From Yahoo Business:

John Mauldin, editor of Thoughts from the Frontline, says Europe’s banks are in worse shape than their US counterparts—and there’s no Fed or Treasury to bail them out.

Europe’s banking system is in far worse shape than the US. The losses may be bigger, and their capital to meet those losses is certainly less. Europe’s banks have been much more aggressive in funding emerging-market expansion than US or Japanese banks. Western European banks have lent $4.5 trillion to various emerging-market countries, businesses, and consumers.

In the first few years of the Bush administration, the banking authorities decided it would be OK to allow five banks to increase their leverage from 12:1 up to 30:1.

Which five banks, you ask? Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley (NYSE: MS), and Goldman Sachs Group (NYSE: GS).

Thirty times leverage means that if you lose 3.3%, you wipe out all your capital. And we watched as banks too big to fail were bailed out with taxpayer dollars. The point is that here there was a central bank and a government that not only could step in but was willing to.

Regulators in the UK allowed 20:1 leverage on a regular basis. It is now almost 40:1. Assets of UK banks are about five times as large as UK GDP. By comparison, for the US the ratio is barely 2:1.

Think about that for a second. The UK has banking assets which are five times as large as the annual domestic output of the country. They also had a housing bubble. They have their own bailouts to deal with, which are massive and will potentially get much larger. But at least they have a central bank and government that can try to fix the problems.

But [in] the Eurozone, leverage is now 35:1. Given the massive credit problems that Eurozone banks have with emerging markets (plus Spain’s housing bubble, which is every bit as bad as that of the US), will this not end up in wailing and weeping?

And here’s the real issue: They have no Paulson and Bernanke. The European Central Bank cannot step in and start saving individual banks. How do you save a Spanish bank and not an Austrian bank? Austria’s banks have made large loans to Eastern Europe, in euros and Swiss francs, and are going to have large losses, far more than 3%, which would wipe out their capital.

We think of Switzerland as a stodgy, by-the-numbers, clockwork type of banking country. But somewhere, somehow, UBS (NYSE: UBS) and Credit Suisse Group (NYSE: CS) ran up a little leverage. Before the crisis, they were over 40:1. And now they’re nearly at a nosebleed-high 70!

Eurozone banks are already reeling from losses from US subprime-related problems. They are now getting ready to deal with even deeper losses from their own lending portfolios. If the losses were just 5% of the portfolio (an optimistic assumption), it would be 20% of Eurozone GDP. But each country is responsible for its own banks. Where does Europe find a few trillion dollars?

Todays Economic Calender

Weekly Bill Settlement

Jobless Claims
8:30 AM ET

EIA Natural Gas Report
10:30 AM ET

3-Month Bill Announcement
11:00 AM ET

6-Month Bill Announcement
11:00 AM ET

7-Yr Note Auction
1:00 PM ET

Fed Balance Sheet
4:30 PM ET

Money Supply
4:30 PM ET

People don’t look much at supply and demand these days, and they talk about it even less, but it is good ol’ supply and demand that determines the price of all material in a capitalist society.  Oil is no exception, and demand has been off for quite some time, hence, the unusually large amount of surplus in our current supply.  To combat this, several oil company economists have issued a few reports that indicate the supply is not nearly as large as is being reported, but my gut instinct is to not trust oil company economists.

INO TV has a nice video that will give you some excellent insight into some of the movements of oil stock prices through an ETF named USO…I think that it is pretty interesting.

You can see the video here

Hope you find the video interesting and make sure you check out the INO-TV training series, which is just excellent at:

“Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger.

A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.”

Of course, Goldman Sachs says:

“At the other end of the spectrum from Verleger, Goldman Sachs Group Inc. predicted in a report yesterday oil will rally to $85 a barrel by the end of the year, and recommended that clients buy futures contracts for delivery in December 2011.”

Sorta makes you wonder if these guys are reading the same data.  It baffles me how Goldman, a for-profit bank, and Verlanger, who is a former member of a government agency group, can arrive at such polarized conclusions.

Then there is this little tidbit:

“Exxon Mobil Corp., the largest U.S. oil company, may be fined more than $1 billion for “malicious” sabotage of wells to prevent other producers from tapping fields it no longer wanted, the Texas General Land Office said…”, the article goes to say that Exxon is accused “of plugging abandoned wells with trash, sludge, explosives and cement plugs. The barriers made it impossible for other producers to revive the wells, Patterson said in a statement he gave to Bloomberg News yesterday.

Note:  All these stories appeared today in Bloomberg News.

The point is a comical if sad one, and one I have been convinced existed for many years, and it is that we are in poor control of our petroleum supply and prices because control has been ceded to irresponsible corporations and countries whose interests have little to do with the well being of the United States.  I wish there were some mechanism to thwart the obvious manipulation of oil prices in the US, short of nationalization (which is, in my opinion, unthinkable).  But trusting our oil supply to the likes of Exxon Mobil, Saudi Arabia and the cabal at OPEC is akin to trusting organized pirates, which they are.

According to Mark Hurlburt, Sullivan’s newsletter, The Chartist is in first place for stock market timing over the last three decades among those newsletters the Hulbert Financial Digest has tracked over this period. And though his mutual-fund newsletter — The Chartist Mutual Fund Letter — hasn’t been published for all three of those decades, it also is one of the top performers over the years it has existed.

Looks like the bull rally of the last four months is running out of gas.  As a scalper, it means little to me, but I would really like to see the economy improve for the sake of our country.  There have been far to many layoffs and jobs continue to be outsourced to cheaper foreign labor as companies struggle to eek out profits, or minimize loses.

So the bull market has lost a formidable ally.

“… I could not resist wondering about Wells Fargo Bank NA, and why it filed a civil complaint against itself in a mortgage foreclosure case in Hillsborough County, Fla.
…
In this particular case, Wells Fargo holds the first and second mortgages on a condominium, according to Sarasota, Fla., attorney Dan McKillop, who represents the condo owner.

As holder of the first, Wells Fargo is suing all other lien holders, including the holder of the second, which is itself.

… court documents clearly label “Wells Fargo Bank NA” as the plaintiff and “Wells Fargo Bank NA” as a defendant.

Wells Fargo hired Florida Default Law Group., P.L., of Tampa, Fla., to file the lawsuit against itself.

And then Wells Fargo hired another Tampa law firm — Kass, Shuler, Solomon, Spector, Foyle & Singer P.A. — to defend itself against its own lawsuit, according to court documents.

Wells Fargo’s defense lawyers even filed an answer to their client’s own complaint.

“Defendant admits that it is the owner and holder of a mortgage encumbering the subject real property,” the answer reads. “All other allegations of the complaint are denied.”

Yes, we are doomed.