Posts filed under “Really, really bad calls”

Dumb Analysis of the Day: Bank Profits May Drop on Regulations

This has to be the single dumbest thing I have read in months: Investment Bank Profits May Drop on Regulations, JPMorgan Says.  (Note: I am referencing the analyst report, not the Bloomberg story)

Here’s a news flash: With the least amount of regulatory oversight in generations in the 1990s and 2000s, bank profits were less than zero — indeed, their losses were so great that many of the biggest financial institutions bankrupted themselves.

When you are an insolvent institution, your profits are non-existent.

The collapse of the banking system reveals the sector to be run by inept clowns and misfits. They require oversight as they have proven beyond any doubt they are incapable of handling themselves, managing risk, to the point where they blew themselves up.


“Goldman Sachs Group Inc., Barclays Plc and Deutsche Bank AG’s investment banking profit may drop by a third as governments step up regulation of the industry, analysts at JPMorgan Chase & Co. said.

Deutsche Bank’s return on equity will probably tumble the most among the world’s largest investment banks, falling to 6.7 percent in 2011 from 10 percent today, JPMorgan analysts led by London-based Kian Abouhossein wrote in a note to clients. New York-based Goldman Sachs’s return on equity will decline by 4.4 percentage points and Barclays’ by 4.3 points, the analysts said.

Governments around the world are stepping up oversight of banks in the wake of the worst financial crisis in seven decades. Forcing banks to hold more capital, and moving more derivatives trading onto exchanges are among the eight regulatory proposals the JPMorgan analysts examined.”

Banks were allowed to set their own leverage, determine their own risk levels, and control their own fate more than anytime in history. And quite bluntly, they blew it.

The JP Morgan analyst is saying that more regulation would make the banks less profitable. Stop and consider the simple fact that with much less regulation, the bank profits were less than zero — their losses were so massive they bankrupted themselves.

How does more regulation make profits somehow amount to less than zero, less than bankrupt?

Unless, of course, the analyst believes we should consider engaging in privatized gains and socialized losses.  Then, of course, his thesis makes sense.

But short of another trillion dollar bailout, WTF is this guy thinking?

The ineptness of bankers demands that taxpayers protect themselves another costly systemic debacle — phantom, non-existent bank profits be damned . . .


Investment Bank Profits May Drop on Regulations, JPMorgan Says
Andrew MacAskill
Sept. 9 (Bloomberg)

Category: Credit, Earnings, Really, really bad calls, Regulation

How Economists Got It Wrong

In keeping with our theme of beating the mainstream press by months and sometimes years — I always try to beat the Noble Laurelates by at least 6 months — I wanted to point to both the massive Krugman piece in the Sunday Times Magazine, as well as referencing similar themes we’ve hit upon over…Read More

Category: Financial Press, Really, really bad calls

1930: “Money on the Sidelines”

This is from “News from 1930” website “There’s a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.” -August 28:, 1930 The more things change…Read More

Category: Financial Press, Really, really bad calls

Barron’s Bad Book Recommendations

I try to follow the advice “Never pick a fight with people who buy ink by the barrel full,” but every now and again, I simply cannot help myself. Today is one such an instance. Like all human beings, I am wrong on a regular basis (my wife can read you chapter and verse). However,…Read More

Category: Really, really bad calls

Defining Recessions; Mis-defining NBER

Here’s another of those articles that look so embarrassing one year later: Can you imagine an article that insinuates that the government, not an independent academic commission, was the more objective arbiter of data? That argued we should let the pols decide when recessions start and end? Insane, right? Let’s go to our WTF were…Read More

Category: Economy, Really, really bad calls

FLASHBACK: No Housing Collapse Ahead…

Blast from the past: Turmoil in the housing market has led to fears that home prices will drop precipitously, particularly if foreclosures force large numbers of homes onto the market in the coming year. Recently, these fears have driven financial stocks down and led to the government rescue of Fannie Mae and Freddie Mac. But…Read More

Category: Real Estate, Really, really bad calls

Analyzing the Analyzers

One of the more fascinating things about a crisis and its resolution is the post-mortems: The after-the-fact analyses that some folks do to explain what occurred. These analyses are fascinating for what they reveal about the beliefs, methodologies, biases and cognitive failures of the many crisis watchers. Human fallibility being what it is, we can…Read More

Category: Bailouts, Corporate Management, Credit, Derivatives, Really, really bad calls

Dear Lord, Anyone but Lawrence Summers . . .

I read articles like these with dread and horror: “As the White House begins to ponder whether to reappoint or replace Ben Bernanke when his term expires in January, the Federal Reserve chairman’s standing on Wall Street is on the rise while attacks on him from Congress mount. Treasury Secretary Timothy Geithner is expected to…Read More

Category: Bailouts, Contrary Indicators, Federal Reserve, Really, really bad calls

Most Subprime Lenders Weren’t Covered by CRA

The CRA brouhaha last year led the Orange County Register to run an analysis of “more than 12 million subprime mortgages worth nearly $2 trillion” in late 2008. What did their data based analysis discover? “Most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act. And many of the…Read More

Category: Bailouts, Credit, Legal, Real Estate, Really, really bad calls, Regulation

John Carney’s Bizarre Crusade Against the CRA

What Felix Said . . .

Category: Credit, Politics, Real Estate, Really, really bad calls