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Banks Weak—But How Big Is Foreclosure Mess?

It is very difficult for the S&P 500 to move ahead with financials so weak today (financials are the second biggest sector in the S&P 500, at 15.5 percent of the index, tech is the largest at 18.9 percent), but techs and healthcare are showing some mid-morning strength.

Banks are weak today, particularly large banks, on concerns that the foreclosure mess could have a significant impact on earnings.

Wells Fargo , for example, likely the largest mortgage servicer in the U.S., is down 4 percent, partly on an FT article alleging Wells too used "robo signers" for mortgage documents.

However, most analysts continue to believe that the incremental costs to bank to dot all the "i's" properly on foreclosures is not as great as traders seem to fear. Miller Tabak analyst Thomas Mitchell, for example, noted this morning that:

1) "we do not see this highly-publicized foreclosure issue as having meaningful investment implications for bank stock investors."

2) "putting in place adequate capacity to legally process the recent and expected volume of foreclosures will require a one-time 'catch-up' cost increase for most banks."

3) "by the time a loan reaches the stage where the lender decides to foreclose, the lender has already absorbed the lion's share of the credit losses and administrative costs..."

FBR this morning estimates losses of $6-$10 billion due to delayed foreclosure costs and litigation expenses and that "the industry could comfortably absorb these losses."

Elsewhere: the Singapore story: good news for the currency wars. Singapore widened its currency's trading band, letting its currency appreciate. They don't actually raise interest rates, but strengthening your currency is comparable to raising rates. This is good news because in lieu of the lack of demand here it needs to be shifted somewhere, and the whole world cannot weaken its currency.

It also somewhat lessens the chance of a currency war.

This of course is negative for the dollar.

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