Is It Time To Panic? We On The Verge of A Rude Earnings Awakening While Global Financial System Remains Exceptionally Fragile
Are banks facing a rude earnings awakening?
With JPMorgan and Wells Fargo on tap to report this week, some investors may be questioning whether the depletion of loan loss reserves — the money banks set aside to pay for loans that turn sour — is too premature as credit quality keeps improving. (Read More: 10 Big Bank Stocks Gearing Up for Third-Quarter Earnings.)
A recent report from the Federal Deposit Insurance Corporation showed that banks’ quarterly provisions, or the amount that banks are allocating to these bad loans, have slowed to pre-crisis levels. In the second quarter, the amount set aside by U.S. banks reached its lowest total in five years.
That trend has raised serious concerns among key banking regulators — including those at the Office of the Comptroller of the Currency.
In late September, OCC chief Thomas Curry warned banks that “too much of the increase in reported profits is being driven by loan loss reserve releases” and that the issue “has to be a matter of great concern” as risk levels remain elevated for the industry….
** Now Comes The Worst Earnings Season Since The Financial Crisis
** Why Alcoa’s results matter – Stay alert: Shortly after 4 p.m. EST Tuesday, the big aluminum maker unofficially kicks off another earnings season
Jim Willie’s latest Hat Trick Letter, ‘Firestorms & Currency Twisters‘ is a MUST READ!!
Willie states that Morgan Stanley faces IMMINENT FAILURE & RUIN, that The older employees are selling all of their stock, and that Many workers are making contingency plans for their next positions in another firm.
He states that JP Morgan will devour the carcass, and that The Morgue may be preparing to execute the 1st ever private stock account vaporization/ rehypothecation.
AN ABSOLUTE MUST READ!!!
The insider conversation, often called chatter when it become deafening in tone, is that Morgan Stanley faces imminent failure and ruin. Almost two weeks ago, the Jackass provided a tip to Bill Murphy of GATA to post on his popular LeMetropole Cafe that Morgan Stanley fund managers and high ranking employees were preparing for the firm’s implosion. A subscriber to the Hat Trick Letter has a good friend whose father works as a fund manager and provided the story. It was not detailed, and bore no follow-up after my request. The older employees are selling all of their stock, some legacy stock from one or two decades ago. Many workers are making contingency plans for their next positions in another firm. When Lehman Brothers was killed, thousands of employees had to find new jobs, some without success. In the last week, the shock waves are being heard from internal Wall Street sources in an unequivocal manner. The implosion is in progress, like the collapse of several platforms and structural cables. The inside is caving in, and the ranking members recognize it, even talk about it openly. Much discussion swirls about a transition to antiquated software that is greatly disturbing the trading desks, causing tremendous problems at precisely the wrong time. A redux of the Knight disaster could be in progress.
The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said today, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a one-in-six chance of growth slipping below 2 percent.
“A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component,” the IMF said in its World Economic Outlook report. “The answer depends on whether European and U.S. policy makers deal proactively with their major short-term economic challenges.”
The IMF’s 188 member countries convene in Tokyo this week as low growth damped by fiscal consolidation in the richest economies hurts developing counterparts fromChina to Brazil. As the IMF urged measures to boost confidence, uncertainties out of Europe show no sign of abating, with leaders still divided over a banking union andSpain resisting a bailout.
“Confidence in the global financial system remains exceptionally fragile,” the IMF said. “Bank lending has remained sluggish across advanced economies” and increased risk aversion has damped capital flows to emerging markets, it said.
…The past few months have seen a rather worrisome trend among the nation’s most prosperous and well-known investors, as a number of them have abandoned a fair amount of equity positions. Starting with Warren Buffet, the Oracle of Omaha has been reducing positions that rely on consumer spending. This is an especially bad sign given that consumer spending is one of the first things to take a hit during times of economic uncertainty. Buffett’s Berkshire “reduced his overall stake in ‘consumer product stocks’ by 21%” writes Newsmax Wires.
But the trend does not end there. Next up we have John Paulson, the man who amassed quite a fortune after correctly betting on the subprime mortgage crisis that put us in the recession in the first place. Paulson dumped a whopping 14 million shares of JP Morgan Chase while completely exiting both Sara Lee and Family Dollar. A general distrust for banks is understandable, but a 14 million share decrease clearly points to a man who feels that the financial sector is headed for a pinch. Finally we have George “the man who broke the Bank of England” Soros who sold more than a million shares of banking/financial stocks, following the anti-financial trend [see alsoPeter Schiff: The Only Way To Fix The Economy Is To Let It Fail].
The fiscal cliff is already happening right now: A new survey shows most Americans agree… we’re in a recession
More and more Americans feel the U.S. economy is mired in a recession, a new Rasmussen Reports survey finds.
The poll found that 62 percent of consumers believe the U.S. economy is currently in a recession, while 22 percent disagree.
Among investors, 61 percent say the economy is in a recession, while 24 percent say it’s not.
The Rasmussen Consumer Index, which measures consumer confidence on a daily basis, rose 2 points on Sunday to 85.9…
Is there Trouble Ahead for Stocks? Volatility Comes When You Least Expect It. Spencer Jakab Has Some Cautionary Tales For Investors.