A couple weeks back, I sat down with my own personal banker. He works for one of the largest banks of the world. But I wasn’t there to open a new checking account or refinance my mortgage.

I was there to get a little inside intel on this so-called “recovery” we have heard so much about in the news lately.

So we started talking. Over the course of our conversation, he admitted that 41 loans have crossed his desk since the beginning of the year. That’s 41 individuals, possible business owners, and families seeking a loan.

Of those 41 loans, he has only approved ONE this year.

To me, this was a harsh reminder that the credit market is still more frozen than we would all like to believe. But it’s possible this is just one isolated incident right? (Maybe my banker just has higher lending standards than most.)

Just to confirm that, I asked my banker if he was the only one rejecting loans, or if this was what happening all over? He confirmed that it was exactly what he was seeing throughout the company.

Furthermore, that’s exactly what’s happening at most banks right now. That means this “recovery” they keep talking about is nothing more than filler on the news.

After all, EVEN if consumers want to spend…they can’t get their hands on the funds that they need for big-ticket items. That means consumers’ hands are tied. They are at the banks’ mercy.

I will give the banks a bit of a break for a second though. Frankly, it’s not really the banks’ fault. You can’t really blame them for tightening their belts in this economy. In fact, if you dig deep enough, you’ll see this all goes back to the government pulling on the economy’s strings.

Who’s Really to Blame for this Lack of Recovery in the U.S.

Remember when the government wanted to “protect the consumer” by running stress tests on all the banks? Well, these banks had to beef up their reserves to pass those tests. Otherwise, the government could take them over or shut them down altogether.

Since they had to hoard the reserves to protect the consumer, it’s made it to where they also can’t LEND to the consumer either. What’s even worse is that this problem has been magnified.

For instance, since banks can lend out roughly 10 times more than they have in reserves….if they have to save back a mere $100,000 …that’s ONE MILLION DOLLARS that they can’t lend out to consumers!

So imagine all of the MILLIONS of dollars banks now have to hold back in extra reserves. You’ll quickly see why they seem tight-fisted with BILLIONS of dollars in loans.

And as I mentioned, tight-fisted banks mean consumers who can’t spend. If consumers can’t spend, our consumer-driven economy will be in trouble for a while still.

It’s not just the bankers who think so. There are key sectors of traders who are shorting right now because they see a pull back coming. In fact, there has been a mass wave of insider selling recently in a few key sectors.

That only means one thing: Certain stocks are poised to correct…big time. When they do, a handful of currencies will rise, and one in particular will drop significantly. But more on that tomorrow…

What the Banker’s Outlook Means

So what does all of this mean? Well in the last 17 years, I’ve come to trust what the inside guys are saying, rather than what the government wants us to believe.

And assuming my banker is right, it means that the stock rally probably doesn’t have much more steam left in it. When it crumbles once again, watch out. There will be plenty of sectors that fall with it.

What does that mean for you? First of all, I wouldn’t be buying U.S. stocks right now. I would be looking to take profits and run.

For all those short-sellers out there, you’re about to have a field day in these markets. You’ll rejoice and prosper as the markets come crashing down once again.

Tomorrow, I’ll give you the inside scoop on the currency that will plummet as stocks drop here in the United States. Talk to you then.

Happy Trading,
Sean Hyman, aka “Professor FX”