The United States and global economic powers increasingly rely on big banks to facilitate government borrowing, fund commercial and consumer loans, underwrite economic growth, and act as originators, principals, and agents in capital markets.
Now that reliance increasingly looks to be the cause of lackluster global growth.
Today, we’ll look at the size of big-banks, their structural issues, and how the need to “socialize” their losses, because of their size, fundamentally retards economic growth.
Then, on Friday, we’ll examine last quarter’s earnings for the biggest banks in the country, and I’ll show you exactly why the big banks are headed for big trouble, and how they could drag the entire global economy down with them.
Let’s start with the most obvious problem…
On Wednesday, I told you that companies and Wall Street analysts are playing a game with your money, and everyone’s in on it. The analysts, the media, the data compilers, and the company executives are all working in concert to make earnings look a lot better than they are.
Stocks can be affected by central bank policies, macro-global events, and existential crises. But in spite of, and especially in the absence of those “big-picture” market impactors, it’s earnings that drive stock prices.
But as I told you, headline earnings numbers fed to us by companies, analysts, and the media are more often than not jacked-up by means of creative accounting tricks.
The headline earnings reports investors take as gospel every quarter when the circus comes to town are non-GAAP, pro-forma, “Street” earnings, not bona fide earnings based on Generally Accepted Accounting Principles.
As you know, the difference between non-GAAP and GAAP earnings can be huge and can trap investors.
If you’re making investment decisions based on headline earnings metrics, and you don’t know what you don’t know, chances are you’ve been burned… or you’re going to get burned very soon.
Here’s some of the fluff you’ve heard, the underlying truth, and how, with just a little guidance, you can analyze real earnings yourself – just like the pros.