Friday, October 14, 2016

Bank Earnings Blowout (Reprise)

JP Morgan, Citi and the tarnished Wells Fargo all reported third quarter earnings this morning. The press was ecstatic. CNBC's original headline "J P Morgan Crushes Expectations", was quickly revised to read "JP Morgan Profit and Revenue Easily Tops Forecasts". At Business Insider, the headline was even more bold: "JP Morgan Smashed it out of the Park". The headline for Citigroup's release at CNBC was "Citigroup Tops Wall Street Expectations for Earnings and Revenue".  

But none of these titles accurately captures what is going on with bank top line revenue or profits. Reading past the headline, here's what we actually learn. JP Morgan saw its earnings decline by 7.5% year over year and its top line revenue climb back to just above where it was in the third quarter of 2014, two years earlier. And this is the report from the nation's top performing bank. The news at Citibank was no better, with top line revenue falling 4.8 % year over year and profits falling by 5.3%. 

These results confirm a trend of now greater than four years of declining bank revenue and earnings, as previously reported here for 2016 Q2. The major US banks are effectively shrinking, based upon poor top line revenue growth and profitability.

Wednesday, October 12, 2016

The Trump Campaign Struggles with the Real America

Poor, poor Trump. As successful as he may have been in the business world, he’s clearly out of his league when it comes to Washington. Try as he might, he’ll never be as polished, his record never as scrubbed, his views never as focus-group tested as it takes to win a major election. He’ll fail to cut the back room deals that build support within his own party, fail to carefully cultivate the media that so expertly shapes public opinion, nor will he promise the favors of access sought by powerful special interest donors. 
His campaign will struggle with finances, raising only $94 million by July 1, 2016, versus the $386 million raised by his Democratic opponent. A pathetic $5 million of his funding will come from Super-PACs, compared with the $121 million raised by Hillary Clinton. He won’t get the $1 million donations given each by JP Morgan, Citigroup, Goldman Sachs and Morgan Stanley to Clinton, nor the $1.2 million given by the taxpayer-funded institution, the University of California (note, Obama’s former head of Homeland Security, Janet Napolitano, is now the President of UC). His paltry $2,000 in funding from the hedge fund industry will be dwarfed by the $25 million received by Ms. Clinton’s campaign. He’ll lack the two-faced, deceptive, partisan skills of successful members of the US Congress, a body that now enjoys an approval rating by the American people of just 11%.
In the end, he’ll likely be returned by the electorate to his role as real estate developer, never to amass the 400% gain in personal wealth of Barack Obama during his tenure in the White House, nor the $111 million fortune built by the Clintons through their public service. Washington will go on as it has, an ever escalating arms race of special interest donations, with never a serious effort at campaign reform. We’ll fail to meaningfully attack the federal deficit, perhaps allowing the US national debt to double once again, as it has over the past eight years. We’ll fail to fix social security, disability insurance and medicare, leaving a ticking time bomb at the doorstep of an aging population. We’ll continue to shift the ever-increasing burden of health care costs to middle and upper-middle income consumers, compromising the quality of their health care while devastating disposable incomes. We’ll become even more polarized in our wealth as a society, as we have undeniably become over the past eight years. All the while, Congress’ day to day activities will stall in senseless, immature partisan bickering to form, what President Obama so aptly characterized in 2014 as, “the least productive Congress in modern history.” And, we the American people will be left wondering, is this really all we can expect from government?
No one can defend Trump. All the same, it would be interesting to see someone who thumbs their nose at both the Republican and Democratic parties stumble their way into the White House. Paul Ryan would suffer irritable bowel syndrome for four years. But here's the real concern: a binary political system we Americans have somehow come to accept. If it it's not this, then it's that. If you're not a liberal, then you're a tee-bagger. If you oppose illegal immigration, then you're a racist (by the way, notice the word "illegal" in that sentence). We demonize the opposition. And it's all designed to foster the interests of the two parities who only fein attention to what benefits our country when focus groups show voter support. Once that nonsense is out of the way, the politicians can return to the actual business of government, addressing the concerns of special interests and Super-PACs. Sorry Mr. Trump, but we live in a post-democratic technocracy, where the parties only exist to perpetuate their incumbency.