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Earnings Actuall Now Matter? or Are They Too Bad To Ignore?

By: Gordon Long & John Rubino | Tuesday, April 19, 2016

Special Guest Host: John Rubino, Author & Publisher of DollarCollapse.com

With John Rubino & Gordon T Long

Published 04-19-16
32 Minute VIDEO

Deeper in Earnings Recession

Bank profits are in trouble!. Don't be fooled by the "beat analyst estimates" charade, because that is exactly what it is. First quarter bank earnings can only be described as an unmitigated disaster.

With the aid of 24 charts, John Rubino and Gordon T Long discuss what they see in this 32 minute video, what is important to be aware of and what is being hidden from public scrutiny.


The Earnings' Season Charade

John Rubino recaps the situation as:

"I think this is hilarious so far! It is the season where banks are reporting earnings and they are reporting really bad numbers Y-o-Y. Citigroup's earnings were down 28% Y-o-Y with a double digit drop in revenue. It is pretty well the same for the Bank of America, JP MorganChase, Wells Fargo BUT the headline in Bloomberg and other major media outlets are oh "Citigroup beats expectations!"

Citigroup Weekly Chart

That is the headline because Wall Street plays this game with their big client accounts where when things are headed south the analysts on Wall Street lower earnings projections even faster than earnings are actually dropping, so the companies can say "yes, we lost money and made less money than we did a year ago BUT we beat Wall Street expectations!". THAT becomes the headline.

The only positive headline out there for the big banks are when the results are horrendous! "

John goes on to say that:

"Year seven in a recovery banks should be reporting phenomenal numbers - they should be reporting 'blowout numbers! This is the point of the cycle when lots of people are borrowing, interest rates are down, funding is cheap for the banks - the bankS should be doing really well!" Instead, the banks are rolling over big time. Their earnings are probably (when all is said and done), they are going to be looking at a low single digit decline in Y-o-Y earnings."

Morgan Stanley Profit Plunges

"Finance at this late stage of Capitalism is now the biggest part of the economy, so you can't have banks shrinking, reporting losses or lower numbers Y-o-Y, laying people off or pulling back on lending and at the same time have a growing economy! They are mutually exclusive when banks are such a large part of the economy."


The Financialization 'Gig" is Up!

Gordon T Long illustrates that through the growth of Financialization, 45% of the equity markets today are Financials. Their spectacular earnings growth is historic and unprecedented and now excessive debt lending, encumbered collateral and rapidly growing non-performing loans are signalling troubles are looming.

Real Corporate Profits

Of particular concern to Gord is problems in the Leveraged Loans area which is critical to sustaining the growth in Collateralized Loan Obligations (CLOs) which has been steradily weakening. The Shadow Banking industry and bank earnings are critically tied to CLO growth and their extremely profitable fees.

CLO Purchase over 81% of $881B Leveraged Loans Market

Gord points out that it was the collapse of CDO's that brought the banking industry to its knees in 2008. One the acronyms have changed and the loan problem. It isn't CDO mortgages today but rather CLOs and Student Debt, Auto Debt and Corporate Leverage Debt.

Same Game, New Acronyms

.... there is much, much more in this fascinating 32 minute video exchange..

 

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

Copyright © 2010-2017 Gordon T. Long

Author: John Rubino

John Rubino
DollarCollapse.com

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners in the Green Tech Boom, The Collapse of the Dollar and How to Profit From It, and How to Profit from the Coming Real Estate Bust. After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine.

Copyright © 2006-2017 John Rubino