Market Commentary:
Investors are growing more confident that the bruised economy is starting to heal.
Whether that is really the case or not is very much up for debate but for the last six weeks, the Fed’s strategy of getting investors back into the stock market is working.
Investors chose to focus on JPMorgan Chase & Company’s stronger than predicted results today.
In truth, JPMorgan's first-quarter profit actually fell 40 cents per share from 67 cents per share a year ago, but the spin that the company beat estimates of 32 cents was enough for the crowd to cheer.
That ladies and gentlemen is how you turn lemons into lemonade. You are still losing money, but you beat arbitrarily lower estimates.
Goldman Sachs Group Inc. and Wells Fargo & Co. also had upbeat earnings news in the past week, so the hype is that the economy is mending and it is obviously sucking in investors who are betting on a recovery dead ahead.
There is so much deception these days and misleading information.
For example, Wells Fargo reported last week that its first-quarter net income rose 50 percent to about $3 billion in announcing preliminary results that topped the most optimistic Wall Street estimates and sparked a 32 percent jump in the stock.
It now turns out that much of the positive news in the preliminary results at Well Fargo had to do with merger accounting, revised accounting standards and mortgage default moratoriums and buried losses rather than improving underlying trends.
Bloomberg.com wrote a very informing article explaining why investors need to be wary of Well Fargo’s misleading numbers.
In fact, it seems that Wells Fargo & Co., the second- biggest U.S. home lender, may need $50 billion to pay back the federal government and cover loan losses as the economic slump deepens, but who wants to believe that?
Next week the government will release the bank stress test and quite frankly I don’t know what to expect, given how much misinformation we have seen. The government wants us to believe that the economy is getting better, so who knows what the bank stress test will reveal.
Please don’t get me wrong – I am all for an economic recovery, just a “real one”. The sooner the better, but if hype and misleading information is at the heart of stock manipulation you better watch your wallet.
SO MUCH FOR A HOUSING RECOVERY
As we talked about yesterday, before we can see an honest economic recovery housing prices have to stop falling and stabilize. Remember how much hype there was last month on increased housing starts, especially with spring on the way?
Today it was announced and largely ignored by the market that housing construction plunged to the second lowest level on record in March, providing a sobering sign that the worst housing slump in decades has not ended.
Housing starts fell 10.8 percent in March and building permits, a sign of future construction fell 9 percent. This is the second lowest construction pace in records that go back 50 years!
A glut of unsold properties is pulling home prices down across the U.S., prompting builders to scale back projects.
The number of homeowners facing foreclosure surged in March as lenders lifted temporary moratoriums and resumed legal actions against delinquent mortgage payers.
Foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 341,180 properties in March, 46% more than a year ago and 17% above February's total, RealtyTrac reports today.
If you think housing is getting better, you might want to listen to this.
We are still in the midst of a credit crunch, despite the spin and misinformation and accounting gimmicks being used now by the banks.
No comments:
Post a Comment