Richard Bove, an outspoken veteran banking analyst at Rochdale Securities, is frightened for what seems like a topsy-turvy reason. Banks have too much capital, not too little.
The extra capital is being driven partly by money flowing into demand deposit accounts offered by banks from other parts of the U.S. economy, Bove wrote in a Thursday note to investors.
This, in turn, is messing with the money supply. M-1 money supply is growing at a healthy 7% annual clip as bank deposits climb, the analyst noted.
But a lot of this money is coming out of small time deposits, large CDs, and money market mutual funds. These sources of money supply look a lot less healthy. M-2 is growing at 1.7% and estimated M-3 is falling by 5.9%.
For M-3, that’s the highest rate of decline recorded since the Federal Reserve re-based the money supply figures in 1959. “It is believed that M-3 fell this fast in the Depression,” Bove said....MORE
Friday, July 2, 2010
Banks: "Why Richard Bove is frightened" (BAC; C; JPM; WFC)
From MarketWatch's Market Junkie blog: