The write-offs just keep on coming. A table we saw from Agora Financial
(www.agorafinancial.com) showed the following in write-offs in the third and fourth quarters, in
billions of US$: Citigroup $11.3, Merrill Lynch $8.5, Morgan Stanley $4.7, Bank of America
$3.9, Barclays $2.7, Wachovia $2.5, Bear Stearns $2.0, J.P. Morgan Chase $1.7, Goldman Sachs
$1.6, Lehman Brothers $0.7.

We have also seen the following numbers from Canadian banks: CIBC $0.46, Royal Bank of
Canada $0.36, Bank of Nova Scotia $0.19 and Bank of Montreal $0.50. BMO’s losses followed
earlier ones (on natural gas futures) of some $0.6 billion. We still need to hear from Toronto
Dominion and National Bank of Canada.

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CREDIT CRUNCH RISING, DOLLAR CRASHING

The ugly part may be just beginning. Over the past week or two the announcements for write-offs have already become staggering. Merrill Lynch $8.5 billion, Citigroup (between $8 to $11 billion added to a $5.9 billion write down reported earlier) was just the most visible of the losses reported. Here in Canada CIBC wrote off $463 million and counting, while Royal Bank of Canada is purported to be writing off $600 million. Barclays Bank is prepared to write off
upwards of $21 billion. We could go on. Many have not reported, and even the ones that have will undoubtedly have more.

What is going on out there is truly staggering. The Federal Reserve, in an attempt to stem the growing crisis, has injected billions of dollars into the system to stop the bleeding but it has done little to stop the haemorrhaging. The potential for losses is truly unknown. And it is impacting the very financial institutions that are needed to provide the funds to the economy so that it may grow. Quite simply, without credit we die.

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For the first time in quite some time the S&P 500 has given us a significant sell signal. The breakdown this week under 1,480 we consider very dangerous. We also note some important developments on the weekly charts. The entire move from the March 2003 low now hangs in the balance. The trend line is at around 1,445; the August lows did take out that trendline with a low at 1,370 but it failed to hold. Another break now will be fatal. These long-term lines are very important. We must never break them if we are to maintain the trend of the market.

We saw what happened when the up trend line from the 1994 lows was broken. That triggered the 2000-02 collapse. It is also significant that that collapse broke the up trend line from the 1987 lows. The current market has been restrained on the upside by that same trend line. It took it out on occasion, but basically it could not maintain any sustained move through the line, and over the past few years we have traded continually on either side of the line.

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