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July 26, 1991
The DoubleDippers got some support this week. Today's release of Second Quarter Gross National Product data showed growth of only .4%. Most analysts had guessed a gain three times as large.
Interest rates fell all week long, as other reports were also weak. Durable Goods Orders fell 1.6% in June, and Initial Jobless Claims jumped 30,000 to 425,000.
Data indicating a slow recovery is a big help, coming just before the giant Treasury borrowing in the first week of August. A soggy economy implies low inflation, which encourages investors to buy the glut of new Treasuries.
In the news business, summertime has long been thought of as "silly season." Most authentic newsmakers are out of town, at the beach, on the ranch, or out to monthlong lunch. Nonnews gets promoted to news status. And, the heat produces goofy behaviour from the secondstringers stuck at their desks.
Some summers it's baseball, some it's swimsuit design. This summer, the mass sillies struck the world of finance.
BCCI finally broke into full odor. It had been softly stinky for a couple of years, but this week was like opening a meat freezer you hadn't known was broken. In July.
Clark Clifford was asleep behind the freezer, snoring through nose plugs.
Every spook on the planet had either known about the scam, or had a checking account. Jimmy Carter thought BCCI was a front for philanthropists ($8 million bucks to his favorite charity!). Meanwhile, Abu Nidal was depositing his bomb fees.
Maybe we could put together a team of recovering S&L terrorists to sort out BCCI. Call it RTCIA?
Next case. A week after Mutual Benefit of New Jersey went down in a heap, Moody's decided it was a good idea to downgrade a half dozen other insurance companies. Outfits that fail are supposed to proceed through increasingly poor ratings, not go directly from "A" to heatstroke. Otherwise, people might think the rating agencies couldn't tell a bad credit from a good one.
Item: Neil Bush has left finance for a job in the cable TV business. Pick a cable stock and short it.
And the capper. The new S&L insurance fund ("Savings Association Insurance Fund" "SAIF," for short) is to begin to cover the last of the S&Ls in August 1992.
You've probably figured this one out already. It seems that SAIF doesn't have much money. When the very first S&L fails (on maybe August 15th), SAIF will be broke.
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