large financial institutions, private equity firms, ex-bankers and others lining up to buy these foreclosed banks on the cheap. This is a painful, but necessary process.
The stock market is going up, but investors are being cautious
The stock market continues its ascent; however, as reported this week in the Wall Street Journal, for the week ending 11/4/2009, investors were net sellers of stock mutual funds and buyers of bond and balanced mutual funds. It is good to see that investors are cautiously approaching this bull market and not stampeding in. I would rather have continued skepticism and not mass euphoria, that way there is plenty of money on the sidelines that can over time make its way into the stock market.
Are things looking up?
Just this week we received conflicting information regarding the direction of the U.S. economy. FedEx forecasted that it would ship approximately 8% more packages on its busiest day this holiday season compared to last year. However, the president of the World Bank noted that high joblessness in the U.S. threatens to trigger loan defaults and a drag on consumption next year.
On a more local note, I spoke with my brother-in-law who runs an executive search/placement firm in the Overland Park area. The firm’s niche is the insurance and healthcare related industries. His belief is that many firms have open positions they want to fill; however, they are waiting to see if there is passage of healthcare reform, and if so, what its impact is. He believes that there is a good possibility that there could be a nice upturn in employment beginning in 2010. This may seem more optimistic than what many economists are forecasting; however, it is nice to hear that companies have intentions to hire at some point in the near term.
Recession – who has time to worry about it
I have spoken with three clients who are business owners in the Overland Park area. In the midst of this recession, all three noted that their firms actually grew and were more profitable in 2009. I am not saying this as a rub against anyone who has been a victim of downsizing. I bring it up as a testament to these professionals who’ve committed their focus and energies on their business models and ignored all the negative news.
I am a very strong believer in this and have been using a business coach and attending CEO roundtables over the past year. My goal is to continually shape and improve how IIA does business for the benefit of you the client and those who work here.
Quotes
“Education is not preparation for life; education is life itself.”
John Dewey, philosopher and psychologist
“Make the most of every failure. Fall forward.”
Author unknown
“Be like a duck – keep calm and unruffled on the surface, but paddle like the devil underneath.”
Author unknown
Tony Moeller, President
Integrity Investment Advisors
12721 Metcalf, #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.
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