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TheStreet Open House

Is Cyprus the Subprime of the Euro Crisis?

Stocks in this article: BACCJPMWFC

According to the FDIC Quarterly Banking Profile for the 2012 fourth quarter, there are $7.1 trillion in insured deposits in the U.S. banking system versus a total of $9.4 trillion in total domestic deposits. It the U.S. Treasury decided to seize 40% of the $2.3 trillion excess they would raise $920 billion. My advice, make sure you have less than $250,000 in any one bank, just in case.

I see the 'Cyprus solution' putting concrete in the can that keeps getting kicked down the road. Even a minor run on the banks could make a can full of concrete impossible to kick.

I still worry about exposures to notional amounts of derivatives, which ended 2012 at $224.1 trillion down 2.3% sequentially as shown in the FDIC Quarterly Banking Profile. Exposure to derivatives is up 34.9% since the end of 2007.

Is there a 'London Whale' lurking off the coast of Cyprus?

We will soon observe how Cypriots react to this bailout in the streets of Nicosia. If you take c-y-p off the word, you'll see what that spells!


On March 11, I wrote, Downgrading Two of Four 'Too Big to Fail' Banks and I bet that these huge money center banks have tentacles in the Cypriot banking system. Today only Citigroup (C) remains buy-rated, with the other three rated hold.

Bank of America (BAC) ($12.56): Has a hold rating and traded to a multi-year high of $12.94 on March 19. The stock has a fair value at $13.12 and one-year price target at $12.85, which indicates limited upside. My semiannual value level is $9.01 with monthly and weekly pivots at $11.54 and $12.39 and annual risky level at $17.07.

Citigroup (C) ($45.23): Has a buy rating and traded to a multi-year high of $47.92 on March 11. The stock has a fair value at $65.17 and one-year price target at $48.25. My annual value level is $33.19 with monthly and weekly pivots at $45.30 and $45.72 and quarterly risky level at $56.11.

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