Taking time out to “Reflect” really does work: And as usual, it doesn’t pay to believe what you read. Less than a month (maybe a day?) ago everyone was worried about bank earnings (inspiring me to buy some banks) and abracadabra….today no worries. The following quote is from my August 10th posting: When not sure what to do: Reflect!
“What is obvious to me (thinking clearly) is that the governments assumed the lion’s share of their debt woes, so once the banks actually start banking again in earnest they’ll be making serious coin.”
Bank of Montreal (BMO-T) kicked off third-quarter earnings for the banking sector by blowing past Bay Street’s profit expectations.
The banks have had it easy (revisit my comments in post entitled: Real reason BANK stocks are STRUGGLING! Lower non-performing loans helps earnings (part of managing earnings expectations for the benefit of managment options) but the ‘surprise’ is that using cheap money (deposits and low interest debt) for trading can be profitable for financial companies even if volatile and not sustainable. Frankly, I still do believe there’s more upside to the banks – yes, the yields are too generous to ignore – but unless they actually start ‘banking’ once again the upside is limited.
From a Barclays research update: “South of the border, financials traded higher with the broader market, as the U.S. banks index gained 3.76% outperforming the U.S. insurance index by 30bps. Over the last five days, however, the North American financials remain in the red, with the U.S. financials lagging.”
This news I find more interested, from Bloomberg:
“Orders for U.S. durable goods climbed more than forecast in July as a surge in demand for aircraft and autos eclipsed a decrease in business equipment.”
I said it before, and I’ll quote me again about Main Street America:
“These companies and industries have waited an awful long time to experience a modest improvement in prosperity. They did not participate at all in the pre-crisis boom enoyed by financial services businesses, and on the contrary struggled while commodity prices kept rising as Asian demand (and speculative excess) blindsided the markets for raw materials.”