What's your stock market prediction for Monday, July 14? IndyMac takeover was announced after close...?

Question

... on Friday, so the market had no chance to react (maybe something happened in after-hours trading, I don't know). Do you think stock traders will see the takeover as a big negative and hammer stocks again, or celebrate because the government is riding to the rescue again, or not react?

Thanks,

Houyhnhnm

Answer 1

Here's what that will translate into in market terms:

Expect oil to add another $3.60 (from Fridays close) at least in the next week. that's all you need to know.

It has made oil less of a relative top and made it more of a relative bottom (or middle, or whatever).

Good luck

Answer 2

The market has been reacting for the past year. The stock is down some 98%.

The FDIC seized the bank on F 07-11-2008 (eve) after the market was closed and everyone was home.

Reuters reports, this is the "2nd biggest bank failure in US history."



The FDIC does not guarantee stock holder's equity in a bank failure. The stock will be desisted soon, then trade on the pinks for pennies, then go to zero ($0.00) when the FDIC can find someone to acquire their assets.

The FDIC has ONLY $53 billion insurance fund. That's a heck of a lot less capital than I thought.

The FDIC estimates they will have to shell out "between $4 billion and $8 billion" to make qualifying depositors whole.

http://www.reuters.com/article/gc06/idUS...

There is about 4% of Indymac depositors that will not be eligible for FDIC insurance.

http://answers.yahoo.com/question/index;...

Answer 3

Unstable conditions do affect stock markets. Moreover, rising prices,rising inflation ,rising gold rates do worry investors. It is likely that after some enthusiasts early, the stock level will continue to stay at the present level. After 21st august, it may start rising,particularly in Sept.,At present further downfall will be only marginal.

Answer 4

I'll tell you one thing; it ain't gonna crash upwards. (you can make money out of that fact!)

Answer 5

First, that ain't a good news. The government did not rescue anybody. The bank was not bailed out or taken over. It is under the FDIC/OTS receivership. That is the worse thing that could happen to a bank. It means they cannot even pay back depositors who, instead, will be paid back by the FDIC under the normal terms of insurance. It may even be possible that some depositors will not be fully paid back if their deposits was higher than the maximum limit insured bt FDIC (This is now estimated at $500 millions of lost deposits out of $1 billion in uninsured deposits, which may be revised upward). IndyMac was under a bank run for the past few days, hundreds of millions of dollars has been withdrawn in a matter of days.

This will not have much effect on IndyMac's stock, it was already a penny stock before the news, and next week may be moved OTC where it will be traded for few cents until it is completely delisted ($0). However, it is a somehow big news for the market (overtaken only by Fannie and Fredie). IndyMac was the second biggest bank to go bust including the 80's S&L crisis (and I think the 3rd biggest in US history). In fact, I see it only as the opening bell for the next wave of medium-sized bank failures (which are not too-big-to-fail) and much bigger institutions such as FNM and FRE (which are too-big-to-bail). If anything, it will have a very strong psychological effect on the markets. Remember Bear Stern. It has become like 9/11. You cannot argue against once it is brought up. Much of what is happening to Lehman is from the trauma of Bear Sterns. IndyMac could have the same trauma effect for other similar banks that are under pressure.

"It's possible this will be the most costly bank failure in history, but it's too soon to say," FDIC Chairman Sheila Bair said in a conference call late Friday night. The failure "could also affect premiums paid by all banks for deposit insurance," she added.

Answer 6

no big deal.  it was trading at 30 cents

Answer 7

The key is how the public reacts. If they make the connection between the size of the sub-prime and Alt-A mortgages outstanding (huge, over a trn USD) and the present level of FDIC capital (small, 50+bn) to make depositors whole (even those with 100k or less), they may decide on a safer alternative to US banks like US Treasury Bills. If they do that, runs on other thrifts and even a money center bank can't be ruled out. This is also terrible for f***y and Freddy (Freddy has big debt to roll this wk) and bad for investment banks who have been under pressure like Lehman.

I expect the S&P to open at 12,000, down about 3%. That is weak support. Real support is at 11,000, which is where we're headed.