As earnings season kicked off, stocks didn't make any explosive moves, but it was a very good week to be a large money center bank in the United States. With the exception of Wells Fargo, the banking sector reported robust results for the second quarter that topped analyst estimates and put the effects of the coronavirus and collapsing US economy into a bizarre perspective that seemed more the handiwork of Hollywood dream-makers than buttoned-down Wall Street executives.
While most Americans were under some form of stay-at-home order and businesses were locked down or locked out from operating as usual, the trading arms of the biggest banks were busy making money hand over fist trading stocks and bonds as those markets rallied back after a near-disaster in the first quarter.
Goldman Sachs (GS), JP Morgan Chase (JPM), Citigroup (C) and Bank of America (BAC) all reported massive gains from their trading desks in the period from April through June. Morgan Stanley, like Goldman, unburdened with consumer loans and credit cards in forbearance like their retail rivals, recorded its most profitable quarter ever. The cumulative results of the nation's largest banks belied the dire conditions plaguing the general US economy. Not only were the banks the beneficiaries of stock and bond market rallies which they largely control, they were also rewarded with infusions of capital from the Federal Reserve in the form of purchases by the Fed of bonds they originated or backed, adding to their Tier 1 assets, strengthening their balance sheets.
The Federal Reserve made certain that 2020 was not going to be a repeat of 2008, when banks were caught with slim reserves, as they were over-leveraged and trapped in a vicious cycle which they helped create without any form of government backstopping.
Thanks to emergency measures taken by the Fed at the beginning of the crisis and executed with alacrity across the spectrum of faulty assets with questionable collateral, the banks came out smelling like rosewater, committed to making money even in the worst of times. Guided by the unerring market-moving hand of the Federal Reserve, the banks managed to put to rest any hint of a liquidity crisis, their magnanimity and generosity expressed as an outstretched hand to beleaguered consumers and small businesses.
Ahead of the curve by committing substantial sums to loan loss reserves, or, in bank parlance, provisions against credit losses, the retail banks, JPM, BofA, and Citi were girded for the worst as they granted forbearance and deferrals on everything from mortgages to credit cards to auto loans. Giving their credit customers a three or four month free ride helped consumers and Main Street business interests ride out the viral storm, though it's unlikely that the banks will be as forgiving when the economy begins to improve, when and if it indeed does. With business loans, mortgages, and credit card delinquencies already on the rise, defaults and bankruptcies are a given going forward, but the cycle is shot-circuited at the banking end thanks to Federal Reserve backstopping. The general economy may crash, but the banks will still be standing. Having bolstered their reserves to a point at which they can withstand not just recession, but depression-like conditions they seem assured of a capability to weather the storm relatively unscathed. Only time will tell if their efforts have been sufficient.
The banks delayed the usual effects of a recession and massive unemployment by - in conjunction with a give-away congress - kicking the debt can further down the road. Their second quarters assured, Wall Street ended the week on a somewhat sober note, as Thursday and Friday's trading lacked any noticeable enthusiasm.
With a banking crisis apparently averted for the time being, the focus of Wall Street was taken off the banks and onto the hope for a miracle vaccine while spiking incidence of the virus had states looking to reimpose stringent demands on the population and widespread business closures.
Topping concerns was the upcoming school year, in which states are ceding authority to local school districts, many of them opting for "virtual" classrooms over actual physical attendance a requirement for students in K-12 grades. Others are adopting a hybrid approach, allowing parents to choose which style of "learning" they think best for their children. No matter the outcome, the trial-and-error, hop-skipping, scattershot solutions across thousands of diverse districts will more than likely ensure more pain than patience, less learning and more disillusion with government remedies. What lies ahead for the economy and humanity in general appears to be a more challenging proposition than the ebullient rejoicing seen on Wall Street this past week.
Over the course of the week Treasury bonds ended where they started. The overall curve structure increased by a mere one basis point. The 10-year note lost one basis point, to end the week at 0.64%. Oil and gas remained rangebound with WTI crude traversing the line at $40 a barrel and gas prices at the pump averaging around $2.00 per gallon.
Precious metals completed another shining seven days, with gold holding above $1800 a troy ounce and silver shooting through $18 and into $19 an ounce territory. Spot silver ended the week at $19.32. Gold closed at $1810.30.
High demand kept premiums elevated for both metals. The most recent sales on eBay for selected items (including shipping) are presented below:
Item: Low / High / Average / Median
1 oz silver coin: 24.00 / 39.90 / 32.32 / 32.47
1 oz silver bar: 24.00 / 39.20 / 31.99 / 31.61
1 oz gold coin: 1,850.00 / 1,931.73 / 1,901.20 / 1,908.06
1 oz gold bar: 1,873.95 / 1,908.01 / 1,895.43 / 1,895.85
As the scare-mongering over COVID-19 continues unabated across all levels of mainstream media, the Bill and Melinda Gates Foundation wants to stick needles in everyone on the planet.
At the Close, Friday, July 17, 2020:
Dow: 26,671.95, -62.76 (-0.23%)
NASDAQ: 10,503.19, +29.36 (+0.28%)
S&P 500: 3,224.73, +9.16 (+0.28%)
NYSE: 12,402.74, +52.63 (+0.43%)
For the Week:
Dow: +596.65 (+2.29%)
NASDAQ: -114.25 (-1.08%)
S&P 500: +39.69 (+1.25%)
NYSE: +52.63 (+0.43%)
Sunday, July 19, 2020
Friday, July 17, 2020
Banks Earnings Show Big Score for Wall Street, Not Much Hope for Main Street
Stocks took a breather Thursday, ending a four-day win streak on the Dow, after Bank of America posted second quarter results which saw their profit cut in half from a year ago.
That wasn't the only news to cross the tape on Thursday. Morgan Stanley's (MS) net income came in at an record $3.2 billion for the quarter, against the $2.2 billion the bank earned a year earlier and the $1.8 billian that had been expected by analysts in a Bloomberg poll.
Morgan Stanley’s investment bank had trading revenues up 68 percent, including a 168 percent increase in fixed income revenues, while investment banking fees were up 39 percent year on year.
Credit loss reserves were not of particular concern for the firm, posting just $239 million, as compared to consumer banks like JP Morgan Chase and Bank of America, which put aside multiple billions to shield against expected defaults on mortgages, credit cards and auto loans.
Overall, it was a banner week for the big banks, as all except Wells Fargo turned profits amid the confusion and government shutdowns stemming from the coronavirus.
Main Street businesses, which suffered the brunt of government action, must be looking at the banking sector with a jaundiced eye. While many small businesses were shut down for lengthy periods, the banks hauled in money as the stock market rallied wildly. Many of the small businesses - particularly retail, restaurant, health and beauty, and fitness establishments - will never reopen. Their silver lining will come with bankruptcy filings, where they will tell the banks that their loans will not be repaid.
While not a rosy picture for either side, the banks will manage to recoup some of their losses if they wish to claim real estate or significant assets in court proceedings from the broke businesses and sell them off in fire sales to the highest bidders, if any are to be found.
Vulture investors are sharpening their claws at the prospect of hundreds of thousands of commercial establishments and billions of dollars worth of salvage assets hitting the auction blocks at pennines on the dollar.
When the crisis is finally put to rest at some unknowable future date the retail landscape of urban and suburban America will be changed forever. Gone will be the majority of boutique retail shops and family-run restaurants.
If the future pans out according to the plan set out by the Federal Reserve, federal and state governments, it will belong to Amazon, Wal-Mart and Target and dining out will offer a choice between KFC, Taco Bell, and McDonald's.
Chains such as Cheesecake Factory, Buffalo Wild Wings and Applebee's may or may not survive, dependent upon how much longer the public feels compelled to submit to the madness of government mandates.
According to the loan loss reserves posted by the likes of Citi (C), Wells Fargo (WFC), JP Morgan Chase (JPM) and Bank of America (BAC), losses are mounting, but have yet to reach critical levels. Defaults on commercial and residential mortgages will take months and years to sort out, along with personal bankruptcies, credit card, and auto lease and loan defaults.
Thanks to the actions by the Federal Reserve, the banks appear solvent and well-capitalized for now, but that may change, dependent upon two primary factors: 1) the degree and length of government mandates on lockdowns, mask-wearing and social distancing, and, 2) the November elections for president, senate and house of representatives.
No matter the case, a deep and long depression appears all but certain.
At the Close, Thursday, July 16, 2020:
Dow: 26,734.71, -135.39 (-0.50%)
NASDAQ: 10,473.83, -76.67 (-0.73%)
S&P 500: 3,215.57, -10.99 (-0.34%)
NYSE: 12,350.11, -41.19 (-0.33%)
That wasn't the only news to cross the tape on Thursday. Morgan Stanley's (MS) net income came in at an record $3.2 billion for the quarter, against the $2.2 billion the bank earned a year earlier and the $1.8 billian that had been expected by analysts in a Bloomberg poll.
Morgan Stanley’s investment bank had trading revenues up 68 percent, including a 168 percent increase in fixed income revenues, while investment banking fees were up 39 percent year on year.
Credit loss reserves were not of particular concern for the firm, posting just $239 million, as compared to consumer banks like JP Morgan Chase and Bank of America, which put aside multiple billions to shield against expected defaults on mortgages, credit cards and auto loans.
Overall, it was a banner week for the big banks, as all except Wells Fargo turned profits amid the confusion and government shutdowns stemming from the coronavirus.
Main Street businesses, which suffered the brunt of government action, must be looking at the banking sector with a jaundiced eye. While many small businesses were shut down for lengthy periods, the banks hauled in money as the stock market rallied wildly. Many of the small businesses - particularly retail, restaurant, health and beauty, and fitness establishments - will never reopen. Their silver lining will come with bankruptcy filings, where they will tell the banks that their loans will not be repaid.
While not a rosy picture for either side, the banks will manage to recoup some of their losses if they wish to claim real estate or significant assets in court proceedings from the broke businesses and sell them off in fire sales to the highest bidders, if any are to be found.
Vulture investors are sharpening their claws at the prospect of hundreds of thousands of commercial establishments and billions of dollars worth of salvage assets hitting the auction blocks at pennines on the dollar.
When the crisis is finally put to rest at some unknowable future date the retail landscape of urban and suburban America will be changed forever. Gone will be the majority of boutique retail shops and family-run restaurants.
If the future pans out according to the plan set out by the Federal Reserve, federal and state governments, it will belong to Amazon, Wal-Mart and Target and dining out will offer a choice between KFC, Taco Bell, and McDonald's.
Chains such as Cheesecake Factory, Buffalo Wild Wings and Applebee's may or may not survive, dependent upon how much longer the public feels compelled to submit to the madness of government mandates.
According to the loan loss reserves posted by the likes of Citi (C), Wells Fargo (WFC), JP Morgan Chase (JPM) and Bank of America (BAC), losses are mounting, but have yet to reach critical levels. Defaults on commercial and residential mortgages will take months and years to sort out, along with personal bankruptcies, credit card, and auto lease and loan defaults.
Thanks to the actions by the Federal Reserve, the banks appear solvent and well-capitalized for now, but that may change, dependent upon two primary factors: 1) the degree and length of government mandates on lockdowns, mask-wearing and social distancing, and, 2) the November elections for president, senate and house of representatives.
No matter the case, a deep and long depression appears all but certain.
At the Close, Thursday, July 16, 2020:
Dow: 26,734.71, -135.39 (-0.50%)
NASDAQ: 10,473.83, -76.67 (-0.73%)
S&P 500: 3,215.57, -10.99 (-0.34%)
NYSE: 12,350.11, -41.19 (-0.33%)
Thursday, July 16, 2020
Bank Of America Posts Earnings, Sets Aside $5 Billion For Credit Losses; Logic Sees Through COVID Crisis
Anybody who has every employed critical, logical thinking to address any problem probably sees what's going on regarding the pandemic, government mandates, Wall Street's enthusiastic rally, and the financial strip-mining of what's left of the middle class, not just in the United States, but around the world.
Just in case one is in need of a refresher, here's a brief month-by-month rundown:
January, 2020: WuHan Flu detected and reported upon in China.
February, 2020: Flu spread, China is largely locked down, other countries begin reporting cases.
March, 2020: Flu spreads massively to Europe and Asia, entire countries locked down, businesses closed, people forced to "shelter-in-place" and "social distance." Stock market crashes. Fed steps in with various programs to aid Wall Street and bolster stressed balance sheets in major firms and banks.
April 2020: Flu continues to spread: New York City is epicenter in United States; lockdowns continue. Stocks begin to rally.
May 2020: Some states begin re-opening their economies, CDC and mainstream media warns of a second wave. Stock rally accelerates as unemployment spikes to record levels.
June 2020: Cases begin to build up in states that were warned by the CDC. Stock rally moderates.
July 2020: The world's biggest banks, those in the US, begin reporting second quarter results, which are almost universally positive and higher than estimates. Stocks resume rally. Media and CDC continue to warn about virus, which, to most people, seems non-existent. States begin imposing more strict requirements for mask-wearing, shut down "non-essential" businesses again. Northeaster states (New York, New Jersey) begin imposing travel restrictions and mandatory quarantines to visitors from other states.
OK, left out are a load of details, including the protests, looting, rioting, tearing down of statuary and associated BLM and ANTIFA-inspired madness. That was largely an unrelated sideshow.
Logical-thinking people have determined a number of things:
Now, here are two stories to sort out in the logic maze:
Wolf Richter of Wolf Street reports: It Starts: Mortgage Delinquencies Suddenly Soar At Record Rate
and
From Great Britain: NHS Consultant Says Staff Are Being Silenced Over COVID19
Finally, the last of the important second quarter earnings reports, from Bank of America (BAC):
Bank of America (BAC) profit was cut in half from a year ago, totaling $3.28 billion, or $0.37 per share in the second quarter of 2020. This compares with $7.11 billion, or $0.74 per share, in 2019's second quarter.
Analysts had expected the company to earn $0.27 per share, so it actually counts as a win ("beat") and will be reported as such by many outlets.
Revenue for the quarter fell 3.2% to $22.33 billion from $23.08 billion last year.
Loan loss reserves, or, as the banks like to call it now, "provision for credit losses" was increased by 5.1 billion to nearly $10 billion total for the first and second quarter combined. Bear in mind that Bank of America is one of the world's leading consumer lenders, issuing mortgages for residential and commercial clients, credit cards, auto loans, personal loans, business lines of credit, and home equity loans.
While $10 billion in reserves may sound like a lot of money, in reality, it's far short of what will eventually be written down by the bank. Mortgages and credit cards have been put into various forbearances, beginning in March. Along with the PPP loans to small businesses and the $600 extra unemployment benefits doled out to millions across the country, the recession and resultant slowdown in consumer spending and business activity has been delayed. More pain will come in the third and fourth quarters. This quarter's results are very counter-intuitive, so it's essential to sift through the noise and bluster and realize that this is only an early reprieve from a financial panic which continues to unfold in fits and starts.
The biggest banks largely made money trading, as the stock market rallied from late March through to the present.
Those interested in slogging through the 18-page press release and financial data [PDF] can do so here.
Second quarter results and loan loss provisions from non-bank financial entities, especially CapitalOne (COF) and Discover (DFS) should be more revealing and possibly more severe. These "shadow banks" don't have investment arms like BofA or JP Morgan. They are mainline consumer lenders of credit cards, auto loans, and a small mix of home equity and mortgage loans, thus, subject to be hard hit by an economic downturn and chronic unemployment. Both report next week, CapitalOne on the 21st and Discover on the 22nd. Also, watch American Express (AXP) which reports on the 24th.
As an afterthought, consider what's coming down the pike. Now that the BLM and ANTIFA protests have subsided and the backlashing by conservative America has begun, the next issue will be whether or not to open public schools over the next four to six or seven weeks, depending on where one lives.
So far, the school districts that have announced plans have presented a basket of options, each district making up an agenda as they go along. Some are not re-opening to students, opting for some form of distance learning alternative. Others are using a hybrid approach. A small number are opening fully, but with various new rules and restrictions. It's complete chaos with no guiding principles.
The other issue will be professional sports, which have been shut down for four months, suspending the NBA season and all but canceling Major League Baseball. Both are supposed to resume in some fashion - without fans in the stands - soon. The NBA is set to resume play for the 2019-20 season on July 30. MLB is planning to open a 60-game season beginning July 23 and 24. Both leagues have announced that some players have tested positive for COVID-19 and some players are already refusing to play.
College football is in limbo. There's been no word from the NCAA on whether play will go according to schedule (about six weeks from now) or whether there will be a delay. The NFL has announced that the 2020 season will proceed as planned. Some teams have already announced that no fans will be allowed to attend games.
First, it's hard to imagine empty stands in arenas, stadiums, ballparks, and fields which normally accommodate tens of thousands of fans. Up to 100,000 attend some college football games. Baseball stadiums are built for anywhere from 38,000 to 50,000 fans. NFL stadiums routinely host up to 80,000. Even if the games are played, it won't be the same. One questions the logic of even playing in the huge facilities. Teams and leagues could save significant sums of money playing in more cozy environs. Without fans, all they need are the fields or courts and some sideline area. NFL games could be played at larger high school stadia.
Then there's the distinct possibility that the games will be cancelled again, either by government edict or over fear of contracting the dreaded COVID by players, officials, mascots, trainers, you name it.
Schools and sports need to be monitored for future developments.
You've been played. Again. You're still being played right now and it's not going to stop.
Do not be guided in your personal economic and social decisions by garbage media, Wall Street hype, nor government dictates. Let logic and critical thinking guide you to your best outcome.
The following is presented as a public service:
Dr. Vladimir (Zev) Zelenko
Board Certified Family Practitioner
501 Rt 208, Monroe, NY 10950
845-238-0000
March 23, 2020
To all medical professionals around the world:
My name is Dr. Zev Zelenko and I practice medicine in Monroe, NY. For the last 16 years, I have cared for approximately 75% of the adult population of Kiryas Joel, which is a very close knit community of approximately 35,000 people in which the infection spread rapidly and unchecked prior to the imposition of social distancing.
As of today my team has tested approximately 200 people from this community for Covid-19, and 65% of the results have been positive. If extrapolated to the entire community, that means more than 20,000 people are infected at the present time. Of this group, I estimate that there are 1500 patients who are in the high-risk category (i.e. >60, immunocompromised, comorbidities, etc).
Given the urgency of the situation, I developed the following treatment protocol in the pre-hospital setting and have seen only positive results:
1. Any patient with shortness of breath regardless of age is treated.
2. Any patient in the high-risk category even with just mild symptoms is treated.
3. Young, healthy and low risk patients even with symptoms are not treated (unless their circumstances change and they fall into category 1 or 2).
My out-patient treatment regimen is as follows:
1. Hydroxychloroquine 200mg twice a day for 5 days
2. Azithromycin 500mg once a day for 5 days
3. Zinc sulfate 220mg once a day for 5 days
The rationale for my treatment plan is as follows. I combined the data available from China and South Korea with the recent study published from France (sites available on request). We know that hydroxychloroquine helps Zinc enter the cell. We know that Zinc slows viral replication within the cell. Regarding the use of azithromycin, I postulate it prevents secondary bacterial infections. These three drugs are well known and usually well tolerated, hence the risk to the patient is low.
Since last Thursday, my team has treated approximately 350 patients in Kiryas Joel and another 150 patients in other areas of New York with the above regimen.
Of this group and the information provided to me by affiliated medical teams, we have had ZERO deaths, ZERO hospitalizations, and ZERO intubations. In addition, I have not heard of any negative side effects other than approximately 10% of patients with temporary nausea and diarrhea.
(Under severe pressure from the media, government entities, and presumably the CDC, Dr. Zelenko retired from his clinic on May 20, 2020 after 20 years as a medical practitioner.
At the Close, Wednesday, July 15, 2020:
Dow: 26,870.10, +227.50 (+0.85%)
NASDAQ: 10,550.49, +61.89 (+0.59%)
S&P 500: 3,226.56, +29.04 (+0.91%)
NYSE: 12,391.32, +187.12 (+1.53%)
Just in case one is in need of a refresher, here's a brief month-by-month rundown:
January, 2020: WuHan Flu detected and reported upon in China.
February, 2020: Flu spread, China is largely locked down, other countries begin reporting cases.
March, 2020: Flu spreads massively to Europe and Asia, entire countries locked down, businesses closed, people forced to "shelter-in-place" and "social distance." Stock market crashes. Fed steps in with various programs to aid Wall Street and bolster stressed balance sheets in major firms and banks.
April 2020: Flu continues to spread: New York City is epicenter in United States; lockdowns continue. Stocks begin to rally.
May 2020: Some states begin re-opening their economies, CDC and mainstream media warns of a second wave. Stock rally accelerates as unemployment spikes to record levels.
June 2020: Cases begin to build up in states that were warned by the CDC. Stock rally moderates.
July 2020: The world's biggest banks, those in the US, begin reporting second quarter results, which are almost universally positive and higher than estimates. Stocks resume rally. Media and CDC continue to warn about virus, which, to most people, seems non-existent. States begin imposing more strict requirements for mask-wearing, shut down "non-essential" businesses again. Northeaster states (New York, New Jersey) begin imposing travel restrictions and mandatory quarantines to visitors from other states.
OK, left out are a load of details, including the protests, looting, rioting, tearing down of statuary and associated BLM and ANTIFA-inspired madness. That was largely an unrelated sideshow.
Logical-thinking people have determined a number of things:
- The mainstream media is full of liars, prevaricators, and propagandists. This was already well known.
- The coronavirus kills mostly people over 60 with pre-existing conditions (co-morbidities) such as heart disease, diabetes, and especially, morbid obesity.
- Government lockdowns, school closings, business closings, stay-at-home orders, etc. were government overreach and crushed the Main Street economy.
- The Federal Reserve bailed out Wall Street and the banks, as it always does.
- While private sector small businesses and employees were ravaged, nobody in the public sector (federal, state, local government) missed a day's pay even though most of them were not working full or even part time.
- The current "wave" of cases is largely made up and bolstered by an enormous ramp-up in testing. More tests = more cases = more fear-mongering by the media. Meanwhile, death rates have been decreasing steadily and the media fails repeatedly to report that.
- Far less than one percent of the total population in the United States has contracted COVID-19. Fewer than 150,000 have died from COVID-19, according to official sources. Anecdotal evidence that COVID-19 deaths have been wildly exaggerated is everywhere.
- It's estimated that 42-50% of small businesses which were shut down by state governments will never reopen. Bankruptcies are about to explode. Unemployment is not going to rebound.
Now, here are two stories to sort out in the logic maze:
Wolf Richter of Wolf Street reports: It Starts: Mortgage Delinquencies Suddenly Soar At Record Rate
and
From Great Britain: NHS Consultant Says Staff Are Being Silenced Over COVID19
Finally, the last of the important second quarter earnings reports, from Bank of America (BAC):
Bank of America (BAC) profit was cut in half from a year ago, totaling $3.28 billion, or $0.37 per share in the second quarter of 2020. This compares with $7.11 billion, or $0.74 per share, in 2019's second quarter.
Analysts had expected the company to earn $0.27 per share, so it actually counts as a win ("beat") and will be reported as such by many outlets.
Revenue for the quarter fell 3.2% to $22.33 billion from $23.08 billion last year.
Loan loss reserves, or, as the banks like to call it now, "provision for credit losses" was increased by 5.1 billion to nearly $10 billion total for the first and second quarter combined. Bear in mind that Bank of America is one of the world's leading consumer lenders, issuing mortgages for residential and commercial clients, credit cards, auto loans, personal loans, business lines of credit, and home equity loans.
While $10 billion in reserves may sound like a lot of money, in reality, it's far short of what will eventually be written down by the bank. Mortgages and credit cards have been put into various forbearances, beginning in March. Along with the PPP loans to small businesses and the $600 extra unemployment benefits doled out to millions across the country, the recession and resultant slowdown in consumer spending and business activity has been delayed. More pain will come in the third and fourth quarters. This quarter's results are very counter-intuitive, so it's essential to sift through the noise and bluster and realize that this is only an early reprieve from a financial panic which continues to unfold in fits and starts.
The biggest banks largely made money trading, as the stock market rallied from late March through to the present.
Those interested in slogging through the 18-page press release and financial data [PDF] can do so here.
Second quarter results and loan loss provisions from non-bank financial entities, especially CapitalOne (COF) and Discover (DFS) should be more revealing and possibly more severe. These "shadow banks" don't have investment arms like BofA or JP Morgan. They are mainline consumer lenders of credit cards, auto loans, and a small mix of home equity and mortgage loans, thus, subject to be hard hit by an economic downturn and chronic unemployment. Both report next week, CapitalOne on the 21st and Discover on the 22nd. Also, watch American Express (AXP) which reports on the 24th.
As an afterthought, consider what's coming down the pike. Now that the BLM and ANTIFA protests have subsided and the backlashing by conservative America has begun, the next issue will be whether or not to open public schools over the next four to six or seven weeks, depending on where one lives.
So far, the school districts that have announced plans have presented a basket of options, each district making up an agenda as they go along. Some are not re-opening to students, opting for some form of distance learning alternative. Others are using a hybrid approach. A small number are opening fully, but with various new rules and restrictions. It's complete chaos with no guiding principles.
The other issue will be professional sports, which have been shut down for four months, suspending the NBA season and all but canceling Major League Baseball. Both are supposed to resume in some fashion - without fans in the stands - soon. The NBA is set to resume play for the 2019-20 season on July 30. MLB is planning to open a 60-game season beginning July 23 and 24. Both leagues have announced that some players have tested positive for COVID-19 and some players are already refusing to play.
College football is in limbo. There's been no word from the NCAA on whether play will go according to schedule (about six weeks from now) or whether there will be a delay. The NFL has announced that the 2020 season will proceed as planned. Some teams have already announced that no fans will be allowed to attend games.
First, it's hard to imagine empty stands in arenas, stadiums, ballparks, and fields which normally accommodate tens of thousands of fans. Up to 100,000 attend some college football games. Baseball stadiums are built for anywhere from 38,000 to 50,000 fans. NFL stadiums routinely host up to 80,000. Even if the games are played, it won't be the same. One questions the logic of even playing in the huge facilities. Teams and leagues could save significant sums of money playing in more cozy environs. Without fans, all they need are the fields or courts and some sideline area. NFL games could be played at larger high school stadia.
Then there's the distinct possibility that the games will be cancelled again, either by government edict or over fear of contracting the dreaded COVID by players, officials, mascots, trainers, you name it.
Schools and sports need to be monitored for future developments.
You've been played. Again. You're still being played right now and it's not going to stop.
Do not be guided in your personal economic and social decisions by garbage media, Wall Street hype, nor government dictates. Let logic and critical thinking guide you to your best outcome.
The following is presented as a public service:
Dr. Vladimir (Zev) Zelenko
Board Certified Family Practitioner
501 Rt 208, Monroe, NY 10950
845-238-0000
March 23, 2020
To all medical professionals around the world:
My name is Dr. Zev Zelenko and I practice medicine in Monroe, NY. For the last 16 years, I have cared for approximately 75% of the adult population of Kiryas Joel, which is a very close knit community of approximately 35,000 people in which the infection spread rapidly and unchecked prior to the imposition of social distancing.
As of today my team has tested approximately 200 people from this community for Covid-19, and 65% of the results have been positive. If extrapolated to the entire community, that means more than 20,000 people are infected at the present time. Of this group, I estimate that there are 1500 patients who are in the high-risk category (i.e. >60, immunocompromised, comorbidities, etc).
Given the urgency of the situation, I developed the following treatment protocol in the pre-hospital setting and have seen only positive results:
1. Any patient with shortness of breath regardless of age is treated.
2. Any patient in the high-risk category even with just mild symptoms is treated.
3. Young, healthy and low risk patients even with symptoms are not treated (unless their circumstances change and they fall into category 1 or 2).
My out-patient treatment regimen is as follows:
1. Hydroxychloroquine 200mg twice a day for 5 days
2. Azithromycin 500mg once a day for 5 days
3. Zinc sulfate 220mg once a day for 5 days
The rationale for my treatment plan is as follows. I combined the data available from China and South Korea with the recent study published from France (sites available on request). We know that hydroxychloroquine helps Zinc enter the cell. We know that Zinc slows viral replication within the cell. Regarding the use of azithromycin, I postulate it prevents secondary bacterial infections. These three drugs are well known and usually well tolerated, hence the risk to the patient is low.
Since last Thursday, my team has treated approximately 350 patients in Kiryas Joel and another 150 patients in other areas of New York with the above regimen.
Of this group and the information provided to me by affiliated medical teams, we have had ZERO deaths, ZERO hospitalizations, and ZERO intubations. In addition, I have not heard of any negative side effects other than approximately 10% of patients with temporary nausea and diarrhea.
(Under severe pressure from the media, government entities, and presumably the CDC, Dr. Zelenko retired from his clinic on May 20, 2020 after 20 years as a medical practitioner.
At the Close, Wednesday, July 15, 2020:
Dow: 26,870.10, +227.50 (+0.85%)
NASDAQ: 10,550.49, +61.89 (+0.59%)
S&P 500: 3,226.56, +29.04 (+0.91%)
NYSE: 12,391.32, +187.12 (+1.53%)
Wednesday, July 15, 2020
Bank Earnings Continue to Shock and Awe As Goldman Sachs, PNC Blow Out Expectations
The parade of bank earnings reports continued prior to the open on Wednesday with heavy-hitter Goldman Sachs leading the march.
Goldman Sachs (GS)
Roughly 10 years ago, Rolling Stone columnist Matt Taibi slapped the moniker of "vampire squid" on Goldman Sachs, describing how their financial tentacles reached into every asset class around the world. The name stuck and Goldman's reach proved unimpaired by the coronavirus as the firm blew away analyst estimates for second quarter revenue and earnings.
EPS rose 7.7% to $6.26 on revenue of $13.3 billion, a 41 percent improvement over the same quarter a year ago. Fixed-income trading revenue shot up 1.49% to $4.24 billion, the best performance in nine years. Equities revenue jumped 46% to $2.94 billion, the highest in 11 years. Investment banking climbed 36% to $2.66 billion.
Analysts were looking for the firm to generate EPS of $4.27 on revenue of $10.07 billion.
Provision for credit losses rose to $1.59 billion from $214 million a year ago and $937 million in Q1, reflecting predictions for deteriorating economic conditions but Goldman's loan loss reserves continue to be much smaller than rival banks because of their light footprint in consumer banking though exposure to commercial real estate is still significant.
Goldman Sachs stock climbed 4.1% to 222.76 in premarket trading.
Bank of NY Mellon (BK)
The company reported revenue of $4.0 billion and earnings per share of $1.01, which was flat compared to last year's second quarter. BNY Mellon added $142 million to its loan loss reserves and increased Tier 1 Capital by $2.55 billion, including issuance of $1 billion of preferred stock. Overall there were no surprises in the company's second quarter report.
PNC Financial (PNC)
Bolstered by the sale of its interest in Blackrock in May, U.S. regional bank PNC Financial Services Group (PNC) reported second-quarter profit more than doubled. Net income attributable to common shareholders jumped to $3.59 billion, or $8.40 per share, in the three months ended June 30, from $1.31 billion, or $2.88 per share, a year earlier.
However, the company reported a net loss from continuing operations, which excludes the one-time gain from shedding its Blackrock investment, was $744 million.
PNC set aside $2.46 billion as loan loss provisions in the quarter, up from $180 million a year earlier.
The bank’s net income from discontinued operations, which includes gains from the sale, was $4.4 billion. The company also said it will continue the temporary suspension of its common stock repurchase program and reaffirmed the quarterly dividend to shareholders of record at $1.15 per share.
US Bancorp (USB)
Beating lowered EPS estimates, U.S. Bancorp (USB) reported second quarter earnings per share of $0.41, compared to $1.09, a year ago. On average, 22 analysts polled by Thomson Reuters expected the company to report profit per share of $0.22 for the quarter. Net income applicable to common shareholders declined to $614 million from $1.74 billion.
The company's provision for credit losses for the second quarter of 2020 was $1.737 billion, a huge increase over the previous quarter and year-ago quarter, reflecting deteriorating economic conditions due to the coronavirus.
Second quarter total net revenue was $5.84 billion compared to $5.82 billion, previous year, in line with estimates. Net interest income on a taxable-equivalent basis was $3.22 billion, a decrease of 3.2 percent.
Thus far, the banking segment, which was largely routed during the early days of the pandemic issue, has delivered results for the second quarter above and beyond even the most optimistic. With US GDP expected to contract by as much as 45%, the banks managed to make hay within unstable conditions, largely due to actions taken by the Federal Reserve and experience in dealing with potential credit losses from 2008 and 2009.
Bank earnings - with the notable exception of Wells Fargo - have generally surprised to the upside, with Goldman Sachs and JP Morgan Chase managing to navigate the rough waters with steady hands.
A week that easily could have blunted the ongoing rally has instead turned the market wildly positive. Leave it to Wall Street and the bankers that run the investment capitol of the world to put the bears back into hibernation. With less than an hour before the opening bell, stock futures have exploded higher. Dow futures are up 540 points.
At the Close, Tuesday, July 14, 2020:
Dow: 26,642.59, +556.79 (+2.13%)
NASDAQ: 10,488.58, +97.78 (+0.94%)
S&P 500: 3,197.52, +42.30 (+1.34%)
NYSE: 12,204.21, +189.51 (+1.58%)
Goldman Sachs (GS)
Roughly 10 years ago, Rolling Stone columnist Matt Taibi slapped the moniker of "vampire squid" on Goldman Sachs, describing how their financial tentacles reached into every asset class around the world. The name stuck and Goldman's reach proved unimpaired by the coronavirus as the firm blew away analyst estimates for second quarter revenue and earnings.
EPS rose 7.7% to $6.26 on revenue of $13.3 billion, a 41 percent improvement over the same quarter a year ago. Fixed-income trading revenue shot up 1.49% to $4.24 billion, the best performance in nine years. Equities revenue jumped 46% to $2.94 billion, the highest in 11 years. Investment banking climbed 36% to $2.66 billion.
Analysts were looking for the firm to generate EPS of $4.27 on revenue of $10.07 billion.
Provision for credit losses rose to $1.59 billion from $214 million a year ago and $937 million in Q1, reflecting predictions for deteriorating economic conditions but Goldman's loan loss reserves continue to be much smaller than rival banks because of their light footprint in consumer banking though exposure to commercial real estate is still significant.
Goldman Sachs stock climbed 4.1% to 222.76 in premarket trading.
Bank of NY Mellon (BK)
The company reported revenue of $4.0 billion and earnings per share of $1.01, which was flat compared to last year's second quarter. BNY Mellon added $142 million to its loan loss reserves and increased Tier 1 Capital by $2.55 billion, including issuance of $1 billion of preferred stock. Overall there were no surprises in the company's second quarter report.
PNC Financial (PNC)
Bolstered by the sale of its interest in Blackrock in May, U.S. regional bank PNC Financial Services Group (PNC) reported second-quarter profit more than doubled. Net income attributable to common shareholders jumped to $3.59 billion, or $8.40 per share, in the three months ended June 30, from $1.31 billion, or $2.88 per share, a year earlier.
However, the company reported a net loss from continuing operations, which excludes the one-time gain from shedding its Blackrock investment, was $744 million.
PNC set aside $2.46 billion as loan loss provisions in the quarter, up from $180 million a year earlier.
The bank’s net income from discontinued operations, which includes gains from the sale, was $4.4 billion. The company also said it will continue the temporary suspension of its common stock repurchase program and reaffirmed the quarterly dividend to shareholders of record at $1.15 per share.
US Bancorp (USB)
Beating lowered EPS estimates, U.S. Bancorp (USB) reported second quarter earnings per share of $0.41, compared to $1.09, a year ago. On average, 22 analysts polled by Thomson Reuters expected the company to report profit per share of $0.22 for the quarter. Net income applicable to common shareholders declined to $614 million from $1.74 billion.
The company's provision for credit losses for the second quarter of 2020 was $1.737 billion, a huge increase over the previous quarter and year-ago quarter, reflecting deteriorating economic conditions due to the coronavirus.
Second quarter total net revenue was $5.84 billion compared to $5.82 billion, previous year, in line with estimates. Net interest income on a taxable-equivalent basis was $3.22 billion, a decrease of 3.2 percent.
Thus far, the banking segment, which was largely routed during the early days of the pandemic issue, has delivered results for the second quarter above and beyond even the most optimistic. With US GDP expected to contract by as much as 45%, the banks managed to make hay within unstable conditions, largely due to actions taken by the Federal Reserve and experience in dealing with potential credit losses from 2008 and 2009.
Bank earnings - with the notable exception of Wells Fargo - have generally surprised to the upside, with Goldman Sachs and JP Morgan Chase managing to navigate the rough waters with steady hands.
A week that easily could have blunted the ongoing rally has instead turned the market wildly positive. Leave it to Wall Street and the bankers that run the investment capitol of the world to put the bears back into hibernation. With less than an hour before the opening bell, stock futures have exploded higher. Dow futures are up 540 points.
At the Close, Tuesday, July 14, 2020:
Dow: 26,642.59, +556.79 (+2.13%)
NASDAQ: 10,488.58, +97.78 (+0.94%)
S&P 500: 3,197.52, +42.30 (+1.34%)
NYSE: 12,204.21, +189.51 (+1.58%)
Tuesday, July 14, 2020
JP Morgan Chase, Citigroup, Wells Fargo Release Second Quarter Results; Loan Loss Provisions Rise Significantly
Being that this week is going to prove to be one of the more significant periods of the ongoing economic storm, Money Daily plans to dispense with most of the rhetoric and focus on stocks as banks release second quarter earnings reports. The ramifications of bank earnings specifically in this quarter will likely be felt for years.
On Monday, the markets took a decided turn with an hour remaining in the trading session. Some have attributed the sudden reversal from positive to negative as a response to comments from OPEC on oil production levels while others blamed Dallas Fed President Robert Kaplan's remarks that mask wearing would lead to faster economic growth or the WHO's Tedros Adhanam saying that government's have sent mixed messages and the response has been inadequate to halt the spread of COVID-19.
The commentary from these diverse sources seemed to be very well-timed, like a chorus from Wagner's Götterdämmerung, signaling chaos and destruction on a massive scale. Whatever the matter, they provided cover for speculators to flee the scene in advance of Tuesday's expected tsunami of bad news, which starts with second quarter earnings from JP Morgan Chase.
J.P. Morgan Chase (JPM)
The nation's largest bank by assets, JP Morgan blew away analyst expectations, which were significantly lowered in response to the coronavirus impact. Adjusted revenue came in at $33.83 billion vs $30.4 billion expected. Adjusted earnings per share was $1.38 versus $1.05 per share expected, a 51% decline from a year ago as the bank made $4.7 billion net and set aside $8.9 billion in loan loss reserves for the quarter, anticipating massive credit losses due to the severe economic impact from the pandemic and government response.
Trading revenues were JPM's strong suit, with market revenue coming in at $9.7 billion, up 79% from a year ago. Revenue from fixed-income nearly doubled from last year's results, up 99% to $7.3 billion, while equity trading revenue rose 38% to $2.4 billion.
The firm suspended its share buyback program until at least the end of September on orders from the Federal Reserve. CEO Jamie Dimon stressed that the company would continue to pay out its dividend of 90 cents annually.
While Bloomberg and CNBC were gushing over the bank's "positive" results, drilling down into the data showed that JP Morgan Chase last money during the quarter in its Consumer and Community Banking (CCB) division, losing $176 million, compared with net income of $4.2 billion in the prior year. Net revenue was $12.2 billion, down 9%.
The company also lost money in commercial banking, dropping another $691 million. The provision for credit losses was $2.4 billion, driven by reserve builds across multiple sectors. Net charge-offs were $79 million,
up $64 million versus the prior year.
Adding it all up, JPM lost money on both sides of it banking business (consumer and commercial), but made up for it by having a blowout quarter trading stocks and bonds. Their loan loss provisions are probably too low and their gains in the market were driven almost exclusively by easy conditions and easier money from the Fed. If the company has a rough quarter in the markets and loan losses continue to pile on, JPM's "fortress balance sheet" will crumble like Chinese concrete.
The company press release and full financials can be found here. [PDF] Be sure to read the notes at the end, which describe some of the tortured "non-GAAP" metrics the firm deploys to persuade Wall Street and the investing public that all is well.
Following JP Morgan, which reported at 7:00 am ET, were Citigroup (C) and Wells Fargo (WFC) at 8:00 am ET. This is where it got a little more interesting.
Wells Fargo (WFC)
Wells Fargo, the bank in which Warren Buffet has a heavy investment, lost $2.69 billion in the second quarter compared to a profit of $5.85 billion in the same period last year. EPS was -$0.66 in Q2 vs. $1.30 in the same period last year. -Analysts projected -$0.20 per share.
Gross revenue was $17.84 billion in Q2 vs. $21.58 billion in the same period last year.
The bank set aside $8.4 billion in loan loss reserves. The Federal Reserve instructed Wells Fargo to cut its 51 cents per share dividend to 10 cents, or 2.5 cents per quarter.
Citigroup (C)
Citigroup reported a nearly 73% plunge in quarterly profit as the bank set aside $5.6 billion to cover potential loan and credit card defaults stemming from the coronavirus outbreak.
The New York-based bank reported a profit of $1.32 billion, or 50 cents per share, for the second quarter ended June 30, down from $4.8 billion, or $1.95 per share, a year earlier.
Revenues were actually higher, up five percent, to $19.77 billion.
Analysts on average had forecast $19.12 billion in revenue and earnings of 28 cents per share, so, on the surface, Citi looks like it beat the estimates, though the numbers were slashed early in the quarter by analysts.
Overall, the banks have now put over $50 billion into loan loss reserves, while some of the other big names, notably Bank of America, still have not yet reported. While the numbers may seem to be adequate to cover losses, it should be noted that many lenders have provisioned troubled borrowers with considerable forbearance on credit card, mortgage, auto, student and private loans.
With unemployment still very high and the effects of many Main Street businesses going broke having yet to be felt, if the crisis continues much longer, these banks may be facing more serious losses than anticipated. Of course, the Fed has all of them backstopped, thus averting a full-blown banking panic.
As the opening bell approaches, it appears that confidence is waning, with Dow, NASDAQ and S&P futures off considerably from levels prior to the bank earnings reports. The NASDAQ and S&P have fallenen into the red and Dow futures are barely positive.
More tomorrow...
At the Close, Monday, July 13, 2020:
Dow: 26,085.80, +10.50 (+0.04%)
NASDAQ: 10,390.84, -226.60 (-2.13%)
S&P 500: 3,155.22, -29.82 (-0.94%)
NYSE: 12,014.67, -60.91 (-0.50%)
On Monday, the markets took a decided turn with an hour remaining in the trading session. Some have attributed the sudden reversal from positive to negative as a response to comments from OPEC on oil production levels while others blamed Dallas Fed President Robert Kaplan's remarks that mask wearing would lead to faster economic growth or the WHO's Tedros Adhanam saying that government's have sent mixed messages and the response has been inadequate to halt the spread of COVID-19.
How the virus proceeds, and what the incidence is, is going to be directly related to how fast we grow," Kaplan told Fox Business Network in an interview. "While monetary and fiscal policy have a key role to play, the primary economic policy from here is broad mask wearing and good execution of these health care protocols; if we do that well, we'll grow faster.
-- Dallas Fed president Robert Kaplan
The commentary from these diverse sources seemed to be very well-timed, like a chorus from Wagner's Götterdämmerung, signaling chaos and destruction on a massive scale. Whatever the matter, they provided cover for speculators to flee the scene in advance of Tuesday's expected tsunami of bad news, which starts with second quarter earnings from JP Morgan Chase.
J.P. Morgan Chase (JPM)
The nation's largest bank by assets, JP Morgan blew away analyst expectations, which were significantly lowered in response to the coronavirus impact. Adjusted revenue came in at $33.83 billion vs $30.4 billion expected. Adjusted earnings per share was $1.38 versus $1.05 per share expected, a 51% decline from a year ago as the bank made $4.7 billion net and set aside $8.9 billion in loan loss reserves for the quarter, anticipating massive credit losses due to the severe economic impact from the pandemic and government response.
Trading revenues were JPM's strong suit, with market revenue coming in at $9.7 billion, up 79% from a year ago. Revenue from fixed-income nearly doubled from last year's results, up 99% to $7.3 billion, while equity trading revenue rose 38% to $2.4 billion.
The firm suspended its share buyback program until at least the end of September on orders from the Federal Reserve. CEO Jamie Dimon stressed that the company would continue to pay out its dividend of 90 cents annually.
While Bloomberg and CNBC were gushing over the bank's "positive" results, drilling down into the data showed that JP Morgan Chase last money during the quarter in its Consumer and Community Banking (CCB) division, losing $176 million, compared with net income of $4.2 billion in the prior year. Net revenue was $12.2 billion, down 9%.
The company also lost money in commercial banking, dropping another $691 million. The provision for credit losses was $2.4 billion, driven by reserve builds across multiple sectors. Net charge-offs were $79 million,
up $64 million versus the prior year.
Adding it all up, JPM lost money on both sides of it banking business (consumer and commercial), but made up for it by having a blowout quarter trading stocks and bonds. Their loan loss provisions are probably too low and their gains in the market were driven almost exclusively by easy conditions and easier money from the Fed. If the company has a rough quarter in the markets and loan losses continue to pile on, JPM's "fortress balance sheet" will crumble like Chinese concrete.
The company press release and full financials can be found here. [PDF] Be sure to read the notes at the end, which describe some of the tortured "non-GAAP" metrics the firm deploys to persuade Wall Street and the investing public that all is well.
Following JP Morgan, which reported at 7:00 am ET, were Citigroup (C) and Wells Fargo (WFC) at 8:00 am ET. This is where it got a little more interesting.
Wells Fargo (WFC)
Wells Fargo, the bank in which Warren Buffet has a heavy investment, lost $2.69 billion in the second quarter compared to a profit of $5.85 billion in the same period last year. EPS was -$0.66 in Q2 vs. $1.30 in the same period last year. -Analysts projected -$0.20 per share.
Gross revenue was $17.84 billion in Q2 vs. $21.58 billion in the same period last year.
The bank set aside $8.4 billion in loan loss reserves. The Federal Reserve instructed Wells Fargo to cut its 51 cents per share dividend to 10 cents, or 2.5 cents per quarter.
Citigroup (C)
Citigroup reported a nearly 73% plunge in quarterly profit as the bank set aside $5.6 billion to cover potential loan and credit card defaults stemming from the coronavirus outbreak.
The New York-based bank reported a profit of $1.32 billion, or 50 cents per share, for the second quarter ended June 30, down from $4.8 billion, or $1.95 per share, a year earlier.
Revenues were actually higher, up five percent, to $19.77 billion.
Analysts on average had forecast $19.12 billion in revenue and earnings of 28 cents per share, so, on the surface, Citi looks like it beat the estimates, though the numbers were slashed early in the quarter by analysts.
Overall, the banks have now put over $50 billion into loan loss reserves, while some of the other big names, notably Bank of America, still have not yet reported. While the numbers may seem to be adequate to cover losses, it should be noted that many lenders have provisioned troubled borrowers with considerable forbearance on credit card, mortgage, auto, student and private loans.
With unemployment still very high and the effects of many Main Street businesses going broke having yet to be felt, if the crisis continues much longer, these banks may be facing more serious losses than anticipated. Of course, the Fed has all of them backstopped, thus averting a full-blown banking panic.
As the opening bell approaches, it appears that confidence is waning, with Dow, NASDAQ and S&P futures off considerably from levels prior to the bank earnings reports. The NASDAQ and S&P have fallenen into the red and Dow futures are barely positive.
More tomorrow...
At the Close, Monday, July 13, 2020:
Dow: 26,085.80, +10.50 (+0.04%)
NASDAQ: 10,390.84, -226.60 (-2.13%)
S&P 500: 3,155.22, -29.82 (-0.94%)
NYSE: 12,014.67, -60.91 (-0.50%)
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