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I said I would be using the banks as my “canaries in the coalmine” for earnings season. Financials tend to lead the stock market, both on the upside and the downside.
Of the big banks to report so far, we’ve heard from JP Morgan (NYSE:
Both banks posted better-than-expected profits based on strong trading results. And both banks continue to be hampered by impaired assets and non-performing loans.
JPMorgan said it lost $1.3 billion on its real estate portfolios, slightly more than the $1.1 billion it lost the previous year. Signaling that it expects further credit weakness, the bank set aside $3.3 billion for real estate loan losses, up from $3.1 billion a year earlier.
Overall, JPMorgan set aside $7 billion for loan losses in the quarter, down 30 percent from a year ago.
Bank of America set aside $9.8 billion to cover soured loans during the quarter, down 3 percent from $10.1 billion the previous quarter. A year earlier, it had set aside $13.4 billion.
So losses on loans are improving. But they’re still there, and they’re still having a big impact on banks performance.
On the upside we can imagine what it would mean for JP Morgan and Bank of America if they could apply the money that’s being set aside for loan losses directly to earnings. They’d be blowing earnings estimates out of the water.
With another couple billion in earnings, Bank of America would be a $30 or $40 stock instead of a $19 stock.
But that’s an overly simplistic scenario. Because the system is currently set up to allow the banks to earn enough money to offset their bad loans. Interest rates are low to help banks earn. Accounting rules have been changed to allow banks to show better looking balance sheets.
The bottom line is that banks, and the economy, are benefiting from stimulus policies designed to help
And so everyone, from banks to traders to investors, is focused on making as much money as possible right now. That, as much as anything, explains why the stock market has done as well as it has.
I don’t mean to sound a skeptical tone. The cash you make from stocks is real, even if some of the reasons for rising stock prices are, shall we say, fleeting.
Investors should “get while the gettin’s good.”
I’ll have more detail on Monday, but starting next week, TradeMaster’s Jason Cimpl will start offering full, detailed, personalized analysis on your stocks. Jason will take the tickers you send in and do a full charting analysis video — helping you decide whether there’s gains to be had.
Jason’s still ironing out the details, which I’ll get you to you starting Monday. So for now just start thinking about which stocks you might want Jason to evaluate for you. Look for more in Monday’s newsletter.
In the meantime, check out Jason’s recent report on biotech breakout stocks. One of the stocks he’s highlighted just made a 186% overnight jump. It’s backed off a bit, but may have another move coming. And that’s just one of the stock’s Jason will share with you. He’s got 4 others ripe for some nice gains. You can read his report HERE .