Well, Bank of America and GE laid stinkbombs for earnings reports on Friday, naturally, finding a way to temper a perfectly nice week in the financial world (if you are long). The issue for both of these monsters was the amount of money they had to set aside for reserves to cover potential loan losses. All of the bad lending to poor credit risks, either businesses, consumers, or homeowners ultimately comes back to bite the lender in the (you know where).
On other encouraging fronts, the 2009 deficit in our fine country has now reached 1.42 Trillion Dollars, a nice comfortable figure. I wonder if our precious kids, like mine, realize what is in store unless we begin to tighten down the hatches. A famous quote in finance is that if something cannot continue, at some point it will end (I know, very profound). Well, chalk this one up in that category- whenever we elect some politicians with more backbone and less windbag tenedencies.
Lastly, a final nail in the coffin for the public perception of the financial services industry- the arrest of Galleon Hedge Fund founder Raj Rajaratnum for insider trading. With the public anger at a fever pitch because of the huge payouts to bank executives, as well as the anger towards public funding of these too big to fail banks, between Bernie and Raj this probably locks in the reality that financial services regulation, on many different levels, is a comin!!!!
Thanks for reading my first blog and I hope you have a good weekend of October 17-18.
As always, on any company mentioned here, past performance is not a guarantee of future returns. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.
Yale Bock, CFA
President, Y H & C Investments
