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In the long-term, ROCs (and their rate of change) drive stock prices of banks. Most GEMS banks have created a capital base from retained earnings and have virtually no long-term debt. Therefore, Return on Equity IS Return on Capital. The low denominator creates impressive returns on capital from 8%-18%. These ROCs can easily meet or beat the cost of capital Please contact us to obtain full access of our weekly reports.
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Overall, the bulk of the world's developed banks are now out of danger. The DXY is telling us this, as are loan-to-deposit ratios. The danger has now clearly moved to the developing world, led by Brazil, Russia, Chile, and to a much lesser extent, China (it is entirely self-funding, has a solid infrastructure and has rich central coffers). The global credit cycle is a lunar move with the high tide now in the US and [...]
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LDRs are peaking in Russia, Brazil, Thailand, and China. Australian banks have been going nowhere for a year. I am in Brazil (Rio) now and it is looking dicey. I think there will be violence for the World Cup
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We looked at banking crises over the past 20 years and found uncanny patterns. When a country's loan/deposit (LDR) rises above 1 (the country has exhausted its savings and starts to borrow other people's money through wholesale banking), the seeds of a crisis are sown. Please contact us for more information .
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Alibaba’s transaction volume rivals any of the global companies but the more important thing is that its net income margin (currently at 44%) is DOUBLE the average of the major players (~20%). Its absolute net income is already greater than Ebay, Facebook, Amazon, or Tencent. The IPO configuration is still unknown, but it may end up being similar to Facebook -- and will likely be larger, perhaps an IPO of $17 bn. We have included a [...]
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Bank stocks are very smart -- much smarter than property stocks. Bank stocks in alliance with currencies, in our view, offer important clues to property and property stocks. We created custom indices for banks, property stocks and FX to show our observations. In this edition, we look at the relationships in several important markets.
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In an interview with ET NOW, Paul Schulte says, the rally in Indian equity markets could run out of steam as sticky inflation and fiscal deficit issues could weigh on sentiment. Schulte says he doesn't see the rupee appreciating further unless macros issues are tackled.
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Investors are now turning from return OF capital to return ON capital for the banks. The global universal investment bank model is broken as their ROCs are now between zero and 1% and this is year six of the GFC. These banks are 1.Issuing staggering amounts of bonds to create unsustainable amounts of leverage 2.Trying to make money in businesses which are, one by one, being eaten away by Silicon Valley innovation 3.Jousting with malcontented [...]
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Three Things are Happening. 1) Short-term government obligations (LGFVs) are being securitized into long-term securities through the nascent fixed income market and will be bought by state pension funds. (This is QE purchases of STATE DEBT because state funds will buy long term government debt). 2) CINDA has been funded to buy risky assets through Ministry of Finance bonds. (and there are 3 more AMCs up and running. This is QE purchases of RISKY [...]
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We have examined the earnings, NPLs, credit growth, and NIMs. Main findings are: Chinese bank earnings for the big banks will come in this week and we know what they will be, This wildfire of negativity could spark a rally from severely depressed levels. I have never seen sentiment worse on Chinese financials. In the US, the numbers for the banks are the best globally. NPLS have dropped by 40% and are now a real [...]
