IS THE END OF THE FINANCIAL CRISIS NEAR??

Wells Fargo is rocking Wall Street today, see article below. Are these the first signs of the recovery? No, the first signs were the recovery in the housing market. We began to bottom out when sales hit their low levels of only 700 per week in mid 2007. That was followed by price declines throughout 2008. In the beginning of 2009, sales regained their normal rate at about 1,500 per week. But as the market started to shift positively sales have soared! For the last 8 weeks, enough to make more than a trend, home sales have jumped to averages of over 2,000 sales per week. Over the past 2 weeks we have experienced 2,400 per week. At the same time, inventory levels have crashed, well relatively speaking. Inventories of single family homes are down 10% over the past 3 weeks and are down 17.6% YTD. These are the signs of a recovery in housing.
So, how did Wells Fargo turn around and make a profit???? I believe one of the biggest reasons is that they are paying, I don't even know, 1.5% on savings for a blended cost. Then lending that money at 5%. That is a huge spread! It seemed logical that if the Fed kept rates artificially low, it was only a matter of time where banks would start to profit from that. Also, since they have written down most of the "toxic" assets to zero, now when they sell them there is a profit there too.
Let's keep it rolling, this shift we experienced over the past 4 years was very difficult on me and I am ready to be a happy survivor!

Every major U.S. bank is rallying like mad on the heels of Wells Fmade a profit in the first quarter. WFC shares have spiked up 23 percent to $18.50 in early trading.

The financial firm said it expects to report record net income of approximately $3 billion for first quarter 2009, or approximately 55 cents per common share after preferred dividends, including $372 million in dividends paid to U.S. taxpayers on the U.S. Treasury's Capital Purchase argo (WFC) reporting that it Program investment.

The word "record" must floor investors based on the perception that American banks still face substantial write-offs from toxic assets, consumer loans, and commercial real estate.

Wells Fargo predicted that it would post total revenue of $20 billion, up an estimated 16 percent, driven by the core businesses it owned before buying Wachovia. Results at Wachovia were better than expected.

If one or two other large money center banks post strong results, there will be a temptation to think that the worst of the financial crisis is over.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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