I have always challenged Loan Loss Reserve accounting because it allows a bank (and lots of other companies) to take revenues that have actually already been declared (and already moved the stock) out of Cash (revealing a loss on demand for taxes, housekeeping, and so on) and then back to revenues when they feel like it (to increase the stock rate or save a quarter). Specifically for Businesses that have the ability to buy back their own stock when the cost is depressed due to a loss they purposely caused and after that, when they wish to offer more stock or take perks– they merely re-recognize the revenues as needed. What a scam!
Well, Goldman Sachs (GS) and JP Morgan (JPM) are good, Wells Farge (WFC)– not so much. And Im not exactly sure I d call JPM “good” as $5.2 Bn of the quarters $14.3 Bn in revenue originated from the release of loan reserves that were reserved in 2015 to cover awaited loan defaults. Because the Federal Government threw $6Tn at the economy because then– it ends up they didnt need the $5.2 Bn to cover bad loans so now the cash (which was always in the bank) is transferred to the income side of the journal.
Bank earnings are good..
So what we have at JPM is a huge “beat” as profits were forecasted to be $3.10 per $154 share for the quarter and now its $4.50– practically 50% greater than predicted. Even if we presume the bank goes back to “regular” $8Bn quarters, were still taking a look at a $40Bn year and you can buy the whole bank for $473Bn– okay. We already have Goldman Sachs (GS) in our Long-Term Portfolio (LTP) so were not going to include JPM and GS also knocked it out of the park. We were stressed over JPM due to the fact that they have common banking (chase) and we didnt depend on those stimulus checks to create a lot business but they did– generally since the Government wired the cash to your bank and didnt just send you a check to spend. We were far too conservative with GS when we made it a Top Trade Idea for our Members on October 14th:.
