CEO Report 05-12-09

CEO Report 05-12-09

Custodio Asset Management reports year-to-date gains of +3.124%.  The CEO is pleased with year-to-date results but acknowledges that the company has traded with care during the turbulence of the recession. 

In the first quarter, 2008, CAM endured substantial losses, yet was able to finish the year with a positive +23.98% return.  This year, the company’s first quarter strategy has been cautious.  As the markets return to the basics, CAM will be there, diligently helping your portfolio grow. 

The CEO and the CIS remain confident in their abilities to read the market, interpret the data and make wise investment decisions.

Thank you for your confidence and support.  We welcome all inquiries at 410-988-2511 or at info@Camtrading.com.

 

Stress Test Show & Tell

Stress Show And Tell is on!

On Thursday, the Obama administration puts transparency and regulation on the table when they detail the results of Treasury’s banking stress tests.  Treasury Secretary Timothy Geithner gave the country’s 19 largest banks a little extra time to prepare for the public release of the department’s findings. 

Meanwhile at least 10 the nation’s largest banks have spent recent days trying to explain unproven abilities to withstand a deepening of the recession.  The Treasury’s projections relative to the bank’s commercial real estate loans are especially troubling.  Treasury is projecting a 12% loss over a two-year period on commercial real estate loans. 

Monday, White House Press Secretary Robert Gibbs indicated that recently several banks had sought additional taxpayer funding.  Gibbs said that the White House was encouraging banks to meet capital requirements by raising private investment.

Meanwhile, the administration’s transparent handling of the stress tests has caused controversy.  Many of the banks as well as investors, like Warren Buffett, feel profits now being generated by the banks will cover a downturn.  Spurred by a responsibility to account to taxpayers, the administration is determined to release Treasury’s findings.

A bigger banking controversy is brewing.  On Wednesday, Congress is holding hearings pointed towards increasing the government’s regulatory arm.  Chaired by Senator Chris Dodd of Connecticut, the Senate Banking Committee will launch the first of several upcoming discussions focused on regulating too-big-to-fail banking institutions.  The House Financial Services Committee is expected to enter the controversy next week.

The Obama administration has pressed to expand the government’s regulatory authority over bank holding companies. The U.S. has received much international criticism for its lack of regulatory authority over commercial banks.

The Treasury and the Federal Reserve have long been pressing for legislation for more regulatory controls.  Currently, the FDIC can ascertain a bank’s strength or weakness and when necessary can intervene to arrange a solution.  Currently, the government has no such authority over bank holding companies.

The Treasury has submitted a proposal to Congress enabling “the federal agency acting as conservator or receiver to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution’s contracts (including with its employees) and to address the derivatives portfolio, thus reducing the potential for further disruption.”

Federal Reserve Chairman Ben Bernanke said to Congress last winter that “what is missing is a comprehensive dissolution authority to address systematically critical firms.”  With billions of dollars on big bank balance sheets, indications are that there is no quick fix to the increase of regulatory authority.