Our financial system is crumbling this week.

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So the major stock averages almost fell off a cliff again but were pulled back. The only stocks I see with any strength are tech companies with a role in the next generation networks or cloud computing, - Aruba Networks, Infinera, Procera Networks, Sycamore Networks, Sandisk, Finisar, Right Now; plus Nordstrom and Berkshire Hathaway. I just don't get where the cash will come from to pay for a new network if people can't afford to pay their cell phone bills or internet providers.

[Hungary Jack]

I don't think so that would be too obvious. J of D or HJ might know.

but you just said they were given?

They weren't given, but were purchased at significant discounts. Some banks made out well, like JP Morgan Chase getting WaMu for about $2B, which included all of WaMu's west coast retail branches, which was a weakness in JPMC's strategy.

However, it looks like BofA made a big mistake in buying Merrill Lynch. They wanted the wealth management and broker business, but got a mess of bad assets for his $50B in stock. The deal cost the CEO, Ken Lewis, his job.

BofA also bought Countrywide for $4B, once run by an icon of a man named Angelo Mozilo. So BofA went way long in mortgages when the thought that all the bad news had been put on the table, a mistake they are paying for dearly.

Lehman was chopped up and auctioned off.

[TimeForGuinness]

I don't think so that would be too obvious. J of D or HJ might know.

but you just said they were given?

They weren't given, but were purchased at significant discounts. Some banks made out well, like JP Morgan Chase getting WaMu for about $2B, which included all of WaMu's west coast retail branches, which was a weakness in JPMC's strategy.

However, it looks like BofA made a big mistake in buying Merrill Lynch. They wanted the wealth management and broker business, but got a mess of bad assets for his $50B in stock. The deal cost the CEO, Ken Lewis, his job.

BofA also bought Countrywide for $4B, once run by an icon of a man named Angelo Mozilo. So BofA went way long in mortgages when the thought that all the bad news had been put on the table, a mistake they are paying for dearly.

Lehman was chopped up and auctioned off.

Hasn't Merrill has been a bright point for BoA in recent quarters? It seems it's the only bright point with the travesty that is Countrywide weighing them down.

[Hungary Jack]

I don't think so that would be too obvious. J of D or HJ might know.

but you just said they were given?

They weren't given, but were purchased at significant discounts. Some banks made out well, like JP Morgan Chase getting WaMu for about $2B, which included all of WaMu's west coast retail branches, which was a weakness in JPMC's strategy.

However, it looks like BofA made a big mistake in buying Merrill Lynch. They wanted the wealth management and broker business, but got a mess of bad assets for his $50B in stock. The deal cost the CEO, Ken Lewis, his job.

BofA also bought Countrywide for $4B, once run by an icon of a man named Angelo Mozilo. So BofA went way long in mortgages when the thought that all the bad news had been put on the table, a mistake they are paying for dearly.

Lehman was chopped up and auctioned off.

Hasn't Merrill has been a bright point for BoA in recent quarters? It seems it's the only bright point with the travesty that is Countrywide weighing them down.

I think so. But right after the ML deal closed, they announced a $21B quarterly loss. Lewis then claimed he was not told of the size of the problems at ML (mostly bad mortgage securities and CDOs) and claimed he was pressured by federal regulators to accept the deal. But ML had a huge network of brokers and advisers with high net worth clients, an area where BofA wasn't very strong.

Countrywide has been a disaster for BofA.

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2:23 PM North American rail traffic last week came in at 721K cars, up from 704K the week before and the highest since pre-Lehman 2008. Todd Sullivan notes that if the U.S. enters a new recession, it will be the first time ever with increases in both rail traffic and auto sales. CSX +2.3%, NSC +2.8%, UNP +3.7%, KSU +2.6%. [U.S. Economy] Comment!

http://seekingalpha.com/currents/all

RRD, PBI
2:19 PM Birinyi screens S&P 1500 stocks to uncover a list of 8 stocks trading with a dividend yield higher than its P/E ratio. Though analysts with the firm say the method isn't a "foolproof" way to find undervalued stocks, they do call it an "interesting starting point." Stocks: RRD, PBI, DLX, UNTD, AINV, USMO, LINC, PSEC. [Quick Ideas] Comment!

[Hungary Jack]

With money so cheap, one would think banks would be falling out of their shoes to make loans. But this is what got us into the mess to begin with.

As a small biz owner, I would definitely like to see more competition in the industry. The consolidation has left us with fairly unappetizing options. I use Chase for checking and merchant services. The merchant occur is OK. I probably pay about 1.5% of sales in credit card commissions. But the checking accounts cost $12 for payroll services (basically direct deposit) and the the fees for a credit overdraft protection kick in at strange times. It is pretty clear they are trying to raise revenue from various fees for service.

But BofA doesn't look any better. And I talked to the lady with hairy arms at PNC, and it's like they had never heard of business banking. North Community Bank, the founder of whom I know a bit, is about to be seized. And so on.

For consumer banking, credit unions seem the way to go, as long as they didn't get into mortgage securities (some did, I think).

I found this about Chicago-area banks (it is actually from 2010, but probably still applies):

Steven Hovde, chief executive of Inverness-based investment bank Hovde Financial, said this month at an Association for Corporate Growth event that an additional 500 to 700 U.S. banks could fail in coming years, on top of the 250 that have collapsed since early 2008.

Community banks, a big part of Chicago's banking scene, "are seeing nothing but pain," he said.

In the first quarter, banks headquartered in the Chicago area lost an aggregate $3 million, while earning $212.5 million in the same period last year, Loan Workout and MDI said.

They also have $6.3 billion of seriously delinquent loans, up from $4.25 billion. And foreclosed real estate has jumped to $1.37 billion from $529.5 million. Those bad-asset numbers are up from the fourth quarter as well.

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It happens almost every night- Yahoo reports European and Asian stock prices are down, yet if you check the quotes they are higher.

[Hungary Jack]

It happens almost every night- Yahoo reports European and Asian stock prices are down, yet if you check the quotes they are higher.

Maybe that's why Yahoo is sucking gas in trying to generate ad revenue, and just replaced their CEO?

[Hungary Jack]

According to data from the U.S. Federal Reserve, total household debt, including consumer credit and mortgage debt, just about doubled between 2000 and 2008, when it hit $13.8 trillion. Since then, it has been declining steadily, coming in at $13.3 trillion at the end of the second quarter of 2011. At the same time consumers are saving more. The personal savings rate -- savings as a percent of disposable income -- was 4.5% in August versus less than 2% in 2005. And while the Thomson Reuters/University of Michigan Index of Consumer Sentiment showed some improvement in September compared to August, it is still far off pre-recession levels

[longhornbaseball]