A bank failure is news. It is clearly negative news. What does this information really mean?
Bank failures are a concurrent indicator of the recession. The rate of failures is bad, but not as bad as the Savings and Loan crisis. Take a look at this chart from featured site Calculated Risk in an article from a year ago. Bank failures are up from good times, but nowhere near the levels of the 80's.
News Information versus Perspective
Several sources are highlighting bank failures, announced each weekend. The information is accurate, but it lacks perspective. The real question is whether the bank failures provide any predictive information about the economy or the market.
CXO Advisory (another featured source) has done the analysis. Readers should check out the entire article to see the typically excellent charts. Here is the key conclusion:
Bank failures are news. Objective reporting of this news cannot be criticized.
Having said this, investors must learn to distinguish between coincident negative indicators of an acknowledged recession, and data that has a better predictive value. At "A Dash" we try to highlight these differences, as we did here.