A Keeper of the Peace
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Stock Pick of the Week: Smith & Wesson
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The President as Magician: Preventing All Future Financial Crises
Our Savior
Most Absurd
The most absurd statement made in the State of the Union message last night was that the United States has passed laws that make another financial crisis impossible. This delusional thinking is so contrary to the whole history of finance going back 1,000 years that it is almost impossible to believe that any person could make this statement let alone believe it. The writers of the Dodd Frank legislation do not believe it why would anyone else?
The Ridiculousness of Political Class Warfare
Gimme, Gimme, Gimme money to support a bloated government.
Schwab: Quarter Largely as Expected; Outlook Remains Bleak
Brad Hintz of Bernstein summation on Schwab (Ticker: SCHW)
Schwab: Quarter Largely as Expected; Outlook Remains Bleak
• SCHW reported operating EPS of $0.13 for Q4 ‘11, in line with our est & mgmt guidance. Total revs of $1.11 billion were 7% above our estimate for the quarter, offset by expenses 9% above our forecast. Higher expenses were entirely related to higher comp
• The top-line beat was driven by higher commissions as December trading activity was flat better than expected. NIM compression and MMF waivers were expectedly weak and unlikely to abate in 2012. With high fixed cost base, no relief on earnings
• History suggests retail investors will remain inactive well after signs of equity mkt and macro improvement. Given severity of the downturn, it is unlikely the current cycle will prove resilient. We lower our 2012 EPS est to $0.63 and 2013 est to $0.90.
Morgan Stanley: Changing Comp. Policy; Brother, Can You Spare a Dime?
Bernstein analst Brad Hintz had the following about Morgan Stanley’s earnings and added that MS Smith Barney unit performed weaker than expected:
• MS reported EPS of ($0.14), above our estimate of ($0.75). The qtr was messy, with several one-time items, including the already anncd. MBIA settlement. Comp was higher from true-ups on deferred and severance, offset by lower non-comp
• Underlying fundamentals were mixed. FICC remains a work in progress, esp. in credit, while equities continue to win mkt share globally. MSSB was weaker than our est. Revs were weak amid tough environment and comp expense was higher
• MS showed positive signs of improvement this qtr and while FICC and MSSB were disappointment, they are progressing. Slowly but surely, the firm continues its turnaround. We increase 2012 EPS to $1.75 from $1.65 and 2013 EPS to $2.36 from $2.19
CEO’s Did Better Than Stockholders and Employees in 2011
Where indeed . . .
“What is clear, assuming I have the numbers right, is that CEOs of banks are doing considerably better than bank employees and bank shareholders (see Appendix E).
“o In banking CEOs may earn on average about 50 to 100 times the average worker depending on the calculation.
o In the brokerage sector, the gap between employees and the CEO is somewhat less but the average pay for the brokerage employee is considerably higher than that of the bank employee.”
Bove points out: “The change in average market capitalization for the 23 domestic stocks followed by Rochdale Securities was negative 30.7% from December 31, 2010 to December 28, 2011 (see Appendix A). The worst performer by far was Bank of America (BAC/$5.42/Buy) with a drop of 60.4%. The best performer was U.S. Bancorp (USB/$27.23/Buy) with a decline of 0.3%.”
He also thinks financials are oversold and now might be the time to begin buying such beaten up dogs as BAC.
U.S. Brokerage: Doom and Gloom in Q4; Will 2012 Be Any Better?
Brad Hintz of Bernstein Research writes:
U.S. Brokerage: Doom and Gloom in Q4; Will 2012 Be Any Better?
• We reduce our Q4 ‘11 estimates for both GS and MS amid a challenging operating backdrop across the global capital markets industry. For GS, we cut our estimate from $3.15 to $0.77; for MS we reduce our estimate from a loss of $0.19 to a loss of $0.75.
• We do not expect a robust recovery in 2012. The EU threat will still dominate customer behavior, and we see little hope of any near-term resolution. Moreover, regulatory concerns and the pace of economic growth pose further headwinds.
• But sentiment has reached a nadir and is overly discounting shares. It’s certainly difficult to forecast profitability in a new regulatory world, but we believe these firms will be able to adapt their balance sheets and business mixes to meet regulation.
And the Recruiting Bragging Continues!
As we all know, recruiting for established, successful advisors has reached the bubble stage, with sign on “bonuses” (forgiveable loans vesting over years with many hurdles, really) reaching stratospheric levels. We’ve written about this continually over the last few years. And we even track movement with our new partner, AIQ database, which tracks SEC and FINRA filings.
And over the past few months, the “press” releases touting a poaching are crossing our (and other financial journalists desks) more frequently than ever. Read the rest of this entry »
Quote of the Day: You Can’t Tax Your Way to Posterity
A Wise Man
- Winston Churchill
Inside Occupy Wall Street: Financial Advisors’ View from the Inside
OWS protestors decrying the right to privately own property.
