Among the 79 or so second quarter earnings reports released on Tuesday, one of particular note was that of Capital One, the credit card and banking behemoth of "last resort" for many.
The company is well-known for its marketing campaign slogan, "What's in Your Wallet" and is also a lender to many who may not qualify for a credit card or auto loan from more traditional loan originators such as the major banks, thus rendering it to a largely "sub-prime" status.
Thus, when the firm released second quarter results after the closing bell on Tuesday, there was a chorus of "told you so" types who saw Capital One's demise in the making months prior.
The company recorded a quarterly loss of $918 million, or $2.21 a share, compared with a profit of $1.63 billion, or $3.24 a share in the year-ago period on a GAAP basis.
Notably, Capital One boosted its provision for credit losses to $4.25 billion from $1.34 billion in the year-earlier period. It also reported $1.51 billion in net charge-offs. That's $1.5 billion of defaults across all of their business units, but in particular, credit cards.
Total net revenue fell to $6.56 billion from $6.business unit.96 billion a year earlier. Analysts targeted $9.22 billion. Those analysts have yet to be fired, but are likely nervous and rapidly revising their third quarter estimates on the consumer lending giant.
Net interest margin, was 5.78%, compared with 6.80% a year ago, a significant decline.
During the conference call, company representatives touted the effectiveness of their forbearance provisions during the COVID crisis. Borrowers were allowed to skip payments on credit cards, home loans, car loans. In its earnings report presentation, the company offered: "As of June 30, 2020, we have assisted 2% of active accounts,
representing 3% of loans outstanding."
Those 2%, 3% figures are leading numbers. When those figures reach 4% to 5%, Capital One will be in dire straits, because of the declining net interest margin, which is heading south of 5% in the current quarter. Capital One also reported that 92% of customers seeking forbearance were current. Put another way, 8% of those were already 30 days delinquent. With net interest margins collapsing and more people expected to go into delinquent status, Capital One will have to provision even more toward credit losses in the third quarter.
Capital One has become the canary in the coal mine for the banking industry, specifically, consumer-oriented banks, like Wells Fargo, Bank of America, Citi, and JP Morgan Chase. When the dominoes begin to fall, expect Capital One to be among the first, if not THE first, to tip over.
Combined with the 3.10 loss in the first quarter, Capital One's price/earnings ratio fell from a high of around 26 to 12 after last quarter to N/A this quarter, as, on a twelve-trailing-month (TTM) basis, they've lost 26 cents per share over the past year.
The current quarter doesn't look very promising for the company either. They lowered their dividend for the third quarter from 40 cents to 10. When they report their third quarter results on or about October 21, expect the dividend to be reduced to zero.
Like Countrywide, the sub-prime mortgage darling prior to the GFC of 2007-09, Capital One may be forced at some time to sell off business segments. If one were to ask the executives at Capital One "what's in your wallet?" the answer would be, appropriately, "other people's money." And if one were to extrapolate out how that's going to work when millions of their customers are out of work, the correct answer would be "not well."
Oh, well, just another banking crisis the Fed plans on postponing until just before the November elections. COVID-19 and the government response is gearing up for an exciting fall presentation.
Meanwhile, silver and gold continue a rally that has now caught the attention of the financial media, at last. The last time CNBC talked about precious metals was back in Spring of 2011, when gold and silver were headed to all-time highs. A mania was underway.
In October, 2008, when everything was crashing, silver bottomed out at $8.88 an ounce, and gold fell to 712.50.
By the peak in 2011, silver checked in at $48.70, more than a five-bagger by April, and gold struck $1895.00 in September. Now, the shining sisters are back for Act Two.
Silver was slammed down to $12 an ounce in March, but has rebounded smartly. On July 2nd it stood at $17.93. It's currently trading above $22, hitting $22.50 on futures markets overnight.
Also in March, gold got smacked down to $1474.25. Overnight, gold futures hit $1862.50, just $32 short of it's record closing high. As of this writing, gold futures are trending at $1858.90.
While gold and silver aren't exactly what people carry around with them (they used to be), astute followers of currencies and real money might want a couple of one ounce silver coins and a few gram-denominated gold pieces in their wallets.
At the Close, Tuesday, July 21, 2020:
Dow: 26,840.40, +159.53 (+0.60%)
NASDAQ: 10,680.36, -86.73 (-0.81%)
S&P 500: 3,257.30, +5.46 (+0.17%)
NYSE: 12,508.68, +115.70 (+0.93%)
Wednesday, July 22, 2020
Tuesday, July 21, 2020
Silver Up and Away Like a Rocket Ship to Mars; Precious Metals Among 2020 Top Performing Assets
For stocks, it was SSDD (Same Stuff, Different Day) After all, it was a Monday and it's a Wall Street imperative that the week starts off with gains.
Pushing the phony COVID-19 narrative was news was Oxford University and AstraZeneca seeing positive results in a clinical trial of its developing COVID vaccine, with immune responses triggered and few side effects other than nausea, headaches, muscle ache, chills and fever. As usual, the news was released right before the opening bell, to ensure maximum fake enthusiasm.
While the Dow and NYSE were flat, the NASDAQ rose 2.5 percent and the S&P closed at a five-month high, but still 135 points shy of it's all-time best of 3,386.15 from February 19.
Not needing any kind of narrative other than the fact that it has been used as money for more than 5,000 years, has incredible conductive properties, and a slew of industrial uses, silver continued its rally, popping above 20 for the first time in four years.
Depending on which futures contract one chooses to quote, gold's shiny cousin is trading at either $20.43 per ounce (August) or $20.85 (September). What's pushing silver and gold higher are a variety of factors, including a growing distaste for fiat currencies, the immutability of precious metals, massive inflows to silver and gold ETFs, or the rumor that JP Morgan was recently told by the Federal Reserve to close out its short positions in silver.
Taken together or separately, gold and silver are among the top performing assets for 2020. Gold ended 2019 at $1514.75 and was quoted at $1815.65 Monday. Silver ended last year at $18.04 and it's gain to $20.43 constitutes a 13 percent gain. Gold's rise in 2020 is just under 20 percent.
It is estimated that fewer than five percent of the world's population has any gold or silver in their possession, despite the fact that all central banks hold tons of gold as a Tier 1 asset.
The days of fiat currency are numbered and the only replacement that will fill the needs of a new era are currencies backed by either gold, silver, or both.
Here's goldsilver.com's Mike Maloney with his thoughts on silver's meteoric rise:
At the Close, Monday, July 20, 2020:
Dow: 26,680.87, +8.97 (+0.03%)
NASDAQ: 10,767.09, +263.89 (+2.51%)
S&P 500: 3,251.84, +27.11 (+0.84%)
NYSE: 12,392.98, -9.72 (-0.08%)
Pushing the phony COVID-19 narrative was news was Oxford University and AstraZeneca seeing positive results in a clinical trial of its developing COVID vaccine, with immune responses triggered and few side effects other than nausea, headaches, muscle ache, chills and fever. As usual, the news was released right before the opening bell, to ensure maximum fake enthusiasm.
While the Dow and NYSE were flat, the NASDAQ rose 2.5 percent and the S&P closed at a five-month high, but still 135 points shy of it's all-time best of 3,386.15 from February 19.
Not needing any kind of narrative other than the fact that it has been used as money for more than 5,000 years, has incredible conductive properties, and a slew of industrial uses, silver continued its rally, popping above 20 for the first time in four years.
Depending on which futures contract one chooses to quote, gold's shiny cousin is trading at either $20.43 per ounce (August) or $20.85 (September). What's pushing silver and gold higher are a variety of factors, including a growing distaste for fiat currencies, the immutability of precious metals, massive inflows to silver and gold ETFs, or the rumor that JP Morgan was recently told by the Federal Reserve to close out its short positions in silver.
Taken together or separately, gold and silver are among the top performing assets for 2020. Gold ended 2019 at $1514.75 and was quoted at $1815.65 Monday. Silver ended last year at $18.04 and it's gain to $20.43 constitutes a 13 percent gain. Gold's rise in 2020 is just under 20 percent.
It is estimated that fewer than five percent of the world's population has any gold or silver in their possession, despite the fact that all central banks hold tons of gold as a Tier 1 asset.
The days of fiat currency are numbered and the only replacement that will fill the needs of a new era are currencies backed by either gold, silver, or both.
Here's goldsilver.com's Mike Maloney with his thoughts on silver's meteoric rise:
At the Close, Monday, July 20, 2020:
Dow: 26,680.87, +8.97 (+0.03%)
NASDAQ: 10,767.09, +263.89 (+2.51%)
S&P 500: 3,251.84, +27.11 (+0.84%)
NYSE: 12,392.98, -9.72 (-0.08%)
Sunday, July 19, 2020
WEEKEND WRAP: Major Banks Put On Happy Face With Stunning Second Quarter Postings; Gold, Silver Continue Advance
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%)
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%)
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%)
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