Tag Archives: Banks

This is the best start for the S&P 500 in nearly 20 years

What a great start of the year 2018. The best weekly gain in more than a year and the bull market continue to surprise many investors. Dow Jones Industrial Average jumped over 25,000 and nearly all of the 100 companies in the Nasdaq rose.

It is also the best start for the S&P 500 since 1999. Analysts forecasts looks pretty good and economic fundamentals are strong enough to lift the stocks higher. President Trump`s tax cut will also be good for the stock market.

It is difficult to find any reasons for a backdrop in the market. A rate hike or two wont stop investors to continue the party. What they really like is Mr Trump`s lower corporate taxes and that will not only help the U.S but also the global economic growth.

U.S stocks are looking good but European stock look even better. A great rally in European stocks so far is based on growth data for the Euro Zone. Services PMI data showed the Euro area was near its best growth in 7 years.

It has been a boost for STOXX 600 and we can thank European banks like Bank Santander and BNP Paribas for that. The outlook for European equities looks good and it is estimated a close to 10% earnings growth in 2018.

 

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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Morgan Stanley reached its all-time high in year 2000 which is twice as much as it is today

JP Morgan Chase & Co came out with its earnings report a few days ago and the company had its most profitable year in the history of banking. What about Morgan Stanley? They are expected to report earnings on Wednesday before market open.

The report will be for the fiscal Quarter ending June 2017, and Morgan Stanley is expected to report $0,76/share on $9,47 billion in revenue. According to the Street`s unofficial view on earnings, the whisper number is $0,78. Earnings for the same quarter last year was $0,75.

 

 

Wells Fargo surprised many analysts when they reported a drop in lending. JP Morgan Chase & Co also toned down its outlook for loan growth and interest income in the second half. We can clearly see that the loan growth is falling huge, while the optimism in the stock market right after Trump`s election is beginning to fade away.

Analysts are projecting revenue to rise to $9,09 billion from $8,91 billion in the second quarter of last year.

Morgan Stanley will probably talk about its new automated wealth advising product on Wednesday. It would be the last of the big wealth-management firms to cave to the whims of the less affluent, younger crowd, following Bank of America Corps Merrill Lynch unit and UBS Group AG. Big news from long a sceptic of robo-advisings staying power.

Indian banks are trading at an all-time high valuation and that is more than we can say about Morgan Stanley. A bank that reached its all-time high in year 2000 which is twice as much as it is today. The stock came back to its all-time high in 2007, but it plummeted during the financial crisis.

Morgan Stanley have never recovered since then and the company`s stock price is trading at $45,14.

 

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 FED`s “Adverse Scenario” and the major shift in the economy

The stock market has been in a euphoric rally since Donald Trump won the election in November last year. This is something that Janet Yellen and the FED has monitored. Not only that. They also monitored strong economic data which have strengthened the case for a rate hike.

As you may know, the FED raised the rates a few days ago, and normally after a rate hike, the stock market drops. Thats the case right now, but the market didnt fall much. Janet Yellen said the FED will continue to raise the rates. What will happen then?

The FED came out with Scenarios for annual stress test required under the Dodd-Frank Act Stress Testing Rules and the Capital Plan Rule on February 10, 2017. It is just a forecast; an Armageddon forecast, which is called «Adverse Scenario» Report, and the scenarios are not forecasts of the FED.

The adverse and severely adverse scenarios describe hypothetical sets of conditions designed to assess the strength of banking organizations and their resilience to adverse economic environments. The baseline scenario follows a profile similar to the average projections from a survey of economic forecasters.

We must be prepared for higher long-term interest rates. What is that suppose to mean? First of all; that is good for banks with retail customers, simply because retail customers usually have checking accounts with zero interest on them.

So, if the rates rise, the spread in the banks rise simply because the banks will make more on their lending. About 2,000 banks has disappeared the last seven years, which means the competition among the rest is not that big anymore.

We can also see a steeper yield curve and regionally concentrated episodes of deflation. More pronounced in Japan, but less severe in the Euro zone and Asia and absent in the UK and US.

This is the major shifts we will see in the FED`s «Adverse Scenario» for 2017, and U.S banks will be stress-tested again. The apocalyptic scenario means that the level of U.S real GDP will decline in the first quarter of this year.

The US economy advanced an annualized 1,9 percent on quarter in the three months of 2016, slowing from a 3,5 percent growth in the previous period and matching earlier estimates. Consumer spending rose faster than anticipated while business investment was revised lower. Last year, the GDP expanded 1,6 percent, which is the lowest since 2011.

Check out next GDP number at 2017-03-30 at 12:30 PM.

In the scenario, the unemployment rate increases to 10 percent, by the third quarter of 2018, and short-term treasury rates fall and remain near zero. House prices will also decline by about 25 – 35 percent, through the first quarter of 2019, and so will equity prices.

In the same scenario, we will se a slowdown in Asia, severe recessions and the dollar will appreciate against euro, the pound sterling and the currencies of developing Asia.

I think the next big think to look at now is the election in France. If Le Pen and the populist wins, it can turn things upside down, and start a new international crisis. Until then, trade in small caps are profitable when rates rise, and higher rates doesn`t stop tech stocks like Alphabet, Apple and Amazon from surging. This is the bull market that everyone hates.

 

 

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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Japan`s Megabanks are up about 50% since the election

This week is a week for a special focus on the banks around the world. Today, I will take a closer look at the banks in Japan.

Japans interest rate peaked in the 70s and 80`s at about 9%, and it went down to 6% in 1991. Then it started to fall down with the stock market. As you may know, Japan has printed tons of money and a great recovery has never happened.

 

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Japan are in a very special situation. The Bank of Japan left the interest rate unchanged at -0,1% at its December 2016 meeting, as widely expected. In addition; policy makers also decided to maintain its 10-years government bond yield target around 0% and viewed a moderate recovery trend in the economy had continued while exports has picked up.

With regard to the amount of JGB`s to be purchased, the Bank will conduct buying at more or less the current pace. An annual pace of increase of about 80 trillion yen.

The biggest banks in Japan are up about 50% since the election.

On top of all this, Japan will continue with its craziness and monetize about $670 billion`s worth of bonds per year.Wow!

Japan`s economy has continued its moderate recovery trend, and overseas economics have continued to grow at moderate pace, although emerging economies remain sluggish in part. In this situation exports have picked up.

Prime Minister Shinzo Abe said the sales for American cars are poor, pushing back after President Donald Trump described the trade imbalance on vehicles as «unfair». Japan exported 1,6 million cars in 2015. Sales of American cars in Japan are almost non-existent, while only 19 000 cars were sold in Japan in 2015, trade minister Hiroshige Seko said.

The reason for the bad sale is competition and not tariff.

Despite all the noise from the U.S and Trump`s fiscal and trade policies, and a number of unclear factors like Brexit, trade deals and the global economic situation, Japan will see its economy grow in 2017 on the back of the weak yen and government steps to stimulate sluggish consumption, economists have said.

They predict that 2017 will be a positive year for Japan, and the government looks to craft more measures to help boost consumption.

A weaker yen against the dollar will also help boost Japanese exporters and their revenue.

Shinzo Abe will meet Donald Trump in Washington 10 February this year.

 

trump100_b

 

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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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.

 

plutonomy

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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