Profit Margins Are Beginning

(Reuters) - Bank executives face great expectations from investors when they report first-quarter results beginning Friday. Bank stocks have shot up 24 percent this year, as measured by the KBW Banks index, in their steepest ascent in any quarter since the end of September 2009. Now investors want to know if they should stick with their bets that the economy will strengthen and lift bank lending margins and profits, or take their gains and get out. "Investors are out on a limb," said Jack Ablin, chief investment officer at Harris Private Bank. They won't get much help from the earnings, which are expected to be murky this quarter and confused by accounting items. Investors may have to rely on their own hunches to sort conflicting numbers and comments from bank executives about the ...

Weekly Economic and Financial Commentary U.S. Review Week Two Brings a Little Less Enthusiasm Some of the optimism about housing, consumer spending and the broader economy eased back a bit this week, amid a smattering of softer economic reports. Retail sales rose just 0.1 percent in December and core retail sales fell by the same amount. Holiday sales came in right in line with our expectations, rising 5.1 percent. Weekly first-time jobless claims spiked up to 399,000 and job openings listed in the JOLTs survey fell slightly. Data on international trade and inventories also point to a more modest gain in 2011 Q4 real GDP growth. Optimism Already Appears to be Fading The New Year always seems to usher in an air of optimism and this year has been no exception. Better ...

Yesterday’s trading revealed nothing of importance. Small moves in stocks and gold. And oil dipped below $100. But the news has been generally “good” ever since the European Central Bank made it clear that it will print money rather than see major banks or minor nations get what is coming to them. Like its US counterpart, the ECB will not permit a major bank or sovereign debtor to go bust. “ECB sees signs of let-up in debt crisis,” is today’s headline in The Financial Times. Let’s see…the news report goes on to tell us that Spain and Italy were able to sell 22 billion euros of debt yesterday, proving that they can still finance their deficits…and that, therefore, we have nothing to worry about. To whom did they sell their bonds? We don’t know, but we presume the buyers were banks who ...

(Reuters) - Grain prices are near their lowest in a year and global stockpiles are on the rise -- so meat, dairy and pasta prices are poised for a fall, right? Not so fast. Food companies from Coca-Cola to General Mills Inc to Sara Lee Corp, which fought hard to push through price increases earlier this year, are unlikely to give them all back right away. Beyond the practicalities that typically delay the pass-through impact of commodity costs through food producers, the fact is that companies are still in the process of recovering the profit margins they lost when prices spiked to record highs earlier this year. And even with U.S. consumers fretting over recession, they tend to get used to higher prices over time, giving companies the confidence to maintain margin rather than grab for ...

Weekly Economic and Financial Commentary U.S. Review The Economy Continues to Grow at a Snail's Pace Much of the economic data released during the week continued to show sluggish economic growth. Real GDP was revised down to a 1.0 percent pace in the second quarter from the initially reported 1.3 percent rate. While growth has slowed significantly, it is growth nonetheless. Durable goods orders rose a more-than-expected 4.0 percent in July, which was double the consensus. Non-defense capital goods excluding aircraft fell 1.5 percent on the month, which may suggest weaker growth in business investment in the coming quarter. Searching for Clues of a Looming Downturn Much of the economic data released during the week continued to show sluggish economic growth. In fact, real GDP ...

When you hear the term “precious metals,” you likely think of gold and silver. That’s what the Spanish conquistadors had in mind, of course, when in the 15th and 16th centuries they trekked inland from their beachheads on the sands of the New World. But there are other metals of great value besides gold and silver. In the two centuries after Christopher Columbus landed in the New World, the Spaniards seized the gold of the Aztecs in what’s now Mexico, and took that of the Incas, as well, further south in the Andes Mountains. But this was just the beginning, because the men from Iberia had developed a bad case of gold fever. They wanted more. High in the mountain streams of New Granada – modern-day Colombia – the Spaniards panned for gold and found plenty. They followed the shows and ...

Nothing is cheap in today’s investment world. Because of the trillions of currency units that governments all over the world have created – and are continuing to create – financial assets are grossly overpriced. Stocks, bonds, property, commodities and cash are no bargains. Meanwhile, real wages are slipping rapidly among those who are working, and a large portion of the population is unemployed or underemployed. The next chapter in this sad drama will include a rapid rise in consumer prices. At the beginning of this year, we saw the grains – wheat, corn, soybeans and oats – go up an average of 36% within one month. In the same time frame, hogs were up 30.7%. Copper was up 29.1%. Oil was up 14%. Cotton was up 118%. Raw commodities are the first things to move in an inflationary boom, ...

Our family has a milkman. Yes, a milkman, just like in the old days. He comes every Friday and drops off a crate full of cold bottles of milk, along with tubs of yogurt and butter, cheeses and sometimes meats. You place your orders online, and the milkman brings it your doorstep, fresh from a local family-owned farm not far from where I live. I mention this because I got an interesting e-mail from the farm over the weekend, which I think sums up what we face in today’s economy. The problem we face is particularly insidious because lots of people don’t really understand what causes it, which allows it go on. But before getting to abstractions, let’s look at the e-mail I got from my milkman. “We would like to take the time to tell you,” it begins, “that due to some large price increases ...

(Reuters) - The inflationary pressures that prompted China to raise interest rates for the third time in four months are evidence that the imbalances destabilizing the global economy are slowly but surely being ironed out. China's current account surplus, though shrinking, will not melt away overnight. Finance ministers from the Group of 20 major economies who are meeting next week are still likely to urge China to let the yuan's nominal exchange rate rise faster. But economists said the same inflationary forces that triggered Tuesday's quarter-point rise in interest rates by the People's Bank of China were inexorably hastening the shift toward consumption and away from exports that the United States and Europe have long urged. "This broader story of rising inflation in China ...