banking-sector

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    If You Want an Accurate Financial Forecast, Ask a Waiter

    financial forecast

    By , Chief Investment Strategist, Money Map Report -

    Many investors really start to study the markets this time of year in an effort to divine what's next for global markets and, by implication, their portfolios.

    But for an accurate financial forecast, I turn to the world's top steak houses, which are known haunts for global traders anxious to blow off some steam and have a fabulous meal.

    Today I'm going to talk about what's not"on the menu" - pardon the pun - and why. Then, I'll highlight an investment poised for profits as a result.

    Here's what waiters can tell you that economics can't.

Article Index

If You Want an Accurate Financial Forecast, Ask a Waiter

By , Chief Investment Strategist, Money Map Report -

financial forecast

Many investors really start to study the markets this time of year in an effort to divine what's next for global markets and, by implication, their portfolios.

But for an accurate financial forecast, I turn to the world's top steak houses, which are known haunts for global traders anxious to blow off some steam and have a fabulous meal.

Today I'm going to talk about what's not"on the menu" - pardon the pun - and why. Then, I'll highlight an investment poised for profits as a result.

Here's what waiters can tell you that economics can't.

JPMorgan Chase (NYSE: JPM) Earnings: Don't Be Misled by Sagging Banking Sector

By , Associate Editor, Money Morning • @DavidGZeiler -

As the grim bank earnings roll in over the next couple of weeks, beginning with JPMorgan Chase & Co. (NYSE: JPM) tomorrow (Friday) morning, don't fall into the trap of thinking the financial sector's woes in the last quarter reflect a sinking U.S. economy.

While bank earnings are usually a good barometer for the nation's economy, many of the factors weighing down financials, such as tougher regulations and the Eurozone debt crisis, aren't necessarily a reflection on U.S. economic activity.

In fact, according to the U.S. Federal Reserve's Beige Book report, released Wednesday, the overall economy at the end of last year continued to improve slowly but steadily.

Friday the 13th for the Financials

Analysts have been consistently lowering earnings expectations for all the big banks in recent weeks.

"Friday the 13th will live up to its name when it comes to bank earnings," Mike Mayo, an analyst with independent research firm CLSA in New York, told Bloomberg News. "You're going to see all sorts of revenue and margin pressure and the results will be underwhelming."

The consensus estimate for JPMorgan, the nation's biggest bank by assets and a bellwether for the industry, has slid from $0.97 per share to $0.94 per share in the past month; three months ago the estimate was $1.11 per share.

That puts JPMorgan's earnings below the $1.02 per share of the previous quarter and well below the $1.13 of the year-ago quarter. JPMorgan's revenue is expected to drop 20.8% from first-quarter 2011.

And as disappointing as that sounds, JP Morgan will be one of the strongest performers this bleak bank earnings season, which follows a year in which some bank stocks fell more than 40%.

As the other major U.S. banks report earnings next week - Citigroup Inc. (NYSE: C) and Wells Fargo & Company (NYSE: WFC) on Tuesday, Goldman Sachs Group Inc. (NYSE: GS) on Wednesday and Bank of America Corp. (NYSE: BAC) and Morgan Stanley (NYSE: MS) on Thursday -- the din of negativity will be hard to ignore.

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It's Time to Bail on Bank Stocks

By , Money Morning -

There was a time when bank stocks actually looked like good investments. And many, having racked up big gains over the past two years, proved to be just that.

But sadly, U.S. banks no longer offer the value and profit-making potential they did immediately following the financial collapse. In fact, they're actually heading for what could be a catastrophic decline.

Let me explain.

On February 18, 2009, I wrote a piece that said bank stocks should not be written off.

I observed at the time that the best U.S. banks had huge business strengths that were not fully undermined by the financial crisis. So I advised investors buy shares of the best among them.

As it turns out, that recommendation may have been too timid.

That is, most bank stocks - including some of the weakest and least investment-worthy - have surged since my article's publication.

Even following a lukewarm second quarter and last week's market meltdown, the top six banks - Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (NYSE: GS), and Morgan Stanley (NYSE: MS) - are in a relatively impressive position.

Take a look for yourself:

  • Goldman Sachs stock is up about 22%.
  • Bank of America is up 30%.
  • JPMorgan is up about 49%.
  • And Wells Fargo is up 55%.
Only Citigroup, down about 13%, and Morgan Stanley, down 20%, have seen their stock plunge.

But in light of this remarkable run up, and the disastrous pitfalls that lie ahead, now is the time to bail on bank stocks.

Margins are narrowing, government regulation is increasing, and the outlook for big deals is drying up.

In other words: The risks related to bank stocks are as present as they ever were - just the profitability is missing.



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Banks Catch a Break with Long Timeline for Implementing Basel III Regulations

By , Associate Editor, Money Morning -

Global regulators on Sunday agreed on new banking capital requirements - known as Basel III - that were much less severe than expected, boosting global financial stocks as investors were optimistic about banks' ability to comply. The Basel Committee on Banking Supervision agreed on new rules that will more than triple capital requirements to give […]

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How to Cure Western Bankers of "Bad-Banker" Behavior

By , Money Morning -

Masayuki Oku, the new head of the Japan Bankers Association, recently said that Western bankers did not understand self-control the way Asian bankers did, which was a major cause of the 2008 crash and the Great Recession.

I think he has a point.

Oku's main purpose in denouncing Western bankers for their lack of self-control was to object to the tougher proposed capital rules from the Basel Committee, the global body that sets banking regulations.

To understand how to fix the Western banking sector, please read on...