We continue to maintain a negative outlook on the U.S. Banks. While the programs launched by the U.S. Treasury and the Federal Reserve to boost the capital levels and alleviate the liquidity problems have helped the capital and funding concerns to a great extent, the efforts have not succeeded in restoring the lending activity at banks. Lower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet. During the current year, the banks have mainly suffered due to the losses in the mortgages and residential construction loans. As not much has been done so far to address the fundamental problems of declining home values and rising foreclosures and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, with the

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We continue to maintain a negative outlook on the U.S. Banks. While the programs launched by the U.S. Treasury and the Federal Reserve to boost the capital levels and alleviate the liquidity problems have helped the capital and funding concerns to a great extent, the efforts have not succeeded in restoring the lending activity at banks. Lower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet. During the current year, the banks have mainly suffered due to the losses in the mortgages and residential construction loans. As not much has been done so far to address the fundamental problems of declining home values and rising foreclosures and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, with the

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The once booming business of private equity faces an uncertain future. What’s not uncertain, however, is that many private equity deals are imploding from the weight of leveraged debt and greed. Inevitable bankruptcies will result in higher unemployment and a deeper recession.

Private equity is an asset class consisting of equity securities in operating companies that are not publicly traded.  The name “private equity”is the rechristened, kinder and more gentile label for what used to be known as leveraged buyouts, or LBOs. But make no mistake about it, while leverage may not be part of the name any more, it remains a big part of every private equity deal.

LBO firms, or “franchises”, as Henry Kravis, co-founder of Kohlberg Kravis Roberts & Co. (KKR), likes to call his shop, acquire publicly traded operating companies. Then they streamline management and operations to increase profitability and hope to cash out

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SLM Corporation, or Sallie Mae (SLM) 3Q08 core net operating income came in at $0.36 per diluted share, substantially short of our estimate. Higher funding costs were the primary reason for the lower-than-expected results.However, the performance of the private credit portfolio was better than expected during the reported quarter. We expect higher funding and credit costs to continue impacting the profitability of the company, though the funding costs are expected to come down slightly once the new facility (TALF) proposed by the Federal Reserve and Treasury becomes operational. Based on our concerns, we are maintaining our Sell recommendation on the shares of SLM, with a reduced six-month target price of $8.00 per share.Kalyan Nandy contributed to this report.Read the full analyst report on SLM "SLM" Free Stock Analysis: Buy? Sell? Hold?Zacks ...

Editor’s Note: This article has been excerpted from a free issue of Robert Prechter’s monthly market letter, The Elliott Wave Theorist.

The full 10-page market letter, Be One of the Few The Government Hasn’t Fooled, can be downloaded free from Elliott Wave International.

By Robert Prechter, CMT

“Who Will Benefit From The Housing Act?”

This question is an actual headline from a national daily paper. The real answer is: mortgage lending corporations, developers, real estate agents, speculators and politicians. The government is also pledging tax money to providers of “financial counseling” and grants for speculators who want to “buy and renovate foreclosed housing”; in other words, it will hand tax money to charlatans and unfunded wheeler-dealers. But a far better headline would have been, “Whom Will the Housing Act Hurt?” The answer to that question is: (1) prudent people, i.e. …

1. The carry trade - I warned you about the carry trade at the start of the week. Don’t underestimate the damage that is done when unwinding occurs. The carry trade has funded all strata of speculative activity that has helped the stock market to rise this year.