Earnings will be up 20% that laster was a really bad year.
The second quarter, jpmorgan had $4 billion in losses on the oil trade, bank of america had more than $20 billion in mortgage losses.
You had any unusual bad quarter for them last year that they're coming off of, so earnings will look at anyway.
Are we going to see like the wall street journal had yesterday, 10, or 12, or $4 billion hit to the balance sheet?
In certain portfolios, commercial loans and industrial loans are going to take a very large hit.
The reason being, those loans are funded on short-term duration, funding devices him and the fed is keeping interest rates really low on that so their net interest margins on those types of loans and securities are down a lot.
Plus you have the bond prices tanked this last quarter, so that is going to hit them on a market to market basis in there available for sale portfolios.
That is what i want to get at.
They keep saying every quarter it is getting thinner and thinner.
You would think with the rising bond yields it would help them.
On shorter duration -- also, they have these 30-year mortgages.
Who is going to refinance when rates are over 4 %? no one is going to refinance.
They will be on the ballot sheet for a long time, but they're getting less money on the commercial loans.
Within his complexity, we have neil borofsky, he had a book i'm going to say two years ago, the movie is out memorial day, 2016, we knew this was coming.
At some point, bond prices go down.
What uncle sam gives, he takes away.
Or really, uncle ben.
Massive distortion in the market caused by the government which was the policy was to recapitalize the banks by creating profitable opportunities for them to interest rates and other types of programs.
Sooner or later, that was going to taper off.
That is what is happening right now.
This is not like the government is striking at the heart of the banking industry, but this is the beginning of a return to normalcy and the supercharged profits generated from government policy are going to wane a little bit.
Do you invest, jason trennert , in banks?
I am interested in banks on the positive side and i would say one of the things that is going to happen as a result of what he is talking about, in my view, is banks might start to make loans.
Not pay out dividends?
This is a key issue for the overall economy, though, because the set has literally been dumping money out of helicopters but it has been going directly into bank vaults.
The velocity of money has collapsed, so no multiplier.
If banks start to make loans, that changes.
Then a lot of the questions we have had as people have been passe about inflation and these other things are to come to to fruition, but that could be the positive result of some of these pressures we are talking about.
And we cannot forget about the basel capital rules going into effect starting next year.
With u.s. regulators pushing for even higher -- they have adopted the basel, but it starts in 2014, but then there is the leverage ratio that goes into effect over the next several years.
Even though the leverage ratio doesn't go into effect until around 2018, banks will have to forecast -- i want to bring in one thing.
Blackrock talked about this yesterday.
Larry was adjusting intended or unintended consequences is staffing the liquidity out of these markets for the banks, exacerbating the problems for these rising interest rates.
You're getting ready in the face.
I don't think we have a real danger of a quiddity problem.
The fact things are going to have to have more capital is a very good thing.
I think these numbers, including the leverage ratio of five percent is probably way too low compared to what is necessary in order to protect us as taxpayers.
I think the impact is going to be minimal.
Anytime there's anything that makes inroads in their ability to monetize, we hear cries of this guy is going to fall, yet it really never falls that much.
I believe in the concept of too big to fail.
But by the same token, only 30% of the rules that have to be written for dodd frank have been completed.
70% are still yet to be written.
That is a problem.
That hampers the credit creation process.
I want to be sure we get this in, what are we going to see tomorrow?
We are going to see a really hot headline numbers that probably mean nothing.
We will see a big boost in earnings for jpmorgan, wells fargo's projected to go up by nine percent, but those numbers are probably not going to mean anything.
You might see a pop in stock prices initially when investors see those initial numbers, or then you might see them settle back as they have time to digest.
And we always hear from jamie diamond.
What are you hoping to hear from him?
He has guided the market saying trading is going to be of more than 50% over last year because they have such a block esther april and early may.
-- blockbuster in april and early may.
Investors will eat that up.
It will be the first quarter really where jamie doesn't necessarily need to talk about the whale loss in a very long time.
Thanks as a group, 20% profit growth.
Is a sustainable beyond this one quarter?
I think banks are going to have to take more risks.
The irony is there going to have to take more risks in order to do that.
I know that is precisely what we don't want them to do, but i think the idea of playing the yield curve, it is clear that is largely over.
At the risk is making more loans, i think that is something we want to have.
If it is making multi-hundred billion dollar bets on synthetic derivatives over in london, not so much.
I was stunned this week at the consolidation of big banks.
We have become more consolidated, haven't we?
We are on that path.
Because of the incredible advantages of having that moniker of being too big to fail and the implicit government guarantee in the lowering of borrowing costs that come with it.
All of the incentives are still in place to get bigger.
This is fascinating.
This is going to be interesting.
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