Citigroup claim that the United States is no longer a democracy, but a Plutonomy

Citigroup Inc is another ridiculous cheap stock that is trading at just 8,31 times estimated 2016 earnings. A little bit cheaper than Bank of America. Citigroup Inc is also trading below its book value. It feels like a «bank robbery» to buy that stock.

Their revenue is expected to decline from $19,27 billion to $17,46 billion, which means an earnings per share of $1,03 and that is down from $1,51 last year, according to Reuters. Once the biggest bank, now ranked number four by assets, it`s obviously going in wrong direction for Citi.

The financial crisis in 2007, hit the bank hard as they were exposed to banks, and indirect to real estate. That was bringing the bank down. Citi were one of the few banks that knew a lot about the real estate market before the financial crisis. Let`s go back in time to 2005.

 

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Citigroup introduced Plutonomy.

This buzz word was initially coined by analysts at Citigroup in 2005 to describe the incredible growth of the U.S economy during that period despite increasing interest rates, commodity prices and an inflated national debt.

Citigroup analysts argued that as such an economy continues to grow in the face of contradictory elements, the more important the society`s ultra rich become to maintaining such growth. The analysts also believed that in addition to the U.S, Canada, Great Britain and China are also becoming plutonomies.

Plutonomy is economic growth that is powered and consumed by the wealthiest upper class of society. Plutonomy refers to a society where the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of the society becomes dependent on the fortunes of that same wealthy minority.

This leads to the next step: Plutocracy, which is a government controlled exclusively by the wealthy either directly or indirectly. A plutocracy allows, either openly or by circumstance, only the wealthy to rule. This can then result in policies exclusively designed to assist the wealthy, which is reflected in its name.

On October 16, 2005, Citi wrote a letter to its rich customers, telling them that the world was divided into two blocks; the Plutonomy and the rest. Their conclusion was that the United States was no longer a democracy, but it become a plutonomy.

A society controlled by the top 1% of the population that have more wealth than the bottom 95% of households combined.

Citi warned about the growing gap between rich and poor and said it was a new era of aristocracy. One of the U.S bank regulators, Bill Black uncovered the savings and loans scandal in the 80`s, so trouble in the banking sector is not something new.

In September 2004, FBI publicly warned about a mortgage fraud ‘epidemic’. The Bush administration transferred (from 9/11 case) 500 white color FBI specialists out of dealing with white color crime. It was the greatest wave of white color crime in the world’s history. FBI said that 80% of the mortgage losses was induced by lender personal. No one is in prison for the crime, and all the CEO`s have gone away with it.

The bursting of the U.S housing bubble, which peaked in 2004, caused the values of securities tied to U.S real estate pricing to plummet, damaging financial institutions globally. The financial crisis is the worst financial crisis since the Great Depression of the 1930`s.

It threatened the collapse of large financial institutions, which was prevented by the bailout of banks by national governments, but the stock market still dropped worldwide. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment.

The crisis was a result of high risk, complex financial products, undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.

Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st -century financial markets.

In the immediate aftermath of the financial crisis palliative monetary and fiscal policies were adopted to lessen the shock to the economy, but don`t complain. You were warned.

Bank stocks are very cheap relative to the markets and analysts have trimmed their Citi target prices marginally, despite the rise of interest rate. JPMorgan lowered its price target to $54, and Deutsche Bank reiterated a Hold rating for Citigroup Inc.

Citi is trading at $44,99, up +1,67% on thursday which is another great day for Citigroup this week. The stock has been trading to the upside all week followed by other banks in that sector.

Investors will look out for a beat-the-street surprise on friday. A surprise they have provided the last four straight quarters.

Watch out for the report on Friday.

 

sam

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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The goal to end “too big to fail” and protect the American taxpayer by ending bailouts is only a goal

It was a great day for banks on Wednesday, while all the big banks were up, leading the financial sector as the big winner. Up +2,27%. All the banks on my screen is in green, and the most active bank shares are JPMorgan Chase & Co, Bank of America, Citigroup Inc and Wells Fargo & Co.

JPMorgan Chase & Co reported a quarterly profit that topped low market expectations. The drop in profit was the first in five quarters, but investors was focusing on the positives and pushed the bank stocks up. Not only JPMorgan Chase & Co, but also its competitors.

Banking regulators like Federal Reserve and the Federal Deposit Insurance Corporation gave a failing grade to five big banks on Wednesday, on their plans for a bankruptcy giving them until October 1 to make amends or risk sanctions.

 

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According to Reuters, this could end with braking up the banks, and it underscore how the debate about banks being «too big to fail» continues to rage in Washington. This is the first time regulators have issued joint determinations flunking banks` plans, commonly called «living wills».

If the banks do not correct serious «deticiencies» in their plans by October, they could face stricter regulations, like higher capital requirements or limits on business activities.

The requirement for a living will was part of the Dodd-Frank Wall Street reform legislation passed in the wake of the 2007-2009 financial crisis, when the U.S government spent billions of dollars on bailouts to keep big banks from failing and wrecking the U.S economy.

The plans they have are separate from the Fed`s stress tests, where banks demonstrate stability by showing how they would withstand economic shocks in hypothetical scenarios.

«The FDIC and Federal Reserve are committed to carrying out the statutory mandate that systemically important financial institutions demonstrate a clear path to an orderly failure under bankruptcy at no cost to taxpayers,» FDIC Chairman Martin Gruenberg said in a statement.

«Today`s action is a significant step toward achieving that goal.»

Thomas Hoenig said the plans show that no firm is «capable of being resolved in an orderly fashion through bankruptcy.»

«The goal to end «too big to fail» and protect the American taxpayer by ending bailouts remains just that: only a goal.»

The biggest banks doesn`t have any plans for themselves if a new financial crisis are turning into panic and chaos, which means, if the panic hit the market today, the government need to prop up the banks called «too big to fail» if they want to avoid financial chaos.

Democratic president candidate Hillary Clinton said regulators need to break big banks apart if they don`t fix their living will problems over time. Bernie Sanders, said on Twitter that many banks have only gotten bigger since they were bailed out during the financial crisis.

One of them is obviously not Citigroup. They have cut more than 26% of its assets since its peak in 2007. Citiygroup was the largest U.S bank but is now ranked number 4 (ranked by assets).

The regulators continue to assess plans for four foreign banks labeled «systemically important» and that is Barclays PLC, Credit Suisse Group, Deutsche Bank AG, DBKGN.DE, and UBS Group AG. Citigroup`s living will did pass, but regulators noted it had «shortcomings.»

I will look for Citigroup`s report on Friday.

 

sam

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Bank of America is still projecting favorable YoY growth of 4% on the bottom line

Bank of America peaked in October 2006 at $54, and started to decline after that. It plummeted during the financial crisis and you had the chance to buy the stock below $4 in early 2009. That feels like a «bank robbery». What now as the price is $13,27?

Buying Bank of America at about $4 is ridiculously cheap, but $13,27 is still cheap. This can be a big scoop for value investors as Bank of America is paying a great annual dividend. The financial crisis reduced its dividend to only $0,01 per share, but later increased to $0,05 in 2014.

The bank`s yield comes in a solid third place among its competitors like JPMorgan Chase, Wells Fargo and Citygroup. The shares are trading well below its book value and they allocated $4 billion on share buybacks compared to about $2 billion for dividend payments.

 

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Warren Buffett bought $5 billion worth of shares in Bank of America in 2011. Many investors were skeptical about that decision because the bank had adopted a ton of risky loans when it bought Merrill Lynch and Countrywide Financial. It was very risky at that time. On top of that if was only three years after the financial crisis.

I bet Warren Buffett knew what he was doing; being greedy when others were fearful. Four years later, he doubled his money and on top of that he got six percent dividend for his preferred shares. Buffett and value investors will not the next bears I think, but there are many things to fear.

Chinas slowing growth can be a reason to dump the stock. So can possible a «Brexit». Bank of America is warning its managers to not use the word «Brexit» when they talk to their customers. They doesnt want to support one side or the other in the all-important June 23 vote.

Bank of America has plummeted more than 20% so far in 2016, and remain in the worst position of the retail banks. The bank topped its earnings expectations in Q4 and managed to miss revenue expectations by about $500 million.

The trend is not good for the bank and this trend is expected to continue as they has forecasted further weakness in its trading and investment banking revenue. Projected YoY declines in these segments outpace the losses of its peers.

The energy sector along with increased expenses and larger capital deployment will hamper the banks earnings this quarter.

Many large banks have large loan exposure to risky assets in the oil & Gas industry. 3,8% of total outstanding loans, or $21,8 billion is related to energy loans in Bank of America. In comparison, JPMorgan has 6% of total outstanding loans, or $42,1 billion.

Energy borrowers announced draws of more than $3 billion in Q1. What will Bank of America say about that and what is the banks next step in the energy sector?

Estimize expect an earnings per share of $0,25, which is two cents higher than Wall Street, on $20,87 billion in revenue, about $28 million ahead of the sell-side. Estimates have been feverishly cut ahead of its earnings, falling 18% in the past 3 months.

That said, Bank of America is still projecting favorable YoY growth of 4% on the bottom line.

 

sam

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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All eyes on bank stocks this week

The earnings season starts off slowly this week with Alcoa reporting after the bell today. Later on this week we will see reports from many banks.

The first trading day of the year didn`t start good, and the first 10 trading days of 2016 slid 8% on S&P 500 Index. That is the worst start to any trading year over the long history on this index dating back to 1928.

In the middle of February, the stock market turned up again. Stock turned down 10,5% in a stock market correction but went straight up again, rallying 13,5% off the lows. The European market didn`t follow, and the biggest losers in Europe is the banking sector.

Sweden, Denmark, Switzerland and Germany have negative interest rate, and banks are suffering from that, which means profit margins are under pressure. So is it for the U.S banks. They are suffering too. The S&P 500 Financial Sector is one of the worst performing domestic sectors, down about 5% YTD.

 

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S&P 500 is near its 2015 peak and corporate profits will drive the stock prices and market. But is it going up or down? First quarter earnings expectations is not the best I have seen, and this will be the first time S&P 500 has had four-straight quarter of declining profitability since the Great Recession in 2008.

According to Merril Lynch, the three-month earnings revision ratio improved during March for the first time since last July. The downward momentum of profit estimates has also slowed. On the other hand; Wall Street are cutting more company earnings estimates than they are increasing.

It can be helpful to look at earnings revisions going forward rather than current quarter earnings results.

Wall Street analysts are less negative about the profit for the big U.S stocks, and this is why Dow Jones Average has been outperforming with all its multi-national blue chips. Their overseas sales are increasing because of a weaker dollar which is helpful for a bigger demand.

Three winning sectors over the past three months is industrials, materials and health care. Materials and health care has been lagging the S&P 500 last year and improving earnings can help both sectors to increase again.

The country`s largest bank JPMorgan Chase & Co will report on Wednesday. Bank of American and Wells Fargo & Co on Thursday, and Citygroup Inc on Friday. Investors will wait for reports from Morgan Stanley on Monday next week and Goldman Sachs the following day.

Banks typically earn about one-third of their annual revenue during the first three months of the year, but some of the banks (Goldman) is expected to come in with the lowest first-quarter earnings since before the financial crisis.

JPMorgan is expected to report adjusted earnings of $1,36 per share, Bank of America $0,25  per share, Wells Fargo: 99 cents per share, Citygroup: $1,11 per share, and Morgan Stanley: $0,63  per share. Goldman Sachs: 3,00 per share.

Banks have a lot of challenges.

 

sam

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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In the early 1930`s, more people emigrated from the United States than to it

I looked up at the sky yesterday and saw a flock of birds coming in to our country as they usually do every year. Bird migration is the regular seasonal movement and has been recorded as much as 3,000 years by Ancient Greek authors like Aristotle and Homer.

The primary motivation for migration appears to be food and they are free to go were they want to hunt. The birds are welcome and they are not doing something illegal. How can a bird be illegal? Human activities have threatened many migratory bird species and that is a huge problem.

People are also moving from one country to another and that is called Immigration. Just ask the indians.

 

immigrant

 

Immigrants are motivated to leave their former countries of citizenship, or habitual residence, for a variety of reasons, including a lack of local access to resources, a desire for economic prosperity, to find or engage in paid work, to better their standard of living, family reunification, retirement, climate change or environmentally induced migration, exile, escape from prejudice, conflict or natural disaster, or simply the wish to change one`s quality of life.

Many people claim they are threatened by a bunch of immigrants that are refusing to assimilate to their culture and their way of life. They claim they are illegal aliens, but that is not true because a human being can never be illegal.

Killing is illegal.

Columbus returned to America in 1493, but this time he was not alone. He brought a force of 17 ships. He began to implement slavery and mass-extermination of the Taino population of the Caribbean.

The Europeans took indians lands and saw themselves as the superior culture bringing civilization to an inferior culture. The colonial world view split reality into popular parts; good and evil, body and spirit, man and nature, head and hear, European and primitive.

The world view which converted bare economic self-interest into noble, even moral, motives was a notion of Christianity as the one redemptive religion which demands fealty from all cultures. In this remaking of the American Indians the impetus drove the conquistador`s invading wars not exploration, but the drive to expand an empire, not discovery of new land, but the drive to accumulate treasure, land and cheap labor.

We are billions of people on this planet with so many different cultures which is the expression of people`s creativity. Everything they make which is distinctively theirs like: language, art, music, healing, religion, cooking, agriculture, style and the institutions governing social life.

It all boils down to one thing: Respect!

 

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In 2013, the United Nations estimated that there were 231, 522, 215 immigrants in the world which is 3,25 percent of the world population. The United Arab Emirates has the largest proportion of immigrants in the world, followed by Qatar.

London has become multiethnic as a result of immigration. In 2008, Black British and British Asian children outnumbered white British children by about 3 to 2 in government-run schools.

American immigration history can be viewed in four epochs: the colonial period, the mid-19th century, the start of the 20th century, and post-1965. Each period brought distinct national groups, races and ethnicities to the United States.

During the 17th century, approximately 400,000 English people migrated to Colonial America. Over half of all European immigrants to Colonial America during the 17th and 17th centuries arrived as indentured servants.

The mid-19th century saw mainly an influx from northern Europe; the early 20th-century mainly from Southern and Eastern Europe; post-1965 mostly from Latin America and Asia.

Historians estimate that fewer than 1 million immigrants came to the United States from Europe between 1600 and 1799. The 1790 Act limited naturalization to «free white persons».

It was expanded to include blacks in the 1860s and Asians in the 1950s. In the early years of the United States, immigration was fewer than 8,000 people a year, including French refugees from the slave revolt in Haiti.

After 1820, immigration gradually increased. From 1836 to 1914, over 30 million migrated to the United States. The death rate on these transatlantic voyages was high, during which one in seven travelers dies.

In 1875, the nation passed its first immigration law, the Page Act of 1875.

After an initial wave of immigration from China following the California Gold Rush, Congress passed a series of laws culmination in the Chinese Exclusion Act of 1882, banning virtually all immigration from China until the laws repeal in 1943. In the late 1800s, immigration from other Asian countries, especially to the West Coast, became more common.

The peak year of European immigration was in 1907, when 1,285,349 persons entered the country. By 1910, 13,5 million immigrants were living in the United States.

Immigration patterns of the 1930`s were dominated by the Great Depression. In 1929, there were 279,678 immigrants recorded, but in 1933, only 23,068 came to the U.S.

In the early 1930`s, more people emigrated from the United States than to it.

Immigrants is positive for the economy and makes the average American better off. Immigrants contribute more than $10 billion a year to the economy. The Kauffman Foundation index of entrepreneurial activity is nearly 40% higher for immigrants than for natives.

Immigrants were involved in the founding of many prominent American high-tech companies, such as Google, Yahoo, YouTube, Sun Microsystems, and eBay.

All Americans are immigrants, and Arnold Schwarzenegger is one of them. He moved to the United States in September 1968 at the age of 21, speaking little English. He became the biggest movie star in the world in the 1990`s and are the most famous immigrant in America.

What gave him the opportunities and were he is today is the open arms of Americans. He said; «I have been adopted by America.

Schwarzenegger is born in Thal, Styria, Austria, and his father was the local chief of police, and served in World War II as a Hauptfeldwebel after voluntarily joining the Nazi Party and SA in 1938. According to Arnold, both his parents were very strict.

He grew up in a Roman Catholic family, and in an interview with Fortune in 2004, he told how he suffered what «would now be called child abuse» at the hands of his father: «My hair was pulled, and I was hit with belts. So was the kid next door. Many of the children I`ve seen were broken by their parents, which was the German-Austrian mentality.

They didnt want to create an individual. It was about conforming. I was one who did not conform, and whose will could not be broken. Therefore, I became a rebel. Every time I got hit, and every time someone said, «you cant do this», I said;

“this is not going to be for much longer, because I`m going to move out of here. I want to be rich. I want to be somebody.”

Schwarzenegger served two terms as the 38th Governor of California from 2003 until 2011.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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