Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.

ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock

picks, and commentary can be found HERE.

Suttmeier's Four in Four video can be watched on the web HERE.

September 30, 2009 – The FDIC Just Doesn’t Get It

FDIC Madness on DIF, The Case-Shiller Home Price Index, Weak Consumer
Confidence, The Bull Versus Bear Debate
Banks to Replenish DIF, but it won’t be enough
FDIC insured institutions are required to prepay their estimated quarterly risk-based
assessments for the 4th quarter of 2009 and for all of 2010, 2011 and 2012 by the end of
2009. This is FDIC MADNESS!
The assessments will total about $45 billion, but that’s not enough to bring the fund back to a
ratio of 1.15 versus insured deposits. This alignment must be completed by the end of June
2013 five years after the Deposit Insurance Fund dipped below 1.15 at the end of June 2008.
We were at 0.22 at the end of Q2 2009. Right now the DIF is in arrears by $4.7 billion.
It is clear to me that FDIC does not understand all of the problems in the banking system just
as they missed the beginning of “The Great Credit Crunch”. This tax on 8,145 banks will put a
drag on lending, which hurts US tax payers, who wish to refinance mortgages and finance
small businesses.
The FDIC projects that bank failures will cost the Deposit Insurance Fund around $100 billion,
which sounds too optimistic to me. The $45 billion may cover this if failures total 200 or so. My
prediction is that failures will total 500 to 800, and the FDIC does not realize the risks I see.
I predict that to get the DIF back into balance by June 2013, the FDIC will have to tap its $500
billion temporary line of credit with the US Treasury. I say, why not start now and leave the
banking system the flexibility to help tax payers and consumers, by making prudent new
loans.
Keep in mind that banks are getting dangerously exposed to additional bad loans and their
Reserve for Losses are not keeping pace with noncurrent loans, and by this stat things are
getting worse in a hurry.
Case-Shiller Home Price Index
The 20-City Composite Home Price Index declined 13.3% year over year, but all cities
showed a sequential rise from June to July. From the June 2006 high to the 2009 trough the
index was down 32.6%.
The rise for the month of July versus June is not seasonally adjusted and the first time
homebuyer tax rebate will expire at the end of November.
In addition, there's an estimated ten million homes that are not yet listed as foreclosures.
Consumer Confidence Weaker Than Expected
The Conference Board reported that Consumer Confidence fell to 53.1 in September when a
rise above 56 was expected. That miss really does not matter as the neutral zone for
confidence is 90 to 120. The reason for confidence to slip is the fact that Main Street, USA is
worried about job losses.
The Bull versus Bear Debate
The bulls seem to think that the bears missed the huge rally since March 6th, but that’s not my
story. When 85% disagreed with my call for a Bear Market Rally on March 6th, I called for a
40% to 50% rally for the S&P 500 and with my target from 666.92 to my annual resistances,
which are now pivots at 910.8 and 967.1. Since then, I have taken the bearish side of the bull
versus bear debate.
I was quoted in a USA Today story as the starving bear – Here’s the paragraph that explains
my market stance - Richard Suttmeier, market strategist at ValuEngine.com, says the
economy is in worse shape than bulls say and warns that stocks will lapse back into a
multiyear bear market. "The market will suffer more than just a correction," he says. "There's
no traction in the economy, and we're not creating jobs."
Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on
our products and services visit www.ValuEngine.com
That’s today’s Four in Four. Have a great day.

Richard Suttmeier
Chief Market Strategist
ValuEngine.com
(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website
www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of
equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products
include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. I hope that you will go to
www.ValuEngine.com and review some of the sample issues of my research.

“I Hold No Positions in the Stocks I Cover.”