Financial stocks have rallied impressively this month from their July lows, but some experts keep one-upping each other talking about how bad it will get.
For example, David Kotok of Cumberland Advisors tells CNBC that we’re about half-way through, and that there could be more Bear-Stearns style blowups ahead of us:
“I think the financial problem is halfway through the cycle,” David Kotok… told CNBC. “There’s another shoe to drop ahead of us and it could be more severe.”
Kotok thinks Merrill Lynch, Wachovia, and other financial companies are at risk of failure as the cost of raising capital soars at a time when the banks need to pay settlements over auction rate securities.
And that’s not all. Billionaire LBO specialist Wilbur Ross thinks that, when all is said and done, up to 1,000 banks could fail::
Meanwhile, billionaire investor Wilbur Ross told “Squawk Box” that a thousand banks could fail before the financial crisis is over. “Not very big ones necessarily,” he said. “But a thousand banks is going to be a lot.” And the impact on the credit crunch could be severe, he added.
“Each dollar of bank equity that gets lost takes out about 12 or 13 dollars of loans so there’s a tremendous magnifier effect of small changes in bank equity.”
And then there’s Morgan Stanley co-president Walid Chammah who thinks that the crisis could last until 2010:
Morgan Stanley co-President Walid Chammah…told a German newspaper that the financial crisis will probably not end until next year or even 2010.”We will likely see more insolvencies among small U.S. regional banks that have focused on mortgage business,” Chammah said.
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