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Category: blogSource: theflyonthewallMay 25th, 2021

A Tale Of Two Civilizations

A Tale Of Two Civilizations Authored by Alasdair Macleod via, In recent years, America’s unsuccessful attempts at containing China as a rival hegemon has only served to promote Chinese antipathy against American capitalism. China is now retreating into the comfort of her long-established moral values, best described as a mixture of Confucianism and Marxism, while despising American individualism, its careless regard for family values, and encouragement of get-rich-quick financial speculation. After America’s defeat in Afghanistan, the geopolitical issue is now Taiwan, where things are hotting up in the wake of the AUKUS agreement. Taiwan is important because it produces two-thirds of the world’s computer chips. Meanwhile, the large US banks are complacent concerning Taiwan, preferring to salivate at the money-making prospects of China’s $45 trillion financial services market. The outcome of the Taiwan issue is likely to be decided by the evolution of economic factors. China is protecting herself against a global credit crisis by restraining its creation, while America is going full MMT. The outcome is likely to be a combined financial market and dollar crisis for America, taking down its Western epigones as well. China has protected herself by cornering the market for physical gold and secretly accumulating as much as 20,000-30,000 tonnes in national reserves. If the dollar fails, which without a radical change in monetary policy it is set to do, with its gold-backing China expects to not only survive but be able to consolidate Taiwan into its territory with little or no opposition. Introduction On the one hand we have America and on the other we have China. As civilisations, America is discarding its moral values and social structures while China is determined to stick with its Confucian and Marxist roots. America is inclined to recognise no other civilisations as being civilised, while China’s leadership has seen America’s version and is rejecting it. Both forms of civilisation are being insular with respect to the other, and their need to peacefully cooperate in a multipolar world is increasingly hampered. Understanding another nation’s point of view is essential for peaceful harmony. This truism has been ignored by not just America, but by the Western alliance under American coercion. The Federal Government and its agencies are pursuing a propaganda effort against China’s exports and technology, while the average American appears less troubled. Perhaps we can put this down to a nation based on immigrants having a more cosmopolitan psyche than its predominantly Anglo-Saxon establishment. In Europe, it sometimes appears to be the other way round, with the politicians more prepared to tolerate China than their US counterparts. But then geography is involved, and the silk roads do not involve America, while rail links between China and Western Europe work efficiently, delivering vital trade between them. Economic interdependency is rarely considered. Nor are the potential consequences of diverging economic and monetary policies. While China has been squeezing domestic credit, the West has been issuing currency and credit like drunken sailors on shore leave. Being starved of extra credit, China’s economy has been deliberately stalled, and there is a real or imagined crisis developing in its property markets. Only now, it has become apparent that the West’s major economies are running into troubles of their own. Economic destabilisation heightens the risk of conflict, and perhaps the timing of the build-up of tensions in the South China Sea and over Taiwan is not accidental. On Wall Street there is an air of complacency, with the US investment community led by the big banks ignoring the developing risks of this dysfunction. In the context of deteriorating relations between China and America and with China’s growing contempt for US political resolve, Taiwan is becoming extremely important geopolitically. China’s plans for Taiwan Taiwan is in the world’s geopolitical crosshairs with President Xi insisting it returns to China. The West, which has failed to protect Taiwan from China’s claims of sovereignty in the past, thereby endorsing them, is only now belatedly coming to its aid with a new Pacific strategy. But the signals already sent to the Chinese are that the Western alliance is too divided, too weak to prevent a Chinese takeover. This surely is the reasoning behind China’s attempts to provoke an attack on its air force by invading Taiwan’s airspace. And all the West can do is indulge in finger-wagging by sailing aircraft carriers through the Taiwan Strait. Taiwan matters, being the source of two-thirds of the world supply of microchips. Faced with a pusillanimous west, this fact hands great power to China — which with Taiwan corners the market. Furthermore, the big Wall Street banks are salivating over the prospects of participating in China’s $45 trillion financial services market and are preparing for it. China has thereby ensured the US banking system has too much invested to support the US administration in any escalation of the Taiwan issue. The actual timing of China’s escalation of the Taiwan issue appears related to the AUKUS nuclear submarine deal. That being so, the posturing between China and the Western Alliance has just begun. There are four possible outcomes: China backs off and the tension subsides, America and the Western Alliance back off and China gets Taiwan, there is a negotiated settlement, or a military war against China ensues. In this context it is important to understand the civilisation issue, which increasingly divides China and America. There is little doubt that the hitherto normal relationship between America and China was disrupted by President Trump becoming nationalistic. His “make America great again” policy was a declaration of a trade war. That was accompanied by a political attack on Hong Kong, which provoked China into taking Hong Kong under direct mainland control. There followed a technology war, leading to the arrest of the daughter of Huawei’s founder in Canada. There appears to be little change in President Biden’s policy against China. Now that his administration has bedded in, China is beginning to test it over Taiwan. To give it context, we should understand the Chinese culture and why the state is so defensive of it, and how the leadership views America and its weaknesses. For that is what is behind its economic divergence from the West. China’s changing political culture Since becoming President, Xi has reformed China’s state machinery. After assuming power in 2012, he needed to clear out the corrupt and vested interests of the previous regime. He instigated Operation Fox Hunt against corrupt officials, who, it was estimated, had salted away the equivalent of over a trillion dollars abroad. By 2015 over 180 people had been returned to China from more than 40 countries. Former security chief Zhou Yongkang and former vice security minister Sun Lijun ended up in prison and Hu Jintao’s powerful Communist Youth League faction was marginalised. By dealing ruthlessly with corrupt officials Xi got rid of the vested interests that would have potentially undermined him. He consolidated both his public support and his iron grip on the Communist Party for the decade ahead. His public approval ratings remain extraordinarily high to this day. On the economic front Xi faced major challenges. Having become the world’s manufacturer, a sharp wealth divide opened between China’s concentrated manufacturing centres and rural China. Some 600 million people are still subsisting on a monthly income of less than 1,000 yuan ($156) a month. A rapidly increasing urban population has been denuding the rural economy of human resources and undermining the family culture. The wealth disparity between city and country has become an important political issue, which is why as well as refocusing resources towards agriculture Xi has clamped down on super-rich entrepreneurs and their record-breaking IPOs. In his Common Prosperity policy, Xi declared that he was not prepared to let the gap between rich and poor widen, and that common prosperity was not just an economic issue but “a major political issue related to the party’s governing foundations”. Following decades of communism under Mao, after China’s initial recovery and development Xi is now clamping down on unfettered capitalism. He and his advisers have observed the disintegration of family values in America and the rise of individualism at the expense of family life; and with popular culture how these trends are being adopted by China’s youth. The state has now shut down western-style social media, and erased celebrity culture. The social impact of cultural change is often overlooked, but it is at the forefront of China’s policy-makers’ consideration. For millennia, a state-controlled Chinese civilisation endured. Despite the Cultural Revolution, the post-war Mao Zedong years failed to erase it. Never sympathetic to free markets, statist thoughts have turned inwardly to Confucius and Marx to escape the obvious failings of American capitalism and its decline from familial values to individualism and rampant speculation. This is what Xi reflects in his presidency. His chief adviser, his éminence grise, is Wang Huning who operates in the political shadows. From all accounts, Wang is extremely clever, speaks French and English, spent a year in America and is a deep thinker who, having examined them, has rejected western values in favour of Chinese tradition. NS Lyons, an analyst and writer living in Washington, DC, has written an interesting article about Wang, published on Palladium Magazine — it is well worth reading. As we saw with the UK’s temporary éminence grise, Dominic Cummings, the power to influence possessed by such a person is considerable, but always in a statist context. The economics of free markets are not involved, except as a source of revenue to fund statist ambitions. The result is an assumption, an ignorance of economic affairs concealed by an automatic acceptance of the status quo. This is Wang’s weak point, and insofar as Xi relies on his advice, it is the President’s as well. Wang appears to be promoting a Confucian/Marxist hybrid civilisation which is intended to unify China’s many ethnic groups in a government-set culture, reverting to a morality of yesteryear. Comparing China’s future with that of American democracy and its moral degradation, the approach is understandable and enjoys popular support. But the consequences are that the state is drifting backwards towards its Marxist roots. The central command over the economy is exemplified in energy policy: power entities have been instructed to keep factories running without power outages, irrespective of coal and natural gas costs. In fact, the management of the economy was never relinquished by the state, which is now redoubling its efforts to retain control over economic outcomes. All one can say is that so far, the Chinese appear to have made considerably less of a mess managing their economy and currency compared with America’s Federal Government and its central bank. The political consequences are also important. By stemming the tide of Western moral decadence in her own territory China is insulating herself from the rest of the American-dominated world. This is being bolstered by steps to shift the emphasis from the export trade towards domestic consumption to improve living standards. In the process China will become more of an economic fortress, mainly interested in Africa and the Americas as sources of raw materials and commodities rather than as export markets to be fostered. China’s internationalism of the last four decades is increasingly redirected and confined to the Eurasian continent over which she exercises greater degrees of political and economic control. Which brings us back to the issues of Taiwan and the South China Sea, which China sees as consolidating her rightful political and cultural borders. However, the increasing autarky of both China and America is making the Taiwan issue more difficult to resolve peacefully. And we must also consider the opposing directions of drift for their two economies, which could decide the outcome. The US’s economic condition and outlook There is a mistaken assumption that the US’s economic troubles relate solely to the consequences of the covid lockdowns. Certainly, the Fed timed its funds rate cut to the zero bound and its current and unprecedented rate of quantitative easing of $120bn every month to March 2020, when lockdowns in Europe and the UK commenced. And it was becoming clear, despite President Trump’s prevarication, that the US would follow. But that ignores developments which preceded covid. Probably due to earlier tapering of QE in 2019, financial markets signalled a developing slump, with the S&P 500 falling 35% in 23 trading sessions to mid-March 2020 — eerily replicating the Wall Street Crash between end-September and late October 1929. It took the reduction of the Fed funds rate to the zero bound, and $120bn of monthly QE feeding into pension funds and insurance companies to turn markets higher. The yield on 10-year US Treasuries fell to 0.5% and equities markets soared on the back of a new basis of relative valuation. After the repo blow-up in September 2019, it became clear that bank balance sheets were too constrained to extend additional bank credit, and conventionally, that might have marked the turn of the bank credit cycle, which was why the comparison with late-1929 was so apt. Furthermore, the banks became less interested in extending credit to Main Street than to Wall Street after financial markets stabilised. The recovery in equities and their move into new high ground is simply asset inflation. Speculators have been quick to add to the Fed’s QE liquidity by drawing on bank and shadow bank credit to play the game. Figure 1 shows how margin loans have nearly doubled as the bull market in equities proceeded from late-March 2020. Never has so much leverage been seen in US securities markets. During covid lockdowns, beyond pure survival few in industry made judgements about the future. It was commonly assumed that when lockdowns ceased business would return to normal. But this made no allowance for the passage of time and the evolution of consumer needs and wants. Eighteen months later, we find that supply chains are still wrongfooted, disrupted by covid shutdowns and not supplying newly needed goods. Consumer demand patterns are not where they left off — they have radically changed. Buoyancy in the US economy is now proving short-lived. The flood of initial spending following lockdowns has receded and different factors are now at play. Supply bottlenecks due to lack of components, transport, and labour are forcing up prices at a pace not reflected in official statistics. In effect, GDP is insufficiently deflated by price rises on the high street to give a reasonable estimate of real GDP. With prices probably rising at over 15% annualised ( estimated 13.5% three months ago and pressures on rising prices have increased significantly since) the US economy is in a slump which is beginning to replicate that of ninety years ago. The difference is that in 1930-33 the dollar was on a gold coin standard increasing its purchasing power as bank credit was withdrawn, while today it is pure fiat and declining at an increasing pace. Rising prices across the board are another way of saying that the currency’s purchasing power is declining, which given the Fed’s monetary policies of recent years is not surprising. Figure 2 shows the impact of the Fed’s monetary policy on commodity prices, which reflects the dollar’s weakness as a medium of exchange. Given that it takes anything between a few weeks and six months for energy and commodity prices to work through to consumer prices, the recent spurt in commodity prices strongly suggests that consumer prices are going to continue to rise into next year. Yet, only now are the Fed and other central banks beginning to accept that rising prices are not going to be as temporary as they first hoped. This is because it is not prices rising, but the dollar’s purchasing power falling. When they fully realise it, foreign holders of dollars, totalling $33 trillion held in securities, short-term instruments, and bank deposits will require higher interest compensation to persuade them to continue holding dollars. And this is where a conflicting problem arises. A rise in interest rates sufficient to compensate foreign holders of dollars for the currency’s loss of purchasing power will undermine the values of their US stock holdings, totalling $14 trillion, of which $12 trillion is held by private sector foreign investors. Furthermore, a further $12.5 trillion of foreign private sector funds are invested in long-term bonds which will also decline in value. Higher interest rates will certainly trigger private sector selling of these assets across the board. The fate of $6.6 trillion of foreign official holdings of long-term securities will be partly political, demonstrated by the most recent Treasury TIC figures which showed China selling $21bn of US Treasuries, and Japan and the UK buying $39bn between them. This is strongly suggestive of swap lines being drawn down to support the US Treasury bond market, while presumably the US, either through the Treasury, the Exchange Stabilisation Fund, or the Fed itself has bought JGBs and gilts as the quid pro quo. It is worth noting this point because it shows how low bond yields are perpetuated by cooperation between major central banks – along with the attendant monetary inflation. That being the case, private sector holders are misled by price stability while bonds are being wildly overvalued. Another way of looking at it is that if John Williams at Shadowstats is right about inflation statistics, then US Treasuries should be yielding as much as 10% along the whole yield curve. Perhaps the recent rise in the 10-year US Treasury yield in Figure 2 is indicating the start of the process of this discovery for foreign and domestic investors alike. The chart shows that once the 1.75% level is overcome, there is considerable upside in the yield, with a golden cross forming under the spot value. If yields rise from here, it will not be long before equity markets take note and enter a full-blown bear market. The first reaction from the Fed to these events will almost certainly be to claim that falling equities are a leading economic indicator, suggesting the economy faces a post-covid recession. Interest rates cannot be eased further, but QE can be stepped up to cap bond yields and encourage pension funds and insurance corporations to increase their investments. This would be a U-turn from the projected policy of reducing QE due to inflation concerns. But at that point the neo-Keynesian argument can be expected to claim that the developing recession more than negates prospective inflation concerns. Facing the same dynamics, the other leading central banks are certain to fall in line with the Fed’s new policy. But as John Law found in a similar situation in France in 1720, rigging a failing stock market (in his case the Mississippi venture) by currency and credit expansion ultimately fails and undermines the currency. Law destroyed the French economy, contrasting with the British South Sea Bubble, where the Bank of England was not involved and did not deploy its currency to ramp markets. Today, it appears that Law’s experiment is about to be repeated on a grander scale by the issuer of the world’s reserve currency. The other major western central banks will follow suite. The whole fiat money system is at risk of being driven into a similar failure as that which faced the French livre. So, where would that leave China? China’s economic and monetary outlook As noted above, China has followed a different monetary path from that of the Fed for some time — most pointedly since March 2020. Consequently, the yuan has risen against the dollar since then, illustrated in Figure 4. After some initial uncertainty, the yuan began to rise against the dollar and is now about 10% up on the late-March 2020 level. This is not significant yet, because the dollar’s trade-weighted index has fallen by a similar amount. But with China’s monetary policy of clamping down on shadow banking and excessive bank credit creation, compared against the Fed’s more expansionary monetary policies, we can expect the trend for a stronger yuan relative to the dollar to continue. In neo-Keynesian language, China is in a period of deflation, leading to falling prices relative to those measured in dollars. But that misses the point: China has been careful not to encourage speculation in financial assets, reflected in relative stock market performances, shown in Figure 5. While the Fed has been inflating stock prices through interest rate and monetary policies, the Chinese have discouraged speculation. The result is that financial assets in China should be less vulnerable to a general market downturn. It has been a deliberate policy to protect the Chinese economy from 2014 onwards, after the PLA’s chief strategist, Major-General Qiao Liang convinced Beijing that permitting unfettered speculation would leave markets vulnerable to a pump-and-dump attack by America. To the Chinese, excessive financial speculation aided and abetted by the Fed must look like a cover for underlying economic failure. Every thread of their analysis must point to economic disintegration from which China must protect herself. Rates of credit expansion must be restricted, and the yuan be permitted to rise on the foreign exchanges. The change in policy emphasis from export markets towards increasing domestic consumption should be accelerated. In any event, China is the world’s dominant manufacturer, so she has a good degree of control over prices in international trade for consumer goods anyway. The prices of imported commodities and raw materials matter more today and rising dollar prices for commodities and energy can be countered by a higher exchange rate for the yuan. The state’s policy of least risk is to quietly divorce the Chinese economy from the dollar’s influence. In switching some of its trade into the yuan and other currencies, it has been doing this since the Lehman failure, which was another seminal moment in Chinese thinking. The cultural analysis is that America is now destroying its own currency towards a terminal event, an outcome forecast by economics professors in China’s Marxist universities over fifty years ago. The post-Mao ride, piggybacking on American capitalistic methods, is no longer tenable. The golden backstop Like the Marxist professors in the universities, China’s thinkers, such as Wang Huning and President Xi himself, always believed America to be politically and morally rudderless and would destroy itself. Presumably the election of an unpredictable Trump followed by a President Biden who appears to be in a geriatric decline is seen in Beijing as evidence that American society is indeed rudderless and imploding. It was against this likely event that in 1983 far-sighted Chinese strategists began to accumulate gold and to corner the word market for bullion. It would have been obvious to them that one day, dancing with the capitalist devils would become too dangerous and China’s future would have to be secured at the outset long before a capitalist collapse. Accordingly, the Regulations on the Control of Gold and Silver were promulgated on 15 June that year, appointing the People’s Bank (PBOC) with sole responsibility for managing China’s gold and silver while private ownership remained banned. The PBOC then began to acquire gold from foreign markets, a task made easier by the 1980-2002 bear market. Meanwhile, the government threw substantial resources into developing gold mining, and became the largest gold producer in the world by a substantial margin, overtaking South Africa, Russia, and the United States. State owned refineries took in doré from abroad, adding to the accumulation. It was only after the PBOC had accumulated sufficient bullion from imports and domestic production that she set up the Shanghai Gold Exchange in 2002 and permitted Chinese citizens to acquire gold. The government even ran advertising campaigns encouraging the purchase of gold, and since then, over 19,000 tonnes have been delivered into private sector ownership from the SGE’s vaults. Together with the total ban on exports of Chinese refined gold, the pre-2002 ban on private ownership while the state acquired sufficient bullion for its purposes, coupled with the subsequent encouragement to the public to do the same, China clearly regarded gold as her most important strategic asset. It has still not shown its hand, but given the likely amounts involved, to do so would risk destabilising the dollar-centric fiat currency world. Until it happens, we should assume that the 20,000-30,000 tonnes likely to have been accumulated in various state accounts since 1983 is an insurance policy against the failure of American capitalism and the world’s reserve currency. This brings us back to the Taiwan question. For China, the re-absorption of Taiwan may become a simpler matter when the capitalistic Americans are economically at their weakest and the dollar is collapsing. Taiwan itself might face up to this reality. A few steps to push America on its way may be tempting, such as selling down their holdings of US Treasuries (already in process) or disclosing a significantly higher level of gold reserves. The latter may wait until a dollar crisis really develops, which is now surely only a matter of a little time. Tyler Durden Sat, 10/23/2021 - 22:30.....»»

Category: personnelSource: nytOct 24th, 2021

BANKFIRST CAPITAL CORPORATION Reports Third Quarter 2021 Earnings of $5.3 Million

COLUMBUS, Miss., Oct. 22, 2021 /PRNewswire/ -- BankFirst Capital Corporation (OTCQX:BFCC) ("BankFirst" or the "Company") reported quarterly net income of $5.3 million, or $1.01 per share, for the third quarter of 2021, an increase of 24% compared to net income of $4.3 million, or $0.81 per share, for the second quarter of 2021, and an increase of 58% compared to net income of $3.4 million, or $0.64 per share, for the third quarter of 2020. The Company also reported net income of $13.9 million, or $2.63 per share, for the first nine months of 2021, compared to net income of $9.5 million, or $2.00 per share, for the first nine months of 2020, an increase of 32%.  2021 Third Quarter Highlights: Net income totaled $5.3 million, or $1.01 per share, in the third quarter of 2021 compared to $3.4 million, or $0.64 per share, for the third quarter of 2020. Earnings per share increased to $2.63 for the first nine months in 2021 compared to $2.00 for the first nine months in 2020, an increase of 32%. Total loan deferrals of $5 million, or 0.4% of the total loan portfolio, in the third quarter of 2021 compared to $7 million, or 0.6% of the total loan portfolio, in the second quarter of 2021. The Company's wholly-owned banking subsidiary, BankFirst Financial Services (the "Bank"), received a Community Development Financial Institution Financial Assistance grant of $1.8 million in the third quarter of 2021. Two new loan production offices were opened, one in Oxford, Mississippi and one in Biloxi, Mississippi. Recent Developments On October 14, 2021, BankFirst announced the signing of a definitive agreement for the acquisition The Citizens Bank of Fayette, Fayette, Alabama ("Citizens"). CEO Commentary Moak Griffin, President and Chief Executive Officer of the Company and the Bank, stated, "We are pleased to report another strong quarter of earnings. During the third quarter of 2021, we expanded our footprint in Mississippi with the opening of two new loan production offices, one in Oxford, Mississippi and one in Biloxi, Mississippi. In addition to the new loan production offices that have been announced, we are also excited by our recent announcement that we have signed a definitive agreement providing for the acquisition of Citizens. We believe that the partnership with Citizens will allow BankFirst to continue its strategic plan by partnering with community banks with strong relationships in their local markets." Financial Condition and Results of Operations Total assets were $1.79 billion as of September 30, 2021, as compared to $1.80 billion at June 30, 2021 and $1.68 billion at September 30, 2020, a decrease of 0.5% and an increase of 7%, respectively. The increase in total assets from the prior year was primarily due to organic loan and deposit growth, supported by participation in the Paycheck Protection Program ("PPP") created under the Coronavirus Aid, Relief, and Economic Security Act and administered by the U.S. Small Business Administration (the "SBA"). Total loans outstanding, net of the allowance for loan losses, as of September 30, 2021 totaled $1.13 billion as compared to $1.12 billion as of June 30, 2021, an increase of 1%, and as compared to $1.19 billion as of September 30, 2020, a decrease of 5%. The decrease from September 30, 2020 is primarily attributed to PPP loan forgiveness payments received from the SBA in 2021. Net loans outstanding, excluding loans associated with the PPP, as of September 30, 2021 totaled $1.09 billion, as compared to $1.05 billion as of June 30, 2021, an increase of 4%, and as compared to $1.07 billion as of September 30, 2020, an increase of 1%. Non-interest-bearing deposits increased to $467 million as of September 30, 2021, as compared to $462 million as of June 30, 2021, an increase of 1%, and as compared to $417 million as of September 30, 2020, an increase of 12%. Non-interest-bearing deposits represented 30% of total deposits as of September 30, 2021. Total deposits as of September 30, 2021 were $1.6 billion, as compared to $1.6 billion as of June 30, 2021, and as compared to $1.5 billion as of September 30, 2020, an increase of 7%. Cost of funds as of September 30, 2021 was 0.31% as compared to 0.31% as of June 30, 2021, and as compared to 0.49% as of September 30, 2020. The ratio of loans to deposits was 73% as of September 30, 2021 as compared to 72% as of June 30, 2021, and as compared to 82% as of September 30, 2020. The ratio of loans, net of PPP loans, to deposits was 69% as of September 30, 2021 as compared to 67% as of June 30, 2021, and as compared to 73% as of September 30, 2020. Net interest income was $14.1 million for the third quarter of 2021, an increase of 10% as compared to $12.9 million for the second quarter of 2021. Net interest margin decreased to 3.00% in the third quarter of 2021, compared to 3.02% in the second quarter of 2021. The decrease is primarily due to the increase in interest expense on Federal Home Loan Bank advances due to early prepayment costs and due to changes in the mix of our interest-bearing deposits and non-interest deposits. Yield on earning assets decreased 1 basis point to 3.31% in the third quarter of 2021, compared to 3.32% during the second quarter of 2021. The decrease, despite an increase in loan volume, is primarily due to the lower interest rate environment as a result of the Federal Reserve's sustained interest rate reductions in response to the ongoing COVID-19 pandemic. Noninterest income was $6.7 million for the third quarter of 2021, an increase of 20% as compared to $5.6 million for the second quarter of 2021, and a decrease of 15% as compared to $7.9 million for the third quarter of 2020. Mortgage banking revenue decreased $531 thousand to $1.2 million in the third quarter of 2021 from $1.7 million in the second quarter of 2021, a decrease of 29%, and decreased $665 thousand from $1.9 million in the third quarter of 2020, a decrease of 35%. In the third quarter of 2021, the Bank received a Community Development Financial Institution Financial Assistance grant of $1.8 million. As of September 30, 2021, tangible book value per share was $22.39. According to OTCQX, there were 106 trades of the Company's shares of common stock during the third quarter of 2021 for a total of 30,525 shares and for a total price of $838,916. The closing price of the Company's common stock quoted on OTCQX on September 30, 2021 was $28.25 per share. Based on this closing share price, the Company's market cap was $150.617 million as of September 30, 2021. Credit Quality The Company recorded $322,000 provision for credit losses during the third quarter of 2021 as compared to $144,000 for the second quarter of 2021, and as compared to $5.161 million for the third quarter of 2020. As of September 30, 2021, the allowance for loan losses was equal to 1.43% of gross loans and equal to 1.48% of gross loans less loans originated through the PPP. Net loan charge-offs in the third quarter of 2021 were $490,000 as compared to $265,000 in the second quarter 2021, and as compared to $136,000 in the third quarter 2020. Non-performing assets to total assets were 0.58% for the third quarter of 2021, a decrease of 5 basis points compared to 0.63% for the second quarter of 2021 and a decrease of 10 basis points compared to 0.68% for the third quarter of 2020. Annualized net charge-offs to average loans for the third quarter of 2021 were 0.04%, compared to 0.02% for the second quarter of 2021 compared to 0.01% for the third quarter of 2020.  Paycheck Protection Program ("PPP") The Bank participated in the PPP, a $944 billion low-interest business loan program funded by the U.S. Treasury Department and administered by the SBA, which officially ended on May 31, 2021. The PPP provided U.S. government guarantees for lenders, as well as loan forgiveness incentives for borrowers that predominately utilize the loan proceeds to cover employee compensation-related business costs. The Bank participated in Rounds 1 and 2 of the PPP during 2020 and in Round 3 of the PPP in 2021 until its expiration on May 31, 2021. In 2020, during Rounds 1 and 2 of the PPP, the Bank approved 1,489 PPP loans totaling $115.6 million. Through September 30, 2021, the Bank has received loan forgiveness payments from the SBA totaling $112 million on PPP loans originated in Rounds 1 and 2 of the PPP. The Bank received approximately $4.4 million in fees (net of expenses) paid by the SBA on PPP loans originated in Rounds 1 and 2 of the PPP, which we have recognized $1.1 million as loan fee income during the third quarter of 2021 and recognized $2 million during the first nine months of 2021, compared to $2.4 million for the first nine months of 2020. In 2021, during Round 3 of the PPP, the Bank approved 1,382 PPP loans totaling $62 million. Through September 30, 2021, the Bank has received forgiveness payments from the SBA totaling $23.9 million on PPP loans originated in Round 3 of the PPP. The Bank received approximately $4 million in fees (net of expenses) paid by the SBA on PPP loans originated in Round 3 of the PPP, which we have recognized $500,000 as loan fee income during the third quarter of 2021 and recognized $550,000 during the first nine months of 2021. Lending The Company regularly takes actions to identify and assess its COVID-19 related credit exposures by asset classes and borrower types. In addition, the Company implemented a loan modification program to assist both consumer and business borrowers that experienced or expect to experience financial hardships due to COVID-19 related challenges. As of September 30, 2021, 0.44% of the Bank's loan portfolio had active COVID-19-related modifications compared to 0.59% as of June 30, 2021 and 2.03% as of December 31, 2020. Modified loans with deferred payments will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. Consistent with bank regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals will continue to be reported as current loans throughout the agreed upon deferral periods. COVID-19 related loan modifications are also deemed to be insignificant borrower concessions, and therefore, such modified loans were not classified as troubled-debt restructured loans as of September 30, 2021. The COVID-19 pandemic continued to impact our financial results, as well as demand for our services and products during the third quarter of 2021 and potentially beyond. The short and long-term implications of the COVID-19 pandemic, and related monetary and fiscal stimulus measures, on our future revenues, earnings results, allowance for credit losses, capital reserves and liquidity are unknown at present. Recent Developments On October 14, 2021, BankFirst announced that it has entered into a definitive agreement to acquire The Citizens Bank of Fayette, headquartered in Fayette, Alabama. On September 30, 2021, Citizens had total assets of $221 million, total loans of $29 million, and total deposits of $174 million. The acquisition of Citizens will result in the Bank having 32 locations serving Mississippi and Alabama, with total assets of approximately $2.0 billion, gross loans of approximately $1.2 billion and total deposits of approximately $1.7 billion. ABOUT BANKFIRST CAPITAL CORPORATION   BankFirst Capital Corporation (OTCQX:BFCC) is a registered bank holding company based in Columbus, Mississippi with approximately $1.8 billion in total assets. BankFirst Financial Services, the Company's wholly-owned banking subsidiary, was founded in 1888 that is locally owned, controlled, and operated. The Bank is headquartered in Macon, Mississippi, with additional branch offices in Columbus, Flowood, Hattiesburg, Jackson, Louin, Macon, Madison, Newton, Starkville, and West Point, Mississippi and Addison, Aliceville, Arley, Bear Creek, Carrollton, Curry, Double Springs, Gordo, Haleyville, Lynn, Northport, and Tuscaloosa, Alabama. The Bank operates one mortgage production office in Brookhaven, Mississippi. The Bank also operates three loan production offices, one in Brookhaven, Mississippi one in Oxford, Mississippi, and one in Biloxi, Mississippi. BankFirst offers a wide variety of services for businesses and consumers. The Bank also offers internet banking, no-fee ATM access, checking, CD, and money market accounts, merchant services, mortgage loans, remote deposit capture, and more. For more information, visit CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This press release contains, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of the Company's goals and expectations with respect to future events that are subject to various risks and uncertainties, (ii) statements about the merger of The Citizens Bank of Fayette with and into the Bank (the "acquisition"), and (iii) statements preceded by, followed by, or that include the words "may," "will," "could," "should," "expect," "plan," "project," "intend," "anticipate," "believe," "estimate," "predict," "potential," "pursuant," "target," "continue," and similar expressions. These statements are based upon the current belief and expectations of the Company's management team and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company's control). Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations include, but are not limited to: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, including as a result of the coronavirus pandemic, our ability to complete the Citizens acquisition and recognize the expected benefits and synergies of the Citizens acquisition, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans or expectations contemplated by the Company will be achieved. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. The forward-looking statements are made as of the date of this press release. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. AVAILABLE INFORMATION The Company maintains an Internet web site at The Company makes available, free of charge, on its web site the Company's annual reports, quarterly earnings reports, and other press releases. In addition, the OTC Markets Group maintains an Internet site that contains reports, proxy and information statements, and other information regarding the Company (at The Company routinely posts important information for investors on its web site (under and, more specifically, under the Investor Relations tab at The Company intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under the OTC Markets Group OTCQX Rules for U.S. Banks. Accordingly, investors should monitor the Company's web site, in addition to following the Company's press releases, OTC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, the Company's web site is not incorporated by reference into, and is not a part of, this press release.   BankFirst Capital CorporationUnaudited Consolidated Balance Sheets(In Thousands, Except Per Share Data) September 30 June 30 March 31 December 31 September 30 2021 2021 2021 2020 2020 Assets Cash and due from banks $                         39,808 $             43,997 $             33,046 $             37,208 $             30,492 Interest bearing bank balances 36,849 47,049 60,599 83,324 10,056 Federal funds sold - 9,313 8,968 8,408 9,391 Available-for-sale securities 439,565 427,390 411,930 329,409 296,748 Loans 1,143,605 1,140,349 1,135,123 1,142,624 1,206,834 Allowance for loan losses (16,358) (16,526) (16,647) (16,496) (16,857) Loans, net of allowance for loan losses 1,127,247 1,123,823 1,118,476 1,126,128 1,189,977 Premises and equipment 43,462 42,164 42,227 42,414 42,232 Interest receivable 8,108 8,366 8,574 8,978 9,829 Goodwill 34,564 34,564 34,564 34,564 34,564 Other intangible assets 4,055 4,214 4,375 4,535 4,695 Other 56,056 57,338 57,206 54,387 53,496 Total assets $                    1,789,714 $        1,798,218 $        1,779,965 $        1,729,355 $        1,681,480 Liabilities and Stockholders' Equity Liabilities Noninterest bearing deposits $                       467,409 $           462,436 $           446,921 $           432,252 $           417,135 Interest bearing deposits 1,098,729 1,115,992 1,120,748 1,082,920 1,051,618 Total deposits 1,566,138 1,578,428 1,567,669 1,515,172 1,468,753 Notes payable 26,428 27,030 27,843 28,605 29,375 Subordinated debt 26,341 26,341 26,341 26,341 26,341 Interest payable 1,060 817 1,084 1,123 987 Other  12,811 12,716 11,801.....»»

Category: earningsSource: benzingaOct 22nd, 2021

CVB Financial Corp. Reports Earnings for the Third Quarter of 2021

Net Earnings of $49.8 million for the third quarter of 2021, or $0.37 per share 6% Quarter-over-Quarter Annualized Core Loan Growth Year-to-Date Efficiency Ratio of 40.9% Return on Average Tangible Common Equity of 14.6% for the third quarter of 2021 ONTARIO, Calif., Oct. 20, 2021 (GLOBE NEWSWIRE) -- CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (the "Company"), announced earnings for the quarter ended September 30, 2021. CVB Financial Corp. reported net income of $49.8 million for the quarter ended September 30, 2021, compared with $51.2 million for the quarter ended June 30, 2021 and $47.5 million for the quarter ended September 30, 2020. Diluted earnings per share were $0.37 for the third quarter, compared to $0.38 for the prior quarter and $0.35 for the same period last year. The third quarter of 2021 included $4.0 million in recapture of provision for credit losses, primarily due to a modest improvement in our economic forecast.   In comparison, the second quarter of 2021 included $2.0 million in recapture of provision. The Company's allowance for credit losses at September 30, 2021 of $65.4 million, compares to the pre-pandemic allowance of $68.7 million at December 31, 2019. David Brager, Chief Executive Officer of Citizens Business Bank, commented, "Citizens Business Bank remains well positioned to take advantage of the improving economic environment in California. Our pre-tax, pre-provision earnings remain strong despite the impact of the low interest rate environment and prevailing lower line utilization rates due to strong customer liquidity. We believe that our net interest margins will increase in a rising rate environment, and we are seeing the steady improvement in our loan pipelines from previous quarters translate into solid loan growth in the third quarter. We are also excited about our announced acquisition of Suncrest Bank and the opportunities it provides to expand into the Sacramento market as well as to solidify our significant position in the Central Valley." Net income of $49.8 million for the third quarter of 2021 produced an annualized return on average equity ("ROAE") of 9.49% and an annualized return on average tangible common equity ("ROATCE") of 14.62%. ROAE and ROATCE for the second quarter of 2021 were 10.02% and 15.60%, respectively, and 9.51% and 15.20%, respectively, for the third quarter of 2020. Annualized return on average assets ("ROAA") was 1.26% for the third quarter, compared to 1.35% for the second quarter and 1.38% for the third quarter of 2020. The efficiency ratio for the third quarter of 2021 was 42.27%, compared to 40.05% for the second quarter of 2021 and 42.57% for the third quarter of 2020.        Net income totaled $164.8 million for the nine months ended September 30, 2021. This represented a $37.7 million, or 29.68%, increase from the prior year, as we recaptured $25.5 million of provision for credit losses for the first nine months of 2021 compared to a $23.5 million provision for credit losses for the same period of 2020. Diluted earnings per share were $1.21 for the nine months ended September 30, 2021, compared to $0.93 for the same period of 2020. Net income for the nine months ended September 30, 2021 produced an annualized ROAE of 10.73%, an ROATCE of 16.64% and an ROAA of 1.46%. This compares to ROAE of 8.55%, an ROATCE of 13.76% and an ROAA of 1.35% for the first nine months of 2020. The efficiency ratio for the nine months ended September 30, 2021 was 40.85%, compared to 41.66% for the first nine months of 2020. Net interest income before recapture of provision for credit losses was $103.3 million for the third quarter of 2021. This represented a $2.1 million, or 1.98%, decrease from the second quarter of 2021, and was flat compared to the third quarter of 2020. Total interest income was $104.5 million for the third quarter of 2021, which was $2.5 million, or 2.32%, lower than the second quarter of 2021 and $2.1 million, or 1.95%, lower than the same period last year. Total interest income and fees on loans for the third quarter of 2021 of $88.4 million decreased $3.3 million from the second quarter of 2021, and decreased $5.8 million, or 6.17%, from the third quarter of 2020.   Total investment income of $15.0 million increased $461,000 from the second quarter of 2021 and increased $3.2 million, or 26.89%, from the third quarter of 2020. Interest expense decreased $392,000 from the prior quarter and decreased $2.1 million, or 62.19%, compared to the third quarter of 2020. During the third quarter of 2021 we recaptured $4.0 million of provision for credit losses, compared to a recapture of $2.0 million of provision for credit losses in the second quarter of 2021. The recapture during the quarter reflects continued improvement in our economic forecast of certain macroeconomic variables, as the negative economic impact from the pandemic continues to wane. A $25.5 million recapture of provision for credit losses was recorded for the nine months ended September 30, 2021. In comparison, $23.5 million in provision for credit losses was recorded for the nine months ended September 30, 2020 due to the severe economic forecast at that time as a result of the pandemic. Noninterest income was $10.5 million for the third quarter of 2021, compared with $10.8 million for the second quarter of 2021 and $13.2 million for the third quarter of 2020. Trust and investment services income declined by $486,000, compared to the second quarter of 2021 and grew by $276,000 year-over-year. Service charges on deposit accounts increased $344,000 quarter-over-quarter and increased $543,000 from the third quarter of 2020. Swap fee income increased $167,000 quarter-over-quarter and decreased $1.4 million from the third quarter of 2020. The third quarter of 2020 included a $1.7 million net gain on the sale of one of our bank owned buildings. Noninterest expense for the third quarter of 2021 was $48.1 million, compared to $46.5 million for the second quarter of 2021 and $49.6 million for the third quarter of 2020. The $1.5 million quarter-over-quarter increase was primarily due to a $1.0 million recapture of provision for unfunded loan commitments recorded in the second quarter of 2021 and $809,000 in acquisition expense in the third quarter related to the announced merger with Suncrest Bank. A $905,000 increase in salaries and employee benefit costs resulted from a one-time reduction in benefit expense of approximately $1 million during the second quarter of 2021. Marketing and promotion expense decreased $900,000 due to the timing of donations made during the second quarter of 2021. The year-over-year decrease of $1.5 million included a $1.3 million decrease in salaries and employee benefits, including $1.1 million in additional bonus expense for "Thank You Awards" paid to all Bank employees during the third quarter of 2020, and a $700,000 write-down of one OREO property in the third quarter of 2020. Compared to the third quarter of 2020, merger related expenses increased $809,000 and regulatory assessment expense increased $227,000 in the third quarter of 2021 compared to the prior year quarter, resulting from the final application of assessment credits provided by the FDIC at the end of the second quarter of 2020. As a percentage of average assets, noninterest expense was 1.22% for the third quarter of 2021, compared to 1.23% for the second quarter of 2021 and 1.44% for the third quarter of 2020. Net Interest Margin and Earning Assets Our net interest margin (tax equivalent) was 2.89% for the third quarter of 2021, compared to 3.06% for the second quarter of 2021 and 3.34% for the second quarter of 2020. Total average earning asset yields (tax equivalent) were 2.92% for the third quarter of 2021, compared to 3.11% for the second quarter of 2021 and 3.45% for the third quarter of 2020. The decrease in earning asset yield from the prior quarter was due to a combination of a 3 basis point decline in loan yields and a change in asset mix with loan balances declining to 54.97% of earning assets on average for the third quarter of 2021, compared to 59.22% for the second quarter of 2021. Interest and fee income from Paycheck Protection Program ("PPP") loans was approximately $7.9 million in the third quarter of 2021, compared to $8.1 million in the second quarter of 2021. The decrease in earning asset yield compared to the third quarter of 2020 was primarily due a change in asset mix with loan balances declining to 54.97% of earning assets on average for the third quarter of 2021, compared to 67.08% for the third quarter of 2020. The decline in interest rates since the start of the pandemic has had a negative impact on loan yields, which after excluding discount accretion, nonaccrual interest income, and the impact from PPP loans, declined by 23 basis points compared to the third quarter of 2020. The significant decline in interest rates also impacted the tax equivalent yield on investments, which decreased by 45 basis points from the third quarter of 2020, but remained essentially the same as the prior quarter. Earning asset yields were further impacted by a change in asset mix resulting from an $876.6 million increase in average balances at the Federal Reserve compared to the third quarter of 2020. Average earning assets increased from the second quarter of 2021 by $471.1 million to $14.40 billion for the third quarter of 2021. Of the increase in earning assets, $186.8 million represented an increase in average investment securities while average loans declined by $333.0 million. Average investments increased by $1.51 billion, while balances at the Federal Reserve grew on average by $876.6 million compared to the third quarter of 2020. Average earning assets increased by $1.91 billion from the third quarter of 2020. Average loans declined by $465.8 million from the third quarter of 2020, which included a $336.7 million decrease in PPP loans on average. Total cost of funds declined to 0.04% for the third quarter of 2021 from 0.05% for the second quarter of 2021. The Company redeemed $27.6 million in subordinated debt on June 15, 2021, which had an average interest rate of 1.57% during the previous quarter. Noninterest bearing deposits grew on average by $292.8 million, from the second quarter of 2021, while interest-bearing deposits and customer repurchase agreements grew on average by $124.3 million. The cost of interest-bearing deposits and customer repurchase agreements declined from 0.12% for the prior quarter to 0.09% for the third quarter of 2021. In comparison to the third quarter of 2020, our overall cost of funds decreased by 7 basis points, as average noninterest bearing deposits grew by $1.26 billion, compared to average growth of $652.6 million in interest-bearing deposits. The cost of interest-bearing deposits and customer repurchase agreements declined by 19 basis points when compared to the third quarter of 2020. On average, noninterest bearing deposits were 62.94% of total deposits during the current quarter. Income Taxes Our effective tax rate for the quarter and nine months ended September 30, 2021 was 28.60%, compared with 29.00% for the quarter and nine months ended September 30, 2020, respectively.   Our estimated annual effective tax rate can vary depending upon the level of tax-advantaged income as well as available tax credits. Assets The Company reported total assets of $16.20 billion at September 30, 2021. This represented an increase of $662.3 million, or 4.26%, from total assets of $15.54 billion at June 30, 2021.   Interest-earning assets of $14.93 billion at September 30, 2021 increased $669.7 million, or 4.70%, when compared with $14.26 billion at June 30, 2021. The increase in interest-earning assets was primarily due to a $667.1 million increase in investment securities and a $223.4 million increase in interest-earning balances due from the Federal Reserve, partially offset by a $221.8 million decrease in total loans which included a decrease in PPP loans of approximately $327 million for the current quarter. The Company's total assets of $16.20 billion at September 30, 2021, represented an increase of $1.78 billion, or 12.36%, from total assets of $14.42 billion at December 31, 2020. Interest-earning assets of $14.93 billion at September 30, 2021 increased $1.71 billion, or 12.92%, when compared with $13.22 billion at December 31, 2020. The increase in interest-earning assets was primarily due to a $1.66 billion increase in investment securities and a $565.9 million increase in interest-earning balances due from the Federal Reserve, partially offset by a $499.3 million decrease in total loans which included a decrease in PPP loans of $552 million for the nine months ended September 30, 2021. Total assets of $16.20 billion at September 30, 2021 increased by $2.38 billion, or 17.24%, from total assets of $13.82 billion at September 30, 2020. Interest-earning assets increased $2.34 billion, or 18.58%, when compared with $12.59 billion at September 30, 2020.   The increase in interest-earning assets includes a $1.85 billion increase in investment securities and a $1.06 billion increase in interest-earning balances due from the Federal Reserve, partially offset by a $558.4 million decrease in total loans which included PPP loan decrease of $770 million.   Total loans include the remaining outstanding balance in PPP loans, totaling $331 million as of September 30, 2021, compared to $657.8 million as of June 30, 2021 and $1.1 billion as of September 30, 2020. Excluding PPP loans, total loans grew by $105.1 million from June 30, 2021 and grew by $211.8 million compared to September 30, 2020. Investment Securities Total investment securities were $4.64 billion at September 30, 2021, an increase of $667.1 million, or 16.81%, from $3.97 billion at June 30, 2021, an increase of $1.66 billion from December 31, 2020, and an increase of $1.85 billion, or 66.56%, from $2.78 billion at September 30, 2020. In the third quarter of 2021, we purchased $892.5 million of securities with an average investment yield of approximately 1.70%, compared to $317.1 million of securities with an average investment yield of approximately 1.69% in the second quarter of 2021 and $1.23 billion of securities purchased in the first quarter of 2021, with an average expected yield of approximately 1.57%. At September 30, 2021, investment securities held-to-maturity ("HTM") totaled $1.71 billion, a $1.13 billion, or 195.69%, increase from December 31, 2020 and a $1.13 billion increase, or 196.17%, from September 30, 2020. In the third quarter of 2021, we purchased approximately $705.1 million of HTM securities. Approximately $546 million of HTM securities were purchased in the first quarter of 2021. At September 30, 2021 investment securities available-for-sale ("AFS") totaled $2.93 billion, inclusive of a pre-tax net unrealized gain of $8.8 million. AFS securities increased by $526.1 million, or 21.93%, from December 31, 2020, and increased by $719.4 million, or 32.62%, from September 30, 2020. During the third quarter of 2021, we purchased approximately $187.4 million of AFS securities, compared to approximately $317.1 million of AFS securities purchased in the second quarter of 2021 and approximately $683 million of AFS securities purchased in the first quarter of 2021. Combined, the AFS and HTM investments in mortgage backed securities ("MBS") and collateralized mortgage obligations ("CMO") totaled $3.81 billion at September 30, 2021, compared to $2.66 billion at December 31, 2020 and $2.48 billion at September 30, 2020. Virtually all of our MBS and CMO are issued or guaranteed by government or government sponsored enterprises, which have the implied guarantee of the U.S. Government. Our combined AFS and HTM municipal securities totaled $242.8 million as of September 30, 2021, or approximately 5% of our total investment portfolio. These securities are located in 28 states. Our largest concentrations of holdings by state, as a percentage of total municipal bonds, are located in Minnesota at 21.18%, Texas at 10.39%, Massachusetts at 10.30%, Ohio at 8.16%, and Connecticut at 5.74%. Loans Total loans and leases, at amortized cost, of $7.85 billion at September 30, 2021 decreased by $221.8 million, or 2.75%, from $8.07 billion at June, 2021. The $221.8 million decrease in total loans included decreases of $326.9 million in PPP loans, $10.9 million in construction loans, and $5.8 million in SFR mortgage loans, partially offset by increases of $64.0 million in commercial real estate loans, $21.8 million in dairy & livestock and agribusiness loans, $20.9 million in commercial and industrial loans, and $15.8 million in Small Business Administration ("SBA") loans. After adjusting for PPP loans, our loans grew by $105.1 million or at an annualized rate of approximately 6% from the end of the second quarter of 2021. Total loans and leases, at amortized cost, of $7.85 billion at September 30, 2021 decreased by $499.3 million, or 5.98%, from December 31, 2020. The $499.3 million decrease in total loans included decreases of $552.0 million in PPP loans, $81.6 million in dairy & livestock and agribusiness loans due to seasonal pay downs, $42.1 million in commercial and industrial loans, $39.2 million in SFR mortgage loans, $7.7 million in construction loans, and $13.5 million in consumer and other loans, partially offset by an increase of $233.2 million in commercial real estate loans and $3.6 million in SBA loans. After adjusting for seasonality and PPP loans, our loans grew by $134.3 million or at an annualized rate of approximately 3% from the end of the fourth quarter of 2020. Total loans and leases, at amortized cost, decreased by $558.4 million, or 6.64%, from September 30, 2020. The decrease in total loans included a $770.2 million decline in PPP loans. After excluding the impact of PPP loans, the $211.8 million or approximately 3% increase in core loans included increases of $306.5 million in commercial real estate loans, $26.8 million in dairy & livestock and agribusiness loans and $9.3 million in municipal lease financings.   Partially offsetting these increases were declines of $47.1 million in commercial and industrial loans, $43.4 million in SFR mortgage loans, $24.5 million in construction loans, and $15.8 million in consumer and other loans. Asset Quality During the third quarter of 2021, we experienced credit charge-offs of $11,000 and total recoveries of $33,000, resulting in net recoveries of $22,000. The allowance for credit losses ("ACL") totaled $65.4 million at September 30, 2021, compared to $93.7 million at December 31, 2020 and $93.9 million at September 30, 2020. The allowance for credit losses for 2021 was decreased by $25.5 million, due to the improved outlook in our forecast of certain macroeconomic variables that were influenced by the economic impact of the pandemic and government stimulus, and by $2.8 million in year-to-date net charge-offs. At September 30, 2021, ACL as a percentage of total loans and leases outstanding was 0.83%. This compares to 1.12% and 1.12% at December 31, 2020 and September 30, 2020, respectively. When PPP loans are excluded, ACL as a percentage of total adjusted loans and leases outstanding was 0.87% at September 30, 2021, compared to 1.25% at December 31, 2020 and 1.28% at September 30, 2020. Nonperforming loans, defined as nonaccrual loans and loans 90 days past due accruing interest plus nonperforming TDR loans, were $8.4 million at September 30, 2021, or 0.11% of total loans. This compares to nonperforming loans of $14.3 million, or 0.17% of total loans, at December 31, 2020 and $11.8 million, or 0.14% of total loans, at September 30, 2020. The $8.4 million in nonperforming loans at September 30, 2021 are summarized as follows: $4.1 million in commercial real estate loans, $2.0 million in commercial and industrial loans, $1.5 million in SBA loans, $399,000 in SFR mortgage loans, $305,000 in consumer and other loans, and $118,000 in dairy & livestock and agribusiness loans. As of September 30, 2021, we had no OREO properties, compared to $3.4 million at December 31, 2020 and $4.2 million at September 30, 2020. At September 30, 2021, we had loans delinquent 30 to 89 days of $1.1 million. This compares to $3.1 million at December 31, 2020 and $3.8 million at September 30, 2020. As a percentage of total loans, delinquencies, excluding nonaccruals, were 0.01% at September 30, 2021, 0.04% at December 31, 2020, and 0.04% at September 30, 2020. At September 30, 2021, we had $8.0 million in performing TDR loans, compared to $2.2 million in performing TDR loans at December 31, 2020 and $2.2 million in performing TDR loans at September 30, 2020. Nonperforming assets, defined as nonaccrual loans and loans 90 days past due accruing interest plus OREO, totaled $8.4 million at September 30, 2021, $17.7 million at December 31, 2020, and $16.0 million at September 30, 2020. As a percentage of total assets, nonperforming assets were 0.05% at September 30, 2021, 0.12% at December 31, 2020, and 0.12% at September 30, 2020. Classified loans are loans that are graded "substandard" or worse. At September 30, 2021, classified loans totaled $49.8 million, compared to $78.8 million at December 31, 2020 and $72.7 million at September 30, 2020. Deposits & Customer Repurchase Agreements Deposits of $12.93 billion and customer repurchase agreements of $659.6 million totaled $13.59 billion at September 30, 2021. This represented an increase of $342.5 million, or 2.59%, when compared with $13.25 billion at June 30, 2021. Total deposits and customer repurchase agreements increased $1.41 billion, or 11.61% when compared to $12.18 billion at December 31, 2020 and increased $1.94 billion, or 16.63%, when compared with $11.65 billion at September 30, 2020. Noninterest-bearing deposits were $8.31 billion at September 30, 2021, an increase of $245.3 million, or 3.04%, when compared to June 30, 2021, an increase of $855.3 million, or 11.47%, when compared to $7.46 billion at December 31, 2020, and an increase of $1.39 billion, or 20.11%, when compared to $6.92 billion at September 30, 2020. At September 30, 2021, noninterest-bearing deposits were 64.27% of total deposits, compared to 63.66% at June 30, 2021, 63.52% at December 31, 2020 and 61.95% at September 30, 2020. Capital The Company's total equity was $2.06 billion at September 30, 2021. This represented an increase of $55.9 million, or 2.79%, from total equity of $2.01 billion at December 31, 2020. The increase was primarily due to net earnings of $164.8 million, partially offset by a $32.3 million decrease in other comprehensive income from the tax effected impact of the decrease in market value of available-for-sale securities and $73.4 million in cash dividends. During the third quarter, we repurchased 390,336 shares of common stock for $7.4 million, or an average repurchase price of $18.97. Our tangible book value per share at September 30, 2021 was $10.13. Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory standards. As of September 30, 2021, the Company's Tier 1 leverage capital ratio was 9.2%, common equity Tier 1 ratio was 14.9%, Tier 1 risk-based capital ratio was 14.9%, and total risk-based capital ratio was 15.7%. CitizensTrust As of September 30, 2021 CitizensTrust had approximately $3.28 billion in assets under management and administration, including $2.39 billion in assets under management. Revenues were $2.7 million for the third quarter of 2021 and $8.5 million for the nine months ended September 30, 2021, compared to $2.4 million and $7.3 million, respectively, for the same periods of 2020. CitizensTrust provides trust, investment and brokerage related services, as well as financial, estate and business succession planning. Corporate Overview CVB Financial Corp. ("CVBF") is the holding company for Citizens Business Bank. CVBF is one of the 10 largest bank holding companies headquartered in California with over $15 billion in total assets. Citizens Business Bank is consistently recognized as one of the top performing banks in the nation and offers a wide array of banking, lending and investing services through 58 banking centers and 3 trust office locations serving the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County, and the Central Valley area of California. Shares of CVB Financial Corp. common stock are listed on the NASDAQ under the ticker symbol "CVBF". For investor information on CVB Financial Corp., visit our Citizens Business Bank website at and click on the "Investors" tab. Conference Call Management will hold a conference call at 7:30 a.m. PDT/10:30 a.m. EDT on Thursday, October 21, 2021 to discuss the Company's third quarter 2021 financial results. To listen to the conference call, please dial (833) 301-1161, participant passcode 9938279. A taped replay will be made available approximately one hour after the conclusion of the call and will remain available through October 28, 2021 at 6:00 a.m. PDT/9:00 a.m. EDT. To access the replay, please dial (855) 859-2056, participant passcode 9938279. The conference call will also be simultaneously webcast over the Internet; please visit our Citizens Business Bank website at and click on the "Investors" tab to access the call from the site. Please access the website 15 minutes prior to the call to download any necessary audio software. This webcast will be recorded and available for replay on the Company's website approximately two hours after the conclusion of the conference call, and will be available on the website for approximately 12 months. Safe HarborCertain matters set forth herein (including the exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company's current business plans and expectations and our future financial position and operating results. Words such as "will likely result", "aims", "anticipates", "believes", "could", "estimates", "expects", "hopes", "intends", "may", "plans", "projects", "seeks", "should", "will," "strategy", "possibility", and variations of these words and similar expressions help to identify these forward-looking statements, which involve risks and uncertainties. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic and market conditions, political events and public health developments and the impact they may have on us, our customers and our assets and liabilities; our ability to attract deposits and other sources of funding or liquidity; supply and demand for commercial or residential real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend; a sharp or prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors, key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance for credit losses and charge-offs; the costs or effects of mergers, acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or our ability to realize the contemplated financial or business benefits associated with any such mergers, acquisitions or dispositions, including our recently announced agreement to acquire Suncrest Bank ; the effects of new laws, regulations and/or government programs, including those laws, regulations and programs enacted by federal, state or local governments in the geographic jurisdictions in which we do business in response to the current national emergency declared in connection with the COVID-19 pandemic; the impact of the federal CARES Act and the significant additional lending activities undertaken by the Company in connection with the Small Business Administration's Paycheck Protection Program enacted thereunder, including risks to the Company with respect to the uncertain application by the Small Business Administration of new borrower and loan eligibility, forgiveness and audit criteria; the effects of the Company's participation in one or more of the new lending programs recently established by the Federal Reserve, including the Main Street New Loan Facility, the Main Street Priority Loan Facility and the Nonprofit Organization New Loan Facility, and the impact of any related actions or decisions by the Federal Reserve Bank of Boston and its special purpose vehicle established pursuant to such lending programs; the effect of changes in other pertinent laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, bank capital levels, allowance for credit losses, consumer, commercial or secured lending, securities regulation and securities trading and hedging, bank operations, compliance, fair lending rules and regulations, the Community Reinvestment Act, employment, executive compensation, insurance, cybersecurity, vendor management, customer and employee privacy, and information security technology) with which we and our subsidiaries must comply or believe we should comply or which may otherwise impact us; changes in estimates of future reserve requirements and minimum capital requirements, based upon the periodic review thereof under relevant regulatory and accounting standards, including changes in the Basel Committee framework establishing capital standards for bank credit, operations and market risks; the accuracy of the assumptions and estimates and the absence of technical error in implementation or calibration of models used to estimate the fair value of financial instruments or currently expected credit losses or delinquencies; inflation, changes in market interest rates, securities market and monetary fluctuations; changes in government-established interest rates, reference rates or monetary policies, including the possible imposition of negative interest rates on bank reserves; the impact of the anticipated phase-out of the London Interbank Offered Rate (LIBOR) on interest rate indexes specified in certain of our customer loan agreements and in our interest rate swap arrangements, including any economic and compliance effects related to the expected change from LIBOR to an alternative reference rate; changes in the amount, cost and availability of deposit insurance; disruptions in the infrastructure that supports our business and the communities where we are located, which are concentrated in California, involving or related to public health, physical site access and/or communication facilities; cyber incidents, attacks, infiltrations, exfiltrations, or theft or loss of any Company, customer or employee data or money; political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, drought, the effects of pandemic diseases, climate change or extreme weather events, that may affect electrical, environmental and communications or other services, computer services or facilities we use, or that may affect our assets, customers, employees or third parties with whom we conduct business; our timely development and implementation of new banking products and services and the perceived overall value of these products and services by our customers and potential customers; the Company's relationships with and reliance upon outside vendors with respect to certain of the Company's key internal and external systems, applications and controls; changes in commercial or consumer spending, borrowing and savings patterns, preferences or behaviors; technological changes and the expanding use of technology in banking and financial services (including the adoption of mobile banking, funds transfer applications, electronic marketplaces for loans, block-chain technology and other financial products, systems or services); our ability to retain and increase market share, to retain and grow customers and to control expenses; changes in the competitive environment among banks and other financial services and technology providers; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions or on the Company's capital, deposits, assets or customers; fluctuations in the price of the Company's common stock or other securities, and the resulting impact on the Company's ability to raise capital or to make acquisitions; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by the principal regulatory agencies with jurisdiction over the Company, as well as by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard-setters; changes in our organization, management, compensation and benefit plans, and our ability to recruit and retain or expand or contract our workforce, management team, key executive positions and/or our board of directors; our ability to identify suitable, qualified replacements for any of our executive officers who may leave their employment with us, including our Chief Executive Officer; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (including any securities, lender liability, bank operations, check or wire fraud, financial product or service, data privacy, health and safety, consumer or employee class action litigation); regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; our ongoing relations with our various federal and state regulators, including the SEC, Federal Reserve Board, FDIC and California DFPI; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company's public reports, including our Annual Report on Form 10-K for the year ended December 31, 2020, and particularly the discussion of risk factors within that document. Among other risks, the ongoing COVID-19 pandemic may significantly affect the banking industry, the health and safety of the Company's employees, and the Company's business prospects.  The ultimate impact of the COVID-19 pandemic on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the impact on the economy, our customers, our employees and our business partners, the safety, effectiveness, distribution and acceptance of vaccines developed to mitigate the pandemic, and actions taken by governmental authorities in response to the pandemic. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements, except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company's earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ. Contact: David A. Brager   Chief Executive Officer   (909) 980-4030               CVB FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)                                 September 30,2021   December 31,2020   September 30,2020 Assets             Cash and due from banks   $ 159,563     $ 122,305     $ 145,455   Interest-earning balances due from Federal Reserve     2,401,800       1,835,855       1,339,498   Total cash and cash equivalents     2,561,363       1,958,160       1,484,953   Interest-earning balances due from depository institutions     27,260       43,563       44,367   Investment securities available-for-sale     2,925,060       2,398,923       2,205,646   Investment securities held-to-maturity     1,710,938       578,626       577,694   Total investment securities     4,635,998       2,977,549       2,783,340   Investment in stock of Federal Home Loan Bank (FHLB)     17,688       17,688       17,688   Loans and lease finance receivables     7,849,520       8,348,808       8,407,872   Allowance for credit losses     (65,364 )     (93,692 )     (93,869 )   Net loans and lease finance receivables     7,784,156       8,255,116       8,314,003   Premises and equipment, net     49,812       51,144       51,477   Bank owned life insurance (BOLI)     251,781       226,818       228,132   Intangibles     27,286       33,634       35,804   Goodwill     663,707       663,707       663,707   Other assets     182,547       191,935       195,240         Total assets   $ 16,201,598     $ 14,419,314     $ 13,818,711   Liabilities and Stockholders' Equity             Liabilities:             Deposits:             Noninterest-bearing   $ 8,310,709     $ 7,455,387     $ 6,919,423   Investment checking     594,347       517,976       447,910   Savings and money market     3,680,721       3,361,444       3,356,353   Time deposits     344,439       401,694       445,148     Total deposits     12,930,216       11,736,501       11,168,834   Customer repurchase agreements     659,579       439,406       483,420   Other borrowings     -       5,000       10,000   Junior subordinated debentures     -       25,774       25,774   Payable for securities purchased     421,751       60,113       -   Other liabilities     126,132       144,530       148,726       Total liabilities     14,137,678       12,411,324       11,836,754   Stockholders' Equity             Stockholders' equity     2,060,842       1,972,641       1,945,864   Accumulated other comprehensive income, net of tax     3,078       35,349       36,093       Total stockholders' equity     2,063,920       2,007,990       1,981,957         Total liabilities and stockholders' equity   $ 16,201,598     $ 14,419,314     $ 13,818,711                 CVB FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited) (Dollars in thousands)                                             Three Months Ended   Nine Months Ended     September 30,2021   June 30,2021   September 30,2020   September 30,2021   September 30,2020 Assets                         Cash and due from banks   $ 156,575     $ 157,401     $ 156,132     $ 154,861     $ 154,543   Interest-earning balances due from Federal Reserve     2,328,745       1,711,878       1,452,167       1,890,160       916,849   Total cash and cash equivalents     2,485,320       1,869,279       1,608,299       2,045,021       1,071,392   Interest-earning balances due from depository institutions     27,376       26,907       41,982       32,074       30,362   Investment securities available-for-sale     2,942,255       2,862,552       2,006,829       2,787,617       1,774,620   Investment securities held-to-maturity     1,169,892       1,062,842       594,751       1,005,613       626,594   Total investment securities     4,112,147       3,925,394       2,601,580       3,793,230       2,401,214   Investment in stock of FHLB     17,688       17,688       17,688       17,688       17,688   Loans and lease finance receivables     7,916,443       8,249,481       8,382,257       8,144,105       7,972,208   Allowance for credit losses     (69,309 )     (71,756 )     (93,972 )     (78,094 )     (82,529 ) Net loans and lease finance receivables     7,847,134       8,177,725       8,288,285       8,066,011       7,889,679   Premises and equipment, net     50,105       50,052       52,052       50,348       52,817   Bank owned life insurance (BOLI)     251,099       239,132       227,333       239,137       226,209   Intangibles     28,240       30,348       37,133       30,377       39,376   Goodwill     663,707       663,707       663,707       663,707       663,707   Other assets     190,445       189,912       189,117       190,034       183,118        Total assets   $ 15,673,261     $ 15,190,144     $ 13,727,176     $ 15,127,627     $ 12,575,562   Liabilities and Stockholders' Equity                   Liabilities:                   Deposits:                   Noninterest-bearing   $ 7,991,462     $ 7,698,640     $ 6,731,711     $ 7,646,283     $ 6,063,469   Interest-bearing     4,704,976       4,633,103       4,184,688       4,591,779       3,844,874    Total deposits     12,696,438       12,331,743       10,916,399       12,238,062       9,908,343   Customer repurchase agreements     636,393       583,996       504,039       593,543       475,103   Other borrowings     4       3,022       10,020       2,658       4,833   Junior subordinated debentures     -       20,959       25,774       15,483       25,774   Payable for securities purchased     151,866       98,771       157,057       113,685       53,630   Other liabilities     108,322       102,697       128,045       110,064       121,579      Total liabilities     13,593,023       13,141,188       11,741,334       13,073,495       10,589,262   Stockholders' Equity                   Stockholders' equity     2,067,072       2,041,906       1,948,351       2,035,787       1,956,676   Accumulated other comprehensive income, net of tax     13,166       7,050       37,491       18,345       29,624      Total stockholders' equity     2,080,238       2,048,956       1,985,842       2,054,132       1,986,300         Total liabilities and stockholders' equity   $ 15,673,261     $ 15,190,144     $ 13,727,176     $ 15,127,627     $ 12,575,562                       CVB FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollars in thousands, except per share amounts)                                             Three Months Ended   Nine Months Ended     September 30,2021   June 30,2021   September 30,2020   September 30,2021   September 30,2020 Interest income:                         Loans and leases, including fees   $ 88,390     $ 91,726     $ 94,200     $ 271,911     $ 281,669   Investment securities:                   Investment securities available-for-sale     9,813       9,410       8,447       28,382       26,945   Investment securities held-to-maturity     5,188       5,130       3,375       14,258       11,033   Total investment income     15,001       14,540       11,822       42,640       37,978   Dividends from FHLB stock     258       283       215       758       761   Interest-earning deposits with other institutions     898  .....»»

Category: earningsSource: benzingaOct 20th, 2021

Bitcoin & The US Fiscal Reckoning

Bitcoin & The US Fiscal Reckoning Authored by Avik Roy via, Cryptocurrencies like bitcoin have few fans in Washington. At a July congressional hearing, Senator Elizabeth Warren warned that cryptocurrency "puts the [financial] system at the whims of some shadowy, faceless group of super-coders." Treasury secretary Janet Yellen likewise asserted that the "reality" of cryptocurrencies is that they "have been used to launder the profits of online drug traffickers; they've been a tool to finance terrorism." Thus far, Bitcoin's supporters remain undeterred. (The term "Bitcoin" with a capital "B" is used here and throughout to refer to the system of cryptography and technology that produces the currency "bitcoin" with a lowercase "b" and verifies bitcoin transactions.) A survey of 3,000 adults in the fall of 2020 found that while only 4% of adults over age 55 own cryptocurrencies, slightly more than one-third of those aged 35-44 do, as do two-fifths of those aged 25-34. As of mid-2021, Coinbase — the largest cryptocurrency exchange in the United States — had 68 million verified users. To younger Americans, digital money is as intuitive as digital media and digital friendships. But Millennials with smartphones are not the only people interested in bitcoin; a growing number of investors are also flocking to the currency's banner. Surveys indicate that as many as 21% of U.S. hedge funds now own bitcoin in some form. In 2020, after considering various asset classes like stocks, bonds, gold, and foreign currencies, celebrated hedge-fund manager Paul Tudor Jones asked, "[w]hat will be the winner in ten years' time?" His answer: "My bet is it will be bitcoin." What's driving this increased interest in a form of currency invented in 2008? The answer comes from former Federal Reserve chairman Ben Bernanke, who once noted, "the U.S. government has a technology, called a printing press...that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation...the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to...inflation." In other words, governments with fiat currencies — including the United States — have the power to expand the quantity of those currencies. If they choose to do so, they risk inflating the prices of necessities like food, gas, and housing. In recent months, consumers have experienced higher price inflation than they have seen in decades. A major reason for the increases is that central bankers around the world — including those at the Federal Reserve — sought to compensate for Covid-19 lockdowns with dramatic monetary inflation. As a result, nearly $4 trillion in newly printed dollars, euros, and yen found their way from central banks into the coffers of global financial institutions. Jerome Powell, the current Federal Reserve chairman, insists that 2021's inflation trends are "transitory." He may be right in the near term. But for the foreseeable future, inflation will be a profound and inescapable challenge for America due to a single factor: the rapidly expanding federal debt, increasingly financed by the Fed's printing press. In time, policymakers will face a Solomonic choice: either protect Americans from inflation, or protect the government's ability to engage in deficit spending. It will become impossible to do both. Over time, this compounding problem will escalate the importance of Bitcoin. THE FIAT-CURRENCY EXPERIMENT It's becoming clear that Bitcoin is not merely a passing fad, but a significant innovation with potentially serious implications for the future of investment and global finance. To understand those implications, we must first examine the recent history of the primary instrument that bitcoin was invented to challenge: the American dollar. Toward the end of World War II, in an agreement hashed out by 44 Allied countries in Bretton Woods, New Hampshire, the value of the U.S. dollar was formally fixed to 1/35th of the price of an ounce of gold. Other countries' currencies, such as the British pound and the French franc, were in turn pegged to the dollar, making the dollar the world's official reserve currency. Under the Bretton Woods system, foreign governments could retrieve gold bullion they had sent to the United States during the war by exchanging dollars for gold at the relevant fixed exchange rate. But enabling every major country to exchange dollars for American-held gold only worked so long as the U.S. government was fiscally and monetarily responsible. By the late 1960s, it was neither. Someone needed to pay the steep bills for Lyndon Johnson's "guns and butter" policies — the Vietnam War and the Great Society, respectively — so the Federal Reserve began printing currency to meet those obligations. Johnson's successor, Richard Nixon, also pressured the Fed to flood the economy with money as a form of economic stimulus. From 1961 to 1971, the Fed nearly doubled the circulating supply of dollars. "In the first six months of 1971," noted the late Nobel laureate Robert Mundell, "monetary expansion was more rapid than in any comparable period in a quarter century." That year, foreign central banks and governments held $64 billion worth of claims on the $10 billion of gold still held by the United States. It wasn't long before the world took notice of the shortage. In a classic bank-run scenario, anxious European governments began racing to redeem dollars for American-held gold before the Fed ran out. In July 1971, Switzerland withdrew $50 million in bullion from U.S. vaults. In August, France sent a destroyer to escort $191 million of its gold back from the New York Federal Reserve. Britain put in a request for $3 billion shortly thereafter. Finally, that same month, Nixon secretly gathered a small group of trusted advisors at Camp David to devise a plan to avoid the imminent wipeout of U.S. gold vaults and the subsequent collapse of the international economy. There, they settled on a radical course of action. On the evening of August 15th, in a televised address to the nation, Nixon announced his intention to order a 90-day freeze on all prices and wages throughout the country, a 10% tariff on all imported goods, and a suspension — eventually, a permanent one — of the right of foreign governments to exchange their dollars for U.S. gold. Knowing that his unilateral abrogation of agreements involving dozens of countries would come as a shock to world leaders and the American people, Nixon labored to re-assure viewers that the change would not unsettle global markets. He promised viewers that "the effect of this action...will be to stabilize the dollar," and that the "dollar will be worth just as much tomorrow as it is today." The next day, the stock market rose — to everyone's relief. The editors of the New York Times "unhesitatingly applaud[ed] the boldness" of Nixon's move. Economic growth remained strong for months after the shift, and the following year Nixon was re-elected in a landslide, winning 49 states in the Electoral College and 61% of the popular vote. Nixon's short-term success was a mirage, however. After the election, the president lifted the wage and price controls, and inflation returned with a vengeance. By December 1980, the dollar had lost more than half the purchasing power it had back in June 1971 on a consumer-price basis. In relation to gold, the price of the dollar collapsed — from 1/35th to 1/627th of a troy ounce. Though Jimmy Carter is often blamed for the Great Inflation of the late 1970s, "the truth," as former National Economic Council director Larry Kudlow has argued, "is that the president who unleashed double-digit inflation was Richard Nixon." In 1981, Federal Reserve chairman Paul Volcker raised the federal-funds rate — a key interest-rate benchmark — to 19%. A deep recession ensued, but inflation ceased, and the U.S. embarked on a multi-decade period of robust growth, low unemployment, and low consumer-price inflation. As a result, few are nostalgic for the days of Bretton Woods or the gold-standard era. The view of today's economic establishment is that the present system works well, that gold standards are inherently unstable, and that advocates of gold's return are eccentric cranks. Nevertheless, it's important to remember that the post-Bretton Woods era — in which the supply of government currencies can be expanded or contracted by fiat — is only 50 years old. To those of us born after 1971, it might appear as if there is nothing abnormal about the way money works today. When viewed through the lens of human history, however, free-floating global exchange rates remain an unprecedented economic experiment — with one critical flaw. An intrinsic attribute of the post-Bretton Woods system is that it enables deficit spending. Under a gold standard or peg, countries are unable to run large budget deficits without draining their gold reserves. Nixon's 1971 crisis is far from the only example; deficit spending during and after World War I, for instance, caused economic dislocation in numerous European countries — especially Germany — because governments needed to use their shrinking gold reserves to finance their war debts. These days, by contrast, it is relatively easy for the United States to run chronic deficits. Today's federal debt of almost $29 trillion — up from $10 trillion in 2008 and $2.4 trillion in 1984 — is financed in part by U.S. Treasury bills, notes, and bonds, on which lenders to the United States collect a form of interest. Yields on Treasury bonds are denominated in dollars, but since dollars are no longer redeemable for gold, these bonds are backed solely by the "full faith and credit of the United States." Interest rates on U.S. Treasury bonds have remained low, which many people take to mean that the creditworthiness of the United States remains healthy. Just as creditworthy consumers enjoy lower interest rates on their mortgages and credit cards, creditworthy countries typically enjoy lower rates on the bonds they issue. Consequently, the post-Great Recession era of low inflation and near-zero interest rates led many on the left to argue that the old rules no longer apply, and that concerns regarding deficits are obsolete. Supporters of this view point to the massive stimulus packages passed under presidents Donald Trump and Joe Biden  that, in total, increased the federal deficit and debt by $4.6 trillion without affecting the government's ability to borrow. The extreme version of the new "deficits don't matter" narrative comes from the advocates of what has come to be called Modern Monetary Theory (MMT), who claim that because the United States controls its own currency, the federal government has infinite power to increase deficits and the debt without consequence. Though most mainstream economists dismiss MMT as unworkable and even dangerous, policymakers appear to be legislating with MMT's assumptions in mind. A new generation of Democratic economic advisors has pushed President Biden to propose an additional $3.5 trillion in spending, on top of the $4.6 trillion spent on Covid-19 relief and the $1 trillion bipartisan infrastructure bill. These Democrats, along with a new breed of populist Republicans, dismiss the concerns of older economists who fear that exploding deficits risk a return to the economy of the 1970s, complete with high inflation, high interest rates, and high unemployment. But there are several reasons to believe that America's fiscal profligacy cannot go on forever. The most important reason is the unanimous judgment of history: In every country and in every era, runaway deficits and skyrocketing debt have ended in economic stagnation or ruin. Another reason has to do with the unusual confluence of events that has enabled the United States to finance its rising debts at such low interest rates over the past few decades — a confluence that Bitcoin may play a role in ending. DECLINING FAITH IN U.S. CREDIT To members of the financial community, U.S. Treasury bonds are considered "risk-free" assets. That is to say, while many investments entail risk — a company can go bankrupt, for example, thereby wiping out the value of its stock — Treasury bonds are backed by the full faith and credit of the United States. Since people believe the United States will not default on its obligations, lending money to the U.S. government — buying Treasury bonds that effectively pay the holder an interest rate — is considered a risk-free investment. The definition of Treasury bonds as "risk-free" is not merely by reputation, but also by regulation. Since 1988, the Switzerland-based Basel Committee on Banking Supervision has sponsored a series of accords among central bankers from financially significant countries. These accords were designed to create global standards for the capital held by banks such that they carry a sufficient proportion of low-risk and risk-free assets. The well-intentioned goal of these standards was to ensure that banks don't fail when markets go down, as they did in 2008. The current version of the Basel Accords, known as "Basel III," assigns zero risk to U.S. Treasury bonds. Under Basel III's formula, then, every major bank in the world is effectively rewarded for holding these bonds instead of other assets. This artificially inflates demand for the bonds and enables the United States to borrow at lower rates than other countries. The United States also benefits from the heft of its economy as well as the size of its debt. Since America is the world's most indebted country in absolute terms, the market for U.S. Treasury bonds is the largest and most liquid such market in the world. Liquid markets matter a great deal to major investors: A large financial institution or government with hundreds of billions (or more) of a given currency on its balance sheet cares about being able to buy and sell assets while minimizing the impact of such actions on the trading price. There are no alternative low-risk assets one can trade at the scale of Treasury bonds. The status of such bonds as risk-free assets — and in turn, America's ability to borrow the money necessary to fund its ballooning expenditures — depends on investors' confidence in America's creditworthiness. Unfortunately, the Federal Reserve's interference in the markets for Treasury bonds have obscured our ability to determine whether financial institutions view the U.S. fiscal situation with confidence. In the 1990s, Bill Clinton's advisors prioritized reducing the deficit, largely out of a conern that Treasury-bond "vigilantes" — investors who protest a government's expansionary fiscal or monetary policy by aggressively selling bonds, which drives up interest rates — would harm the economy. Their success in eliminating the primary deficit brought yields on the benchmark 10-year Treasury bond down from 8% to 4%. In Clinton's heyday, the Federal Reserve was limited in its ability to influence the 10-year Treasury interest rate. Its monetary interventions primarily targeted the federal-funds rate — the interest rate that banks charge each other on overnight transactions. But in 2002, Ben Bernanke advocated that the Fed "begin announcing explicit ceilings for yields on longer-maturity Treasury debt." This amounted to a schedule of interest-rate price controls. Since the 2008 financial crisis, the Federal Reserve has succeeded in wiping out bond vigilantes using a policy called "quantitative easing," whereby the Fed manipulates the price of Treasury bonds by buying and selling them on the open market. As a result, Treasury-bond yields are determined not by the free market, but by the Fed. The combined effect of these forces — the regulatory impetus for banks to own Treasury bonds, the liquidity advantage Treasury bonds have in the eyes of large financial institutions, and the Federal Reserve's manipulation of Treasury-bond market prices — means that interest rates on Treasury bonds no longer indicate the United States' creditworthiness (or lack thereof). Meanwhile, indications that investors are growing increasingly concerned about the U.S. fiscal and monetary picture — and are in turn assigning more risk to "risk-free" Treasury bonds — are on the rise. One such indicator is the decline in the share of Treasury bonds owned by outside investors. Between 2010 and 2020, the share of U.S. Treasury securities owned by foreign entities fell from 47% to 32%, while the share owned by the Fed more than doubled, from 9% to 22%. Put simply, foreign investors have been reducing their purchases of U.S. government debt, thereby forcing the Fed to increase its own bond purchases to make up the difference and prop up prices. Until and unless Congress reduces the trajectory of the federal debt, U.S. monetary policy has entered a vicious cycle from which there is no obvious escape. The rising debt requires the Treasury Department to issue an ever-greater quantity of Treasury bonds, but market demand for these bonds cannot keep up with their increasing supply. In an effort to avoid a spike in interest rates, the Fed will need to print new U.S. dollars to soak up the excess supply of Treasury bonds. The resultant monetary inflation will cause increases in consumer prices. Those who praise the Fed's dramatic expansion of the money supply argue that it has not affected consumer-price inflation. And at first glance, they appear to have a point. In January of 2008, the M2 money stock was roughly $7.5 trillion; by January 2020, M2 had more than doubled, to $15.4 trillion. As of July 2021, the total M2 sits at $20.5 trillion — nearly triple what it was just 13 years ago. Over that same period, U.S. GDP increased by only 50%. And yet, since 2000, the average rate of growth in the Consumer Price Index (CPI) for All Urban Consumers — a widely used inflation benchmark — has remained low, at about 2.25%. How can this be? The answer lies in the relationship between monetary inflation and price inflation, which has diverged over time. In 2008, the Federal Reserve began paying interest to banks that park their money with the Fed, reducing banks' incentive to lend that money out to the broader economy in ways that would drive price inflation. But the main reason for the divergence is that conventional measures like CPI do not accurately capture the way monetary inflation is affecting domestic prices. In a large, diverse country like the United States, different people and different industries experience price inflation in different ways. The fact that price inflation occurs earlier in certain sectors of the economy than in others was first described by the 18th-century Irish-French economist Richard Cantillon. In his 1730 "Essay on the Nature of Commerce in General," Cantillon noted that when governments increase the supply of money, those who receive the money first gain the most benefit from it — at the expense of those to whom it flows last. In the 20th century, Friedrich Hayek built on Cantillon's thinking, observing that "the real harm [of monetary inflation] is due to the differential effect on different prices, which change successively in a very irregular order and to a very different degree, so that as a result the whole structure of relative prices becomes distorted and misguides production into wrong directions." In today's context, the direct beneficiaries of newly printed money are those who need it the least. New dollars are sent to banks, which in turn lend them to the most creditworthy entities: investment funds, corporations, and wealthy individuals. As a result, the most profound price impact of U.S. monetary inflation has been on the kinds of assets that financial institutions and wealthy people purchase — stocks, bonds, real estate, venture capital, and the like. This is why the price-to-earnings ratio of S&P 500 companies is at record highs, why risky start-ups with long-shot ideas are attracting $100 million venture rounds, and why the median home sales price has jumped 24% in a single year — the biggest one-year increase of the 21st century. Meanwhile, low- and middle-income earners are facing rising prices without attendant increases in their wages. If asset inflation persists while the costs of housing and health care continue to grow beyond the reach of ordinary people, the legitimacy of our market economy will be put on trial. THE RETURN OF SOUND MONEY Satoshi Nakamoto, the pseudonymous creator of Bitcoin, was acutely concerned with the increasing abundance of U.S. dollars and other fiat currencies in the early 2000s. In 2009 he wrote, "the root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." Bitcoin was created in anticipation of the looming fiscal and monetary crisis in the United States and around the world. To understand how bitcoin functions alongside fiat currency, it's helpful to examine the monetary philosophy of the Austrian School of economics, whose leading figures — especially Hayek and Ludwig von Mises — greatly influenced Nakamoto and the early developers of Bitcoin. The economists of the Austrian School were staunch advocates of what Mises called "the principle of sound money" — that is, of keeping the supply of money as constant and predictable as possible. In The Theory of Money and Credit, first published in 1912, Mises argued that sound money serves as "an instrument for the protection of civil liberties against despotic inroads on the part of governments" that belongs "in the same class with political constitutions and bills of rights." Just as bills of rights were a "reaction against arbitrary rule and the nonobservance of old customs by kings," he wrote, "the postulate of sound money was first brought up as a response to the princely practice of debasing the coinage." Mises believed that inflation was just as much a violation of someone's property rights as arbitrarily taking away his land. After all, in both cases, the government acquires economic value at the expense of the citizen. Since monetary inflation creates a sugar high of short-term stimulus, politicians interested in re-election will always have an incentive to expand the money supply. But doing so comes at the expense of long-term declines in consumer purchasing power. For Mises, the best way to address such a threat is to avoid fiat currencies altogether. And in his estimation, the best sound-money alternative to fiat currency is gold. "The excellence of the gold standard," Mises wrote, is "that it renders the determination of the monetary unit's purchasing power independent of the policies of governments and political parties." In other words, gold's primary virtue is that its supply increases slowly and steadily, and cannot be manipulated by politicians. It may appear as if gold was an arbitrary choice as the basis for currency, but gold has a combination of qualities that make it ideal for storing and exchanging value. First, it is verifiably unforgeable. Gold is very dense, which means that counterfeit gold is easy to identify — one simply has to weigh it. Second, gold is divisible. Unlike, say, cattle, gold can be delivered in fractional units both small and large, enabling precise pricing. Third, gold is durable. Unlike commodities that rot or evaporate over time, gold can be stored for centuries without degradation. Fourth, gold is fungible: An ounce of gold in Asia is worth the same as an ounce of gold in Europe. These four qualities are shared by most modern currencies. Gold's fifth quality is more distinct, however, as well as more relevant to its role as an instrument of sound money: scarcity. While people have used beads, seashells, and other commodities as primitive forms of money, those items are fairly easy to acquire and introduce into circulation. While gold's supply does gradually increase as more is extracted from the ground, the rate of extraction relative to the total above-ground supply is low: At current rates, it would take approximately 66 years to double the amount of gold in circulation. In comparison, the supply of U.S. dollars has more than doubled over just the last decade. When the Austrian-influenced designers of bitcoin set out to create a more reliable currency, they tried to replicate all of these qualities. Like gold, bitcoin is divisible, unforgeable, divisible, durable, and fungible. But bitcoin also improves upon gold as a form of sound money in several important ways. First, bitcoin is rarer than gold. Though gold's supply increases slowly, it does increase. The global supply of bitcoin, by contrast, is fixed at 21 million and cannot be feasibly altered. Second, bitcoin is far more portable than gold. Transferring physical gold from one place to another is an onerous process, especially in large quantities. Bitcoin, on the other hand, can be transmitted in any quantity as quickly as an email. Third, bitcoin is more secure than gold. A single bitcoin address carried on a USB thumb drive could theoretically hold as much value as the U.S. Treasury holds in gold bars — without the need for costly militarized facilities like Fort Knox to keep it safe. In fact, if stored using best practices, the cost of securing bitcoin from hackers or assailants is far lower than the cost of securing gold. Fourth, bitcoin is a technology. This means that, as developers identify ways to augment its functionality without compromising its core attributes, they can gradually improve the currency over time. Fifth, and finally, bitcoin cannot be censored. This past year, the Chinese government shut down Hong Kong's pro-democracy Apple Daily newspaper not by censoring its content, but by ordering banks not to do business with the publication, thereby preventing Apple Daily from paying its suppliers or employees. Those who claim the same couldn't happen here need only look to the Obama administration's Operation Choke Point, a regulatory attempt to prevent banks from doing business with legitimate entities like gun manufacturers and payday lenders — firms the administration disfavored. In contrast, so long as the transmitting party has access to the internet, no entity can prevent a bitcoin transaction from taking place. This combination of fixed supply, portability, security, improvability, and censorship resistance epitomizes Nakamoto's breakthrough. Hayek, in The Denationalisation of Money, foresaw just such a separation of money and state. "I believe we can do much better than gold ever made possible," he wrote. "Governments cannot do better. Free doubt would." While Hayek and Nakamoto hoped private currencies would directly compete with the U.S. dollar and other fiat currencies, bitcoin does not have to replace everyday cash transactions to transform global finance. Few people may pay for their morning coffee with bitcoin, but it is also rare for people to purchase coffee with Treasury bonds or gold bars. Bitcoin is competing not with cash, but with these latter two assets, to become the world's premier long-term store of wealth. The primary problem bitcoin was invented to address — the devaluation of fiat currency through reckless spending and borrowing — is already upon us. If Biden's $3.5 trillion spending plan passes Congress, the national debt will rise further. Someone will have to buy the Treasury bonds to enable that spending. Yet as discussed above, investors are souring on Treasurys. On June 30, 2021, the interest rate for the benchmark 10-year Treasury bond was 1.45%. Even at the Federal Reserve's target inflation rate of 2%, under these conditions, Treasury-bond holders are guaranteed to lose money in inflation-adjusted terms. One critic of the Fed's policies, MicroStrategy CEO Michael Saylor, compares the value of today's Treasury bonds to a "melting ice cube." Last May, Ray Dalio, founder of Bridgewater Associates and a former bitcoin skeptic, said "[p]ersonally, I'd rather have bitcoin than a [Treasury] bond." If hedge funds, banks, and foreign governments continue to decelerate their Treasury purchases, even by a relatively small percentage, the decrease in demand could send U.S. bond prices plummeting. If that happens, the Fed will be faced with the two unpalatable options described earlier: allowing interest rates to rise, or further inflating the money supply. The political pressure to choose the latter would likely be irresistible. But doing so would decrease inflation-adjusted returns on Treasury bonds, driving more investors away from Treasurys and into superior stores of value, such as bitcoin. In turn, decreased market interest in Treasurys would force the Fed to purchase more such bonds to suppress interest rates. AMERICA'S BITCOIN OPPORTUNITY From an American perspective, it would be ideal for U.S. Treasury bonds to remain the world's preferred reserve asset for the foreseeable future. But the tens of trillions of dollars in debt that the United States has accumulated since 1971 — and the tens of trillions to come — has made that outcome unlikely. It is understandably difficult for most of us to imagine a monetary world aside from the one in which we've lived for generations. After all, the U.S. dollar has served as the world's leading reserve currency since 1919, when Britain was forced off the gold standard. There are only a handful of people living who might recall what the world was like before then. Nevertheless, change is coming. Over the next 10 to 20 years, as bitcoin's liquidity increases and the United States becomes less creditworthy, financial institutions and foreign governments alike may replace an increasing portion of their Treasury-bond holdings with bitcoin and other forms of sound money. With asset values reaching bubble proportions and no end to federal spending in sight, it's critical for the United States to begin planning for this possibility now. Unfortunately, the instinct of some federal policymakers will be to do what countries like Argentina have done in similar circumstances: impose capital controls that restrict the ability of Americans to exchange dollars for bitcoin in an attempt to prevent the digital currency from competing with Treasurys. Yet just as Nixon's 1971 closure of the gold window led to a rapid flight from the dollar, imposing restrictions on the exchange of bitcoin for dollars would confirm to the world that the United States no longer believes in the competitiveness of its currency, accelerating the flight from Treasury bonds and undermining America's ability to borrow. A bitcoin crackdown would also be a massive strategic mistake, given that Americans are positioned to benefit enormously from bitcoin-related ventures and decentralized finance more generally. Around 50 million Americans own bitcoin today, and it's likely that Americans and U.S. institutions own a plurality, if not the majority, of the bitcoin in circulation — a sum worth hundreds of billions of dollars. This is one area where China simply cannot compete with the United States, since Bitcoin's open financial architecture is fundamentally incompatible with Beijing's centralized, authoritarian model. In the absence of major entitlement reform, well-intentioned efforts to make Treasury bonds great again are likely doomed. Instead of restricting bitcoin in a desperate attempt to forestall the inevitable, federal policymakers would do well to embrace the role of bitcoin as a geopolitically neutral reserve asset; work to ensure that the United States continues to lead the world in accumulating bitcoin-based wealth, jobs, and innovations; and ensure that Americans can continue to use bitcoin to protect themselves against government-driven inflation. To begin such an initiative, federal regulators should make it easier to operate cryptocurrency-related ventures on American shores. As things stand, too many of these firms are based abroad and closed off to American investors simply because outdated U.S. regulatory agencies — the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, the Treasury Department, and others — have been unwilling to provide clarity as to the legal standing of digital assets. For example, the SEC has barred Coinbase from paying its customers' interest on their holdings while refusing to specify which laws Coinbase has violated. Similarly, the agency has refused to approve Bitcoin exchange-traded funds (ETFs) without specifying standards for a valid ETF application. Congress should implement SEC Commissioner Hester Peirce's recommendations for a three-year regulatory grace period for decentralized digital tokens and assign to a new agency the role of regulating digital assets. Second, Congress should clarify poorly worded legislation tied to a recent bipartisan infrastructure bill that would drive many high-value crypto businesses, like bitcoin-mining operations, overseas. Third, the Treasury Department should consider replacing a fraction of its gold holdings — say, 10% — with bitcoin. This move would pose little risk to the department's overall balance sheet, send a positive signal to the innovative blockchain sector, and enable the United States to benefit from bitcoin's growth. If the value of bitcoin continues to appreciate strongly against gold and the U.S. dollar, such a move would help shore up the Treasury and decrease the need for monetary inflation. Finally, when it comes to digital versions of the U.S. dollar, policymakers should follow the advice of Friedrich Hayek, not Xi Jinping. In an effort to increase government control over its monetary system, China is preparing to unveil a blockchain-based digital yuan at the 2022 Beijing Winter Olympics. Jerome Powell and other Western central bankers have expressed envy for China's initiative and fret about being left behind. But Americans should strongly oppose the development of a central-bank digital currency (CBDC). Such a currency could wipe out local banks by making traditional savings and checking accounts obsolete. What's more, a CBDC-empowered Fed would accumulate a mountain of precise information about every consumer's financial transactions. Not only would this represent a grave threat to Americans' privacy and economic freedom, it would create a massive target for hackers and equip the government with the kind of censorship powers that would make Operation Choke Point look like child's play. Congress should ensure that the Federal Reserve never has the authority to issue a virtual currency. Instead, it should instruct regulators to integrate private-sector, dollar-pegged "stablecoins" — like Tether and USD Coin — into the framework we use for money-market funds and other cash-like instruments that are ubiquitous in the financial sector. PLANNING FOR THE WORST In the best-case scenario, the rise of bitcoin will motivate the United States to mend its fiscal ways. Much as Congress lowered corporate-tax rates in 2017 to reduce the incentive for U.S. companies to relocate abroad, bitcoin-driven monetary competition could push American policymakers to tackle the unsustainable growth of federal spending. While we can hope for such a scenario, we must plan for a world in which Congress continues to neglect its essential duty as a steward of Americans' wealth. The good news is that the American people are no longer destined to go down with the Fed's sinking ship. In 1971, when Washington debased the value of the dollar, Americans had no real recourse. Today, through bitcoin, they do. Bitcoin enables ordinary Americans to protect their savings from the federal government's mismanagement. It can improve the financial security of those most vulnerable to rising prices, such as hourly wage earners and retirees on fixed incomes. And it can increase the prosperity of younger Americans who will most acutely face the consequences of the country's runaway debt. Bitcoin represents an enormous strategic opportunity for Americans and the United States as a whole. With the right legal infrastructure, the currency and its underlying technology can become the next great driver of American growth. While the 21st-century monetary order will look very different from that of the 20th, bitcoin can help America maintain its economic leadership for decades to come. Tyler Durden Tue, 10/19/2021 - 23:25.....»»

Category: worldSource: nytOct 20th, 2021

Herb Greenberg: Despite A Hot IPO, Think Twice Before Rushing Into This Growth Story

Empire Financial Daily newletter in which Herb Greenberg discusses investing in Dutch Bros Inc (NYSE:BROS). Q3 2021 hedge fund letters, conferences and more One of my favorite interviews – many years ago – was with Gordon Segal, founder of home décor retailer Crate & Barrel… Q3 2021 hedge fund letters, conferences and more We discussed […] Empire Financial Daily newletter in which Herb Greenberg discusses investing in Dutch Bros Inc (NYSE:BROS). if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more One of my favorite interviews – many years ago – was with Gordon Segal, founder of home décor retailer Crate & Barrel... if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more We discussed why he never got tempted by the riches offered by investment bankers to take Crate & Barrel public. Segal hated, just hated, the thought of putting up stores for the sake of meeting Wall Street's growth forecasts. Instead, he preferred opening new stores when he could find the right location, then staffing them with current employees. The truth is, once a retailer or restaurant goes public, especially if it has a seemingly hot concept, the goal is fast growth. That means slapping up stores as fast as possible – and wherever possible – even if it's a terrible location. As veteran restaurant analyst John Gordon of Pacific Management Consulting put it, "This is the trouble every cool brand gets into." And with restaurants, especially, the eyes of management are often much bigger than their stomachs... Buca di Beppo A perfect example is Buca di Beppo, which had grand plans to dot the U.S. with 450 cavernous family-style Italian restaurants. As I wrote in Fortune magazine in 2001, when the company had just 68 stores in 21 states... Good luck! Says one former brokerage industry analyst who now works as a hedge fund manager: "I would be very careful of any management team that thinks it can build a 'national brand.' It just will not happen." And it didn't... Buca di Beppo's stock wound up collapsing until it was acquired in 2008 by Planet Hollywood. Even today, the company's website says it has "over 100 locations worldwide." (Translation: If it does, it's not much more than that.) The truth is that some concepts don't travel well to other geographies... or they aren't economically feasible for rapid or even broad expansion... or, if they're publicly traded, they simply can't remotely get close to the forecasted numbers they used to lure investors. Dutch Bros Enter the newly public coffee chain Dutch Bros Inc (NYSE:BROS)... With 471 drive-thru locations in 11 states – almost all west of the Rockies – the company's initial public offering ("IPO") last month caused lots of chatter. Born out of a coffee cart in Oregon, Dutch Bros rapidly created a cult-like following for its coffee – almost In-N-Out-like. The company also separated itself from competitors with mostly cold, high-octane drinks. Roughly a quarter of its sales, in fact, come from an energy drink that has no caffeine. Execution has been beyond reproach. The real sizzle in the story, though, is what the company says in its IPO filing about its future growth: That it believes it can balloon to 4,000 units. That got Wall Street's attention. But some big questions remain... Just how realistic is that number? And just as important, how long will it take to get there? After all, much like Crate & Barrel, Dutch Bros has prided itself on only opening stores staffed by existing employees. In a story, last June in Restaurant Business, Dutch Bros President Joth Ricci told the magazine's Jonathan Maze... We make sure the culture and the way we do things [are] protected. We only promote from within related to how we expand our culture and our business. That may be easier said than done now that Dutch Bros is a public company. As John Gordon says... Now they've got the burden of growing responsibly what they want to do versus the natural pressures that come with being publicly traded and pressures of quarterly earnings. But for Dutch Bros, there's something else that may give investors pause... Unlike most restaurants – or even coffee chains – Dutch Bros is drive-thru only. While that's good from the cost of the buildout and revenue per square foot, it's terrible for finding locations... especially post-pandemic and especially in crowded, well-established markets. As Gordon says... Demand for drive-thrus is great... After [the] pandemic, they became the golden property and will remain the golden property because for those afraid to get out of the car it became the ultimate convenience. Therein lies what quite possibly could be a problem for Dutch Bros... According to Gordon... Everyone realizes your fighting the likes of Starbucks (SBUX) and Dunkin' Donuts... They're all out for exactly the same kind of site – either conversion or new unit sites that Dutch Bros is. And it doesn't matter that the competition might not be as cool as Dutch Bros. This isn't about the coffee, the food, or even the product... The only thing that matters is the general lack of viable drive-thru locations, both new-builds and existing ones. Gordon put it this way... It's very difficult to get sites right now... I'm working for a huge international QSR [quick service restaurant] franchisor that has me looking for drive-thru sites. I will tell you... for one of their brands, it is beyond impossible to find drive-thrus. Given how hard it is – and to show what Dutch Bros is up against – Gordon says he and his client think it will take more than a year to find the right spots. As one friend in the coffee business put it to me... There aren't many options and Starbucks is really big on going that route. Landlords don't know much about coffee, so a lot of them would take Starbucks because of the name. Plus, Starbucks can pay more. That also doesn't bode well for part of the growth story... that Dutch Bros has yet to fully tap Southern California, especially Los Angeles and San Diego. As Gordon says... In certain dense states, California being one, it's going to be an immense challenge... [In other populated parts of California] city zoning makes it very hard to construct a new unit because of traffic and noise. There's something else to consider... Even if the company can build 4,000 units... how long will it take? In a recent report from investment bank Piper Sandler, I saw some impressive-looking stats... However, the length of time to hit 4,000 units is one thing (surprise, surprise!) that Dutch Bros doesn't say. Piper Sandler tried to take a stab at it, though... Based on "theoretical" performance, analyst Nicole Regan said her best guess is that "it may take as many as 12 years for this ultimate unit count to materialize." Twelve years? Forecasts based that far out, in my opinion, are generally meaningless. Besides, it doesn't really matter because from here to there, the only thing that matters for Dutch Bros (or any other fast-growing retailer or restaurant) is growth relative to expectations. That goes for revenue, average unit volume, and (key in the mix) the number of units. If Dutch Bros can't find enough good drive-thru locations, all bets are off. And while analyst after analyst in recent days has put a positive spin on Dutch Bros in their post-IPO initiation reports, it'll take a few quarters of earnings – especially guidance and management's commentary – for the real story to start emerging. And that doesn't even get into the question of whether Dutch Bros will play east of the Rockies. Two other points to consider... If its stock ever craters – or even if it doesn't – if Dutch Bros shows it has legs, it could wind up a potential acquisition target for a mature chain like Starbucks or Dunkin' Donuts. That is, of course, unless it proves to be a fad. Remember what I said earlier about how nearly a quarter of Dutch Bros' sales come from one product – a non-caffeine energy drink? What's to keep the company from striking a distribution partnership with a consumer packaged goods ("CPG") firm for a canned version – much like Starbucks does... or like California Pizza Kitchen does with its pizzas? That's a long-winded way of saying that while Dutch Bros faces a massive hurdle in finding drive-thru locations, there are levers that could bail out investors. The short term could be rocky... but for investors with a time horizon of longer than "immediate gratification," it's definitely worth watching. Goodrx And Traeger In the mailbag, reader responses about Medicare, Goodrx Holdings Inc (NASDAQ:GDRX), and Traeger Inc (NYSE:COOK)... As always, feel free to reach out via e-mail at And if you're on Twitter, feel free to follow me there at @herbgreenberg. My DMs are open. I look forward to hearing from you. "When comparing the pricing of Plan D plans vs. GoodRx, don't forget to add in the amount Social Security charges you for the privilege of using a Plan D. There is also GoodRx Gold for even better pricing. I use Kroger's (KR) drug Savings plan, which is run by GoodRx. Two years ago, I quit Medicare Plan D and (was) self-insured. I can't figure out how GoodRx makes any money? Could it be that the drug store gives them a rebate for the store selling at a reduced price?" – George C. Herb comment: George, you quit Medicare Part D? That's a bold move... but I'm glad to hear the Kroger plan is working. Turning to the way GoodRx makes money, as my colleague Enrique Abeyta wrote in the May issue of his Empire Elite Growth newsletter... GoodRx pays the PBMs [pharmacy benefit managers] a fee to get access to discounted drugs. That price includes the cost to manufacturers for those drugs, as well as what they pay for the drugstore to make their margin. The markup from those inputs becomes GoodRx's revenue. (Subscribers can read the full issue here... And if you aren't a subscriber, you can click here to find out how to gain instant access.) "Herb... Don't forget to check for other discount drug prices beyond GoodRx. They are not always the least expensive. For example, I get [a] continuous glucose monitor. In my area, GoodRx has it at around $128 for two from CVS Health Corp (NYSE:CVS) with about $117 from Giant Pharmacy or $120 from my local pharmacy. A different discount card which seems to go by has them for $92 at CVS rather than $128 (same CVS location), but in searching around, I found another card that has them for $77 at a CVS in Target (TGT)... Still CVS, but it has to be one in Target. If you get them at a regular CVS, it is more. Makes you wonder even more how much they really cost. Medicare doesn't cover them yet, but when it no doubt does it will pay more than this. Very strange and dysfunctional medical market in the USA. "Another thing that is also odd is the many drugs are lower priced for commercial insurance patients only. If you are on Medicare they are not discounted. I was taking one drug on a commercial insurance plan before my wife retired and it was a $5 co-pay each month. Under Medicare and Plan D, it was a $40 co-pay until the donut hole, then it was a $112 co-pay each month. GoodRx didn't help with this one as it was one of those advertised on TV. "And then there are the dental discount plans that you pay for rather than free that discount the dental cost by 40% or 50%. Be sure to look into those if you have to pay your own dental bills. I think GoodRx is going to expand to do that as well, but for now, I use the Aetna one." – Larry M. Herb comment: Thanks for the insightful comments, Larry. GoodRx definitely has competition, including in-store at the likes of CVS, when at point-of-sale the clerk might steer you to an even cheaper price. You know, the one that wasn't advertised but is offered because you showed a GoodRx coupon. Still, GoodRx probably has the single-best pricing platform, which is to its advantage. I think the one thing we can agree on is that when it comes to screw-ups, drug pricing in this country is at or near the top of the list! "So given what you've written, I assume you're no longer voting Republican right?" – Jack H. Herb comment: Hi Jack, I see the sarcasm there! Reality: I rarely discuss politics... But, for the record, I am and have been for years a registered independent. "Herb, your discussion regarding Traeger evoked some thoughts. We bought our first Traeger over 15 years ago when they were produced by a small company in Oregon. We have purchased seven more since then as we moved from one home to another and left ours for the lucky homebuyer. We even gave one to our parish priest for a home warming gift. We did buy one at a Costco and while the price was attractive the model was different than Traeger's own models and was 'bundled' with pellets, cover, etc., to make it seem like more of a bargain. "Why would they do this you asked. For people like you who haven't heard of Traeger and might never know of them! Costco has millions of members who shop regularly, and many of them will be introduced to the brand during their normal visits. Once someone is 'hooked on Traeger', few will move away from them. Meanwhile, Traeger sells their top-of-the-line 'Timberline' models at premium prices available only at select retailers who won't discount them. You should check out a Traeger... they're used to cook many dishes besides barbecue for which they are well known. My wife even bakes cakes in ours as well as recipes aimed at an oven! The Traeger imparts special flavors using different wood pellets, and temperatures are electronically controlled as precisely as our kitchen oven. We love our Traeger and use it several times a week! Best," – Robert O. Herb comment: Hi Robert, unfortunately, my overpriced Lynx is built-in, and everybody I know who uses a Traeger swears by it (though one friend who recently bought one was a little underwhelmed). I think the bigger issue here is why Traeger was discounting its grills at Costco Wholesale Corporation (NASDAQ:COST). It's one thing to be at Costco, which sometimes is a "tell" that a company is having problems pushing a product. I understand the difference with Traeger and its Costco relationship. But discounting at Costco – with not only special sales but even deeper-discounted roadshows – is a red flag. Of course, so was Starbucks opening up stores across the street from one another, and you see how that turned out! Regards, Herb Greenberg Updated on Oct 18, 2021, 3:54 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 18th, 2021

Which War Is Beijing Preparing For?

Which War Is Beijing Preparing For? Op-Ed by James Gorrie via The Epoch Times (emphasis ours), Soldiers march to position during an anti-invasion drill on the beach during the annual Han Kuang military drill in Tainan, Taiwan, on Sept. 14, 2021. (Ann Wang/Reuters) It’s no secret that Beijing is preparing for war. One of the main reasons is China’s cratering economy. The recent collapse of the Evergrande real estate development firm is only the latest in a series of dire symptoms that are fueling rising domestic discontent. The $8 trillion debt crisis in the shadow economy—more than half of its GDP—is also looming large in China’s ability to keep its financial system afloat. An aging, less productive population, higher production costs, and fleeing foreign investment all result in falling GDP. China’s Power Has Peaked The reality is that China’s economic power is already declining. Sure, the statistics can be adjusted, but it doesn’t change reality. What’s more, this across-the-board economic decline is driving the Chinese Communist Party (CCP) to impose even more extreme, oppressive measures against its people and businesses. The CCP’s response only worsens economic performance and civil unrest. Concurrently, Beijing has been adjusting its internal arrangements for several years. For example, its National Defense Transportation Law went into effect on Jan. 1, 2017. The law restructured its legal framework, putting all commercial shipping under direct authority of the CCP. Externally, China’s deepening isolation from the world is clearly evident and underscores its ongoing decoupling from the global economy and the international norms of trade and diplomacy. This trend may well make a Taiwan invasion likely sooner than later, if only to divert attention from China’s domestic problems. Taiwanese domestically-built Indigenous Defense Fighters (IDF) take part in the live-fire, anti-landing Han Kuang military exercise in Taichung, Taiwan, on July 16, 2020. (Ann Wang/Reuters) Military and naval experts conclude that Beijing plans to use commercial transport ships to help transport up to 2 million soldiers in a Taiwan invasion. Recent news reports seem to confirm such a conclusion. China’s official press, the Global Times, all but acknowledges the inevitable, if not imminent, invasion of Taiwan. “China is prepared for the worst-case scenario—the US and its allies, including Japan, launch(ing) an all-out military intervention to interrupt China’s national reunification.” Clearly, war or the threat of war is on the horizon, and all the nations in the Asia-Pacific region know it. In response to China’s increasing aggressive posture, including the commercial shipping arrangement, Taiwan and other nations are adding more long-range anti-ship missiles. Japan, which for decades has maintained a pacifist foreign policy, has also made a massive shift in its thinking, linking Taiwan’s security to its own. The impact of a Chinese invasion of Taiwan wouldn’t be limited to just Taiwan. Should it occur, like Japan, it will be perceived by the United States and other nations as a strategic threat to their own national security. This is partially due to the fact that Taiwan provides more than 50 percent of the world’s semiconductors necessary for advanced data processing, automobiles, artificial intelligence, and other high technology. But an invasion would also threaten democratic nations in the region, as well as trade and international legal norms. More Trigger Points But Taiwan is not the only trigger point. China is also threatening the uninhabited Senkaku Islands in the East China Sea, which Japan considers its territory. They’re also claimed by China and Taiwan, and could become a flashpoint for war. The Biden administration has recently assured Japan’s new prime minister, Fumio Kishida, that the United States would defend the Senkaku Islands if China should attack. And as noted in an earlier article, the CCP has already put Australia on notice. Should Canberra acquire nuclear-powered submarines from the United States under the recent AUKUS military alliance, China would add Australia as a legitimate target for nuclear attack. A type 094 Jin-class nuclear submarine Long March 15 of the Chinese Navy participates in a naval parade in the sea near Qingdao, in eastern China’s Shandong Province on April 23, 2019. (Mark Schiefelnein/AFP via Getty Images) South Korea has expressed clear opposition to Beijing’s ambitions in Taiwan. In a joint statement with the United States, and for the first time, both nations committed to defend international rules and norms in the South China Sea and Taiwan Strait. The unusual directness of the message is an acknowledgement of the imminent threat China poses to Taiwan and the Asia-Pacific region. Further afield, China’s recent military skirmish with India in the Himalayan heights of the Galwan Valley has alerted New Delhi to the reality that China is seeking unambiguous hegemony over its neighbors, of which India is one. This has driven India to strategically align itself with the U.S.-led AUKUS alliance. Its recent participation in the Malabar joint naval exercises off the U.S. territory of Guam from Aug. 26 to 29 of this year sent a clear message to Beijing. The lynchpin to all of these arrangements is, of course, the United States. It still maintains a significant naval advantage over China. But what is less certain is the political will of the Biden administration to follow through on its military commitments. With the United States’ retreat from Afghanistan, the Biden administration is perceived as weak and more concerned with domestic economic and social issues than projecting American power to protect the international order. Around the world, confidence in American leadership is at an ebb. Beijing is certainly aware of these facts, and it may be influencing its strategy with respect to Taiwan and the region as a whole. Chinese leadership may have concluded that the Biden administration’s weakness poses a unique opportunity to test American resolve in the region. Such perceptions would help explain the new and greater threats to the United States that are coming out of Beijing. But Xi Jinping’s personal leadership and ownership of the CCP, coupled with China’s mounting domestic failures, are most certainly also contributing factors. China would prefer to avoid war—at least until it can match U.S. military might in the region. But one area that it does lead the United States is in hypersonic anti-ship missile technology. Rather than clashing with its neighbors, could the CCP be planning a strike on American naval forces to drive the United States from the region? If so, how would the United States react? How would the region react? Anything less than a full response by the United States to a Chinese attack would mean that the U.S.-led Asia-Pacific security alliance would immediately cease to exist. It would then likely be up to each nation to make their separate peace with Beijing—if that were even an option. That would suit the CCP just fine. Tyler Durden Tue, 10/12/2021 - 22:25.....»»

Category: blogSource: zerohedgeOct 13th, 2021

Luongo: Is Europe"s Entire "Energy Crisis" Manufactured?

Luongo: Is Europe's Entire "Energy Crisis" Manufactured? Authored by Tom Luongo via Gold, Goats, 'n Guns blog, The European Gas Crisis keeps hitting new high after new high as gas prices around the world go ballistic.   While this isn’t just a European problem, if you read the MSM, that’s all they seem to care about.   You know, it snows in Japan as well folks, and China. Prices keep skyrocketing in Europe because there is no shortage of idiocy at the top of the European power structure. The confluence of the pressurizing of Nordstream 2 with the release of the “Pandora Papers” and the beginnings of German coalition talks just after the beginning of Q4 should have everyone’s Spidey-Sense shutting down like your adrenals do after a long period of self-inflicted stress. And honestly, whose adrenals aren’t on the verge of collapse after eighteen months of ‘flatten the curve,’ ‘follow the science,’ and ‘just roll over to the Communism, already, you disgusting plebe!’ that we’ve been going through. I guess that’s yet another thing we have to try and factor into our analysis of what collapse is the most imminent? Because when you put this gas crisis in Europe into its proper context it should be clear where the battle lines are being drawn as the extreme pressure cooker of today’s geopolitical landscape forces everyone off the sidelines and into the fray. On the one hand we have natural gas prices in Europe approaching coffin corner. On the other we have Russia browning out gas deliveries to Europe. China is experiencing major energy shortages and the entirety of the coal delivery network around the world is buckling. These are facts. There are more I could list but let’s stay focused here. The thing that makes no sense, seemingly, is that no one has an answer why these facts exist in the first place. Because all anyone official ever wants to do is blame the sneaky Russians to avoid their own responsibility for this. Finally, after a couple of weeks of this howling, Russian President Vladimir Putin addressed the issue from their side. I suggest strongly you read his remarks carefully. Because in there you’ll find a couple of ‘facts’ which make this entire crisis in Europe seem like yet another staged ‘false flag’ for political gain. Ready? The two middle points are the ones the no one want to report on but are the key to the understanding of this. Europe is engaged in a game of idiotic brinksmanship with its people and the capital markets over gas supplies. They do this to construct a narrative and distort markets for political benefit. When the reality is that this entire ‘crisis’ is a manufactured one because of their unwillingness to bow to the forces their policies have unleashed. Gas prices in Europe are this way because of Europe’s own mistakes in trying to remake its economy (Putin Point #4). Moreover, Putin also urged Gazprom, as a gesture of good faith despite his misgivings, to ship gas through Ukraine even though it would be better to turn on other capacity. “Gazprom believes that it is economically more viable, it would even be more profitable to pay a fine to Ukraine, but to increase the volume of pumping through new systems precisely because of the circumstances that I mentioned – there is more pressure in the pipe, less CO2 emissions into the atmosphere. Everything is cheaper, around 3 billion a year. But I ask you not to do this,” the President said. Does this sound like the mustache-twirling tyrant that’s portrayed in the odious British, US and German media? Of course not. Now, I’m not accusing Putin of being an angel here or anything, he’s throwing scraps back to people who have put themselves in a position to starve and freeze to death, both literally and politically. The goal here is to highlight just how moronic the EU’s stance on energy has become, to finally to break up the logjam. He’s happy to see Gazprom (and possibly Rosneft if need be) sell all Europeans as much gas as it can supply and they demand, but only on terms that benefit everyone, supplier and demander. As I’ve talked about in previous blog posts, the EU thinks they have a monopsony on Russian gas and because of this can dictate terms to them. This is patently untrue, and Gazprom shifting around supplies for a few days here and there proves that point dramatically. Like Jay Powell draining the world of eurodollars with just five basis points, Putin and Gazprom can expose the the extent of Eurocrat mendacity with just a few days of slowing gas exports. That’s why this brinksmanship over gas supplies and electricity prices isn’t aimed at the Russians, who clearly have other customers for their gas, but with the people of Europe themselves and the capital markets all structured around one-sigma price volatility they are now extremely vulnerable even if things begin to return to normal. The Russian Bogey Man is simply the cover story for what is a much deeper and, frankly, much more disturbing game. So, while Zerohedge is correct about gas supply brown outs in Europe it’s only partly for reasons abundantly clear to even first-year geopolitical analysts: Flows dropped as Gazprom has booked only about a third of the gas transit capacity it was offered for October via the Yamal-Europe pipeline and no extra transit capacity via Ukraine. Gazprom declined to comment. It has repeatedly said it was supplying customers with gas in full compliance with existing contracts and said additional supplies could be provided once the newly built Nord Stream 2 gas pipeline was launched. Ball. Court. Germany. Yes, Germany needs Nordstream 2. Hell Europe needs Nordstream 3 if these Davos ninnies are wrong about Climate Change, which they are. Germany is the country caught in the middle of this titanic battle for the future of the world and Davos is the group creating this false flag to force a shift in sentiment negatively towards Russia. That’s what’s driving this current crisis, one that, I think, is now threatening the future of the European Union itself. If those are the stakes, then eventually someone will finally do the right thing. Putin just offered the smallest of olive branches. Now let’s see if the European Commission has three collective brain cells to rub together and figure out how to save face (and their backsides). Beating up and demeaning your neighbor is not a winning strategy, nor is it a path to lower prices and stable markets. At some point they, the Russians, realize that the situation is exactly what it looks like from the outside, war. And, in this case the Russians under Putin are finally treating the EU commissars as enemy combatants because that’s who they are. That’s why his comments were structured to put the onus of the crisis back on Europe’s leadership rather than blaming the people keeping the lights on in the first place. Whenever things like this happen Capitalism is always blamed. But, it’s always Commie vandals like the EU Commission who created the problem, either deliberately with dumb things like the Third Gas Directive or malinvestment of capital which leaves the world vulnerable to a hot summer in Asia. And this is the essential point no one wants to confront. The EU picked this fight purely for political purposes because they have an agenda — energy instability for political benefit — but it has come back to bite them in the ass. Because, as I said, the markets are so tight it takes only a small shift in sentiment to see the prices of things with inelastic demand, like energy, rise dramatically with a marginal shift in either supply, demand or, in this case, both. Russia doesn’t act this ‘by the book’ at this moment in time without a plan. Treating the EU like the enemies they are is the strategic play. Whining about it in the media only accentuates their weakness and lack of leverage. My friends at are positively despondent because they see this power play for how it affects Italy, which is that it will carve the country up into pieces over divergent needs for inflation and deflation between it and Germany since one of these two countries need to exit the Euro-zone. There’s no way this massive ‘drop’ in Russian supplies to the EU occurs without a longer-term strategic plan by the Russians.  Putin has made it clear he is fully fed up with EU shenanigans and this is the time for him to put the most pressure imaginable on Brussels to break the EU into tiny pieces. How?  It’s again, all about Germany.   When Nordstream 2 was announced and I was writing Gold Stock Advisor for Newsmax in 2013 I talked then about how the difference between how gold was accounted for between the ECB and the Fed.  That put Germany squarely in the middle between the U.S. on one side and Russia on the other. Russia and China still hadn’t signed the big deal for the Power of Siberia pipeline at the time. They are now working on Power of Siberia 2, which will open up the massive mineral deposits in Mongolia.  So, even then, in my naïve way of seeing the world then as a first-year geopolitical analyst, I understood that Russia’s foreign policy had to be focused on getting Germany to side with them versus the U.S. The political establishment in Germany was never going to let that happen because under Obama. Davos was running the operation to cleave Ukraine from Russia.  To date, both have been partially successful.  Both Ukraine and Germany are being torn apart from within as domestic leadership bows to internationals forces forcing them to pursue policies which go completely against their countries’ wishes and best interests. So, now, fast forward to today.  The day after the German elections brings a mess but with a highly likely outcome that the SPD will ally with the Greens and the FDP. With Christian Lidner (FDP) as Finance Minister (at least temporarily) we have a German government at war with itself. As Alex Mercouris brought up after I left the chat with Crypto Rich last week, the Greens are fracturing over the Russia issue.  Part of them want a restoration of good Russian relations, the other are neocon/Davos infiltrators trying to constantly move the goalposts on both Climate Change and geopolitics. The SPD are pure Davos scum at this point so expect nothing good from them.  This is why I think Putin ‘shut off the taps’ the day after the election.  Like everyone else, he can see what Davos is doing and doesn’t like it.  So, in order for him to make his point he does exactly what he should, stop trading with those who have unofficially declared war on Russia and push the political scene in Germany to a breaking point. Because here’s where this goes.  Germany needs to either control the purse strings of the EU or it needs to leave the euro-zone and be independent of the sinking ship.  Putin realizes that the best way to achieve this is to pour gasoline on a raging firestorm in the energy markets (oh, the humanity of the puns!) and remind German voters just who is truly responsible for their €2000/month electricity bills. It’s not Putin.  It’s Berlin.  So, Berlin needs to sign off on Nordstream 2 and then ram it down the EU Commission’s throat.  And they better do it soon because Winter is Coming, after all. And they just voted for more of this while Merkel, who has been the biggest obstacle to AfD’s inclusion in any government, is leaving the scene.  The CDU leadership got whacked across the board.  Most of the big names will not be in the Bundestag this time around, so the party will be doing a lot of self-reflection. Inflation of the type Putin is ‘forcing’ on Europeans today is the type a country only recovers from with a political inversion.  This is why today we’re seeing surprise rate hikes from Poland, for example. It’s why Serbia is begging Russia to increase gas supplies there and Hungary signed a 15-year deal to secure its energy future. While there is no appetite for a political inversion in Germany today after last week’s vote, there will be in about 3 months if coalition talks stall. Because the ECB under Christine Lagarde cannot raise rates but is powerless to stop them rising ultimately if the market senses that there is no political leadership capable of reining it in. That ship sailed a few months ago after the Fed called Lagarde’s hawkish bluff and actively drained more than $1 trillion from overseas dollar markets and just increased the capacity to drain even more, without tapering QE. Now let’s go back to the Fed and Wall St.  If there is a real backlash within some areas of the U.S. ‘big money’ against Davos which is showing up as Fed monetary policy, per my consistent analysis of the situation and events playing out to support it, then they are tacitly coordinating with Putin to give Germany what it wants, an excuse to leave the euro and conduct independent trade and energy policy.   Think about it.  On the one hand the Fed is drying up dollars.  On the other Putin is spiking energy prices making it impossible for Germany to fight inflation within the EU.  On the third hand, China is cracking down on property speculation domestically, kicking out the foreign NGOs and reminding foreign investors that the rules in China are not the same as they are in the West. You can and will lose all your money if you invest behind the Great Wall, as so many Evergrande bondholders just found out. Now let’s square the entire circle. If Europe’s energy crisis is a constructed false flag event to spook capital, encourage speculators and effect political change, then can’t you make the same arguments for the concurrent fight on Capitol Hill regarding the Democrats, the debt ceiling and the spending bills? Senate Majority Leader Mitch McConnell has been adamant that the Democrats do not need any help in passing a debt ceiling resolution. They can do it any time they want to. But, the Democrats won’t do this? Why? They are manufacturing a narrative that there is crisis on the horizon — default on U.S. bond payments. This is the one outcome no investor wants to contemplate. So, the Democrats, like the Europeans, are arguing against themselves in order to blackmail the world into giving them their cookie or they will hold their breath until they collapse global markets. Let me repeat. There is no debt ceiling crisis. There is no U.S. default crisis. There is only a bunch of Mafiosi on Capitol Hill doing what they’ve been told to do while purposefully scaring everyone into believing there is a crisis when none exists. Do I have to invoke a classic Who song to make my point? What’s the goal? Chaos and the continued undermining of faith in politics, capital markets, energy production and seizing supply chains as we approach the winter in the Northern Hemisphere where susceptibility to pesky things like the flu, the latest iteration of COVID-9/11 and blatant political bullshit swells like a boil on the back of a government bureaucrat blocking a permit for some basic, but eminently important thing. That Putin came out and told the world he’s ready to work with Europe to do his part alleviating the energy supply problems in Europe I’ve not heard one encouraging word from those that would benefit from this the most. Their silence is deafening. And that brings me back to Germany where, unless this gets resolved quickly, the most likely downstream outcome is Germany leaving the euro, reinstitute the Deutsche Mark, watch it fall vs. the dollar in the near term but outcompete the euro.   With the euro in freefall after a disastrous Q3 close and German Bunds getting prepared for their next big sell-off, perhaps, maybe, for the first time in a long time, the markets are beginning to wake up from their central bank induced SOMA injections and get real with the possibilities that forces are now aligned to do the unthinkable, break up the EU. But that only happens with a political inversion where the CDU/CSU ally with AfD and the FDP to form a real government after the current parties can’t form a coalition or any three-way coalition formed fails as inflation crushes the German middle class. If the AfD were smart now they would be blaming all of this on Merkel’s moronic energy policy.  Now we’re seeing calls for delaying shutting down Germany’s nuclear reactors.  They can’t import enough coal to feed the plants.  BASF has shut down ammonia production, so food production is threatened. There is no Agenda 2030 on the horizon if Germans freeze to death in their homes or get decimated by COVID-9/11 because they can’t afford to heat their homes. This will crush France and Macron, overthrow Davos at the mid-terms here in the states and break the European Union in the process. Germany is the lynchpin to the entire Davos edifice.  Without a compliant and beaten Germany there is no further Great Reset.  A Germany that breaks from the euro becomes a Germany that realigns with Russia and Eastern Europe. It’s a Germany no longer hell bent on internal European mercantilism and the establishment of the Fourth Reich through the EUSSR.   The German people keep asking for that policy to end but aren’t given the options by their leadership to make that happen.  Then again, they keep giving their leadership just enough power to forestall their having to make a real decision. That decision is coming at them, fast. As it is everyone across the West in various guises. So, as Powell with five little basis points is under extreme pressure to go full MMT retard, so far has held his water and Putin with a few million BTUs of gas, these men are forcing open fault lines in the aristocracy that thinks it deserves to run the world and can bring down the whole rotten edifice. *  *  * Join my Patreon if you don’t put up fronts BTC: 3GSkAe8PhENyMWQb7orjtnJK9VX8mMf7Zf BCH: qq9pvwq26d8fjfk0f6k5mmnn09vzkmeh3sffxd6ryt DCR: DsV2x4kJ4gWCPSpHmS4czbLz2fJNqms78oE LTC: MWWdCHbMmn1yuyMSZX55ENJnQo8DXCFg5k DASH: XjWQKXJuxYzaNV6WMC4zhuQ43uBw8mN4Va WAVES: 3PF58yzAghxPJad5rM44ZpH5fUZJug4kBSa ETH: 0x1dd2e6cddb02e3839700b33e9dd45859344c9edc DGB: SXygreEdaAWESbgW6mG15dgfH6qVUE5FSE Tyler Durden Fri, 10/08/2021 - 03:30.....»»

Category: smallbizSource: nytOct 8th, 2021

Hidden Bankruptcy: The Reality Behind Uncle Sam"s Inflated Bar Tab

Hidden Bankruptcy: The Reality Behind Uncle Sam's Inflated Bar Tab Authored by Matthew Piepenburg via, Below, we look at The hidden bankruptcy of the US in the wake of even more inflationary forces confirmed by cost-of-living-adjustments, Uncle Sam’s interest expenses, objectively unloved Treasuries and a roaring as well as convenient COVID narrative. Math vs. Double-Speak Given the fact that just about everything coming out of the mouths of debt-cornered policy makers requires a lie-detector and “double-speak” translator, we’ve been arguing since the moment the Fed began peddling the “transitory inflation” meme/myth to think differently. In short: It’s our view that inflation is a snowball growing, not melting. Toward this end, we’ve written and spoken at length as often as we can as to the many converging forces pointing toward rising inflation—from increased governmental guarantees (controls) over commercial bank loans, commodity super cycles to just plain economic realism, as inflation (and hence currency debasement) is the only tool left (beyond bankruptcy, taxation and “growth”) to service otherwise unsustainable debt levels: A hidden bankruptcy. But let us not stop there, as other inflationary storm clouds are on the horizon yet ignored (not surprisingly) by an increasingly clueless financial media. Another Glaringly-Ignored Inflation Indicator—COLA 2.2022 In particular, we are thinking about the U.S. Cost of Living Adjustment (“COLA”) for 2022 which could easily reach 6%, the highest of its kind since 1982. It would seem that the U.S. Social Security Administration, unlike Powell, is aware of inflation, and therefore preparing (i.e., “adjusting”) for the same. As the price for entitlement obligations rises, so too will the level of money printing to pay for the same, a veritable vicious circle for rising inflation. Then there’s simple math. We’ve talked about the Realpolitik of negative real rates as the final and desperate way for debt-soaked sovereigns to service their debt. The signs of this are literally everywhere. If we take, for example, a 1.4% Treasury Yield and subtract a potential 6% COLA increase for Social Security, we get -4.6% real rates, which will be a boon for alternative stores of value like gold and silver or “currencies” like BTC (as well as farmland and high-end real estate, which is continuing to enjoy a debt-jubilee of negative 3% real (i.e., “free” mortgages). The necessary evil of negative real rates also speaks to the ongoing taper debate… Giving Clarity to the Taper Debate As tweets by twits pour across the electronic universe, it’s often important to notice what is not being “tweeted,” such as the interest expense on Uncle Sam’s national bar tab. As the financial world hangs on the edge of its seat to see if the Fed will taper its QE (i.e., money printing) program and send bonds (and stocks) to the floor and rates toward the sky, they’ve ignored some basic math and a key chart. Specifically, we are referring to the chart below representing the true interest expense on the debt bar-tab of a now fully debt-intoxicated Uncle Sam: With central-bank “accommodated” asset bubbles (from stocks to real estate to art) now at historically unprecedented levels, tax receipts flowing into the U.S. coffers from the ever-growing millionaire-to-billionaire class have been rising. This may seem good for that punch-drunk Uncle Sam, but what no one is talking about is that despite even those “capital gain” receipts, the interest expense (i.e., “bar tab”) in D.C. is now an astronomical 111% of those same tax receipts. In other words, U.S. tax income doesn’t come close to even paying interest (let alone that archaic concept known as “principal”) on growing U.S. debt obligations. Can anyone say, “Uh-oh?” Given the stark but ignored reality of unpayable U.S. debt, the implications going forward are fairly clear. First, the Fed will not be able to “taper,” as less QE will mean an even higher interest rate, and thus higher interest expense on debt it still can’t pay at today’s artificially low rates. Stated otherwise, a “taper” would only add helicopters of gasoline to a debt fire that is already burning the Divided States of America. Given the dangers of such a taper, it likely won’t happen because it can’t happen, and this means more money printing and hence more negative real rates creating a hidden bankruptcy ahead, a weaker USD and rising precious metal prices, among others. But What If the Fed Tapers? Alternatively, should the Fed somehow turn hawkish and taper its QE support in the face of a debt forest fire, Treasuries will sell off dramatically, rates will rise, markets will tank, and the USD will surge—not good for Gold, BTC or just about anything else. Does it Matter? But as we’ve also tried to make crystal clear, there is no way the Fed will taper QE liquidity before it sets up a back-channel for even more liquidity from the Standing Repo Facility, Reverse Repo Facility and FIMA swap lines, which are all just “QE” by other names. In simple speak, therefore, the “taper debate” is no debate, as the Fed has many liquidity tricks up its greasy sleeves. In addition to liquidity tricks, the Fed has some ugly bonds to buy. Embarrassing Treasuries As we’ve said so many times, the biggest issue today is unsustainable and embarrassing debt levels requiring inflation (hidden bankruptcy), compliments of policy makers rather than a viral pandemic narrative out of all proportion to its confused scientific truths. COVID has been an all-too timely and convenient pretext for blaming global debt ($300T) or U.S. public debt ($28.5T) on a flu rather than a sordid history of grotesque mismanagement from politico’s and bankers that was in play long before the first headlines out of Wuhan. Furthermore, COVID monetary and fiscal policy measures effectively became a (hidden) pretext for a second market bailout greater in scope (yet better in optics) than the post-Lehman bailout of those otherwise Too Big to Fail banks. In short, the façade (and branding) of a humanitarian crisis allowed a market-saving liquidity rescue (Bailout 2.0) to an otherwise Dead-on-Arrival bond market in late 2019. In case this sounds too controversial to consider, please follow the Treasury market rather than our bemused nouns and adjectives, not to mention our total lack of scientific/medical credentials. Bad IOUs Just like friends don’t accept IOUs from drug addicts, global investors heading into 2020 stopped buying Uncle Sam’s Treasuries. In simple-speak, Uncle Sam just seemed too debt-drunk to trust. As a result, his Treasury bonds, once seen as “safe havens,” were finally seen as “bad jokes”—akin to the paper coming out of equally discredited zip codes like Greece, Italy or Spain. For this reason, foreigners in a nervous 2020 (unlike a broken 2009) had not only stopped buying U.S. Treasuries, they were selling them. Yep. Months ago, smart voices from the Street, including Stan Druckenmiller, were warning about the implications of such a shift in financial consciousness/trust. Druckenmiller’s Astonishment Specifically, Druckenmiller spoke of something he’d never seen in over 40 years as a market veteran. That is, as stocks were tanking in the spring of 2020, he also saw the bond market lose 18 points in one day. This correlated fall in stocks and bonds was not, as everyone “tweeted,” a reaction to the fiscal profligacy of the CARES Act, but more sadly a very new trend by foreigners to get rid of increasingly discredited U.S. IOUs. Folks, this is a critical shift. For over two decades (including during the Great Financial Crisis of 2009), U.S. Treasuries (and the USD) were once seen as “safe” landing places for foreign money rather than a risky bet. Now, instead of seeing an annual average $500B inflow into U.S. bonds, we are seeing annual outflows of $500B… When you tack on a $700B current account deficit in D.C. to a net loss of $1 trillion in Treasury support, whose left to “fill the gap” and buy those unwanted IOU’s? You guessed it: The Fed. And how will they come up the money to cover these purchases? You guessed it again: They’ll mouse-click that “money” out of thin air to create a stealthy, hidden bankruptcy. Needless to say, such realism (i.e., objective math) puts a lot of pressure on the U.S. Dollar as the Fed is forced to create even more money at a record pace to buy otherwise unwanted Treasuries. But what kept the USD from falling in favor by end of 2020, if no one was buying our bonds but the Fed? Well, the short answer is that all that foreign money (from sovereign wealth funds and foreign central banks) once ear-marked for our once-credible U.S. Treasury bonds went instead into those massive U.S. digital transformation companies who benefited most from a locked-down new mad world, namely GOOG, ZOOM and MSFT etc. And how did Druckenmiller describe this shift? Simple. He called it a “raging new mania.” From Mania to Desperate Foreign money once reserved for “safe haven” bonds was (and is) pouring into an already over-sized equity bubble. By July, the USD had peaked, but after a peak comes, well…a fall for the Greenback—all very good for commodities, real estate, growth tech stocks and, of course, precious metals. Back to the “What If” of a Naked Taper But (and this is a very big “but”), what if the Fed were insane enough to taper QE without any back-door liquidity from foreign swap lines and the repo programs? Again, ugly Treasuries would get even uglier, tank in price, sending rates and the USD higher and gold lower, along with a sharp sell-off in risk assets—i.e., corporate stocks and bonds. But again, we don’t think this will happen, because as desperate as central bankers are, they are equally predictable. Predictable Behavior? That is, they know that such a naked taper (i.e., a taper without a back door repo or swap-induced liquidity) would cause rates to spike, and hence Uncle Sam’s bar-tab to default. As the Fed’s Vice Chair intimated last year, US Treasuries (Uncle Sam’s bar tab) are simply too big to fail. This means we can expect more liquidity (QE or repo/swap) and hence more, not less inflation. The Fed is stuck in a self-inflicted dilemma–between letting inflation rip (to partially service America’s bar tab and “declaring” a hidden bankruptcy) or watching markets sink to the bottom of time. For now, which choice do you think these banking, pro-market cabal thinkers will make? The Realpolitik of COVID Meanwhile, and regardless of one’s views on the vaccine mandates, case fatality rates vs. infection rates, or mask wearing vs. mask annoyance, no one needs our amateur medical advice. But looking at COVID as a policy tool rather than as controversial health issue, it’s also fairly clear that the powers that be will be milking this fear-porn-to-policy trick for all its worth for as long as its worth. Why? Again, COVID is a wonderful narrative to justify more debt and more instant liquidity (i.e., fiat monetary expansion) and hence more inflation to inflate away the debt of debt-drunk nations already fatally in debt pre-COVID. Rightly or wrongly, there are already scientists out of the UK (namely Oxford vaccine creator Sarah Gilbert) with more IQ-power and credibility than Fauci or Fergusson (admittedly not a high bar), who are already signaling that COVID will resemble little more than a common cold by next year. This, if true (and no one really knows anyway), would be good for the world—but would the policy makers like this? A post-COVID normal would be a boon to commerce and economic activity, and hence a boon to the velocity of money, which would kick inflation into ultra-high-gear. High inflation will mean higher rates, which scare debt-soaked politicians and central bankers, unless inflation rises higher than those rates and negative real yields become the norm, which, again, we think is the realistic (i.e., only option) for these financial magicians running our governments, lives and central banks. In such a scenario, gold will smile upon the inflation to come. In short, and however we look at it, inflation is the new norm, and negative real rates are no less so, regardless of how the taper or COVID debate plays out. As the future unfolds, gold, whose price is waiting for confirmation of such inflation, will only grow stronger as the “transitory” meme gets weaker by the day. Tyler Durden Tue, 10/05/2021 - 21:25.....»»

Category: worldSource: nytOct 5th, 2021

Regions (RF) Ups Homeowner Lending Ability With EnerBank Buyout

The buyout of EnerBank accelerates Regions' (RF) strategy to strengthen its competencies in the homeowners lending space. Regions Financial Corporation’s RF subsidiary, Regions Bank, has completed the previously-announced deal to acquire the specialized home improvement lender, EnerBank USA, from its parent, CMS Energy Corporation CMS.Estimated transaction proceeds (including customary adjustments at closing) for CMS Energy are $1 billion.  In the past few years, the demand for mortgage and refinancing options due to higher home prices as well as new alternatives to finance home upgrades has increased. Hence, the acquisition is a strategic fit for Regions Financial and will help the company to leverage on EnerBank’s platform to offer a comprehensive suite of financing options to homeowners, thereby, fortifying its presence in the homeowners lending space.EnerBank offers prime and super-prime home improvement point-of-sale loans via a national network of contractors. It has a countrywide footprint. The company has served more than one million homeowners since its inception. The firm has more than 10,000 contractors through mobile, online, and phone-based point-of-sale lending options.Over time, the EnerBank USA name will merge with the Regions Bank brand and its employees will join the latter as part of the Consumer Banking Group.Scott Peters, senior executive vice president and head of the Consumer Banking Group for Regions Bank, noted, “The addition of EnerBank’s exceptional team and leading-edge technology will help Regions deliver even greater value to customers who are seeking convenient, competitive solutions for efficiently financing home improvement needs.”When the deal was announced in June, Regions Financial estimated the buyout to be accretive to 2022 earnings per share (including Purchase Accounting Adjustments or PAA and “no foregone share repurchases”) in low-single-digit percentage, and 5% accretive to earnings over the medium term.Our TakeEnerBank’s platform consummates Regions Financial’s recent investments in mortgage and home equity lending services. Over the years, the company has been investing in products, services and omni-channel originations central to mortgage lending, mortgage servicing and home equity lending. This has significantly boosted its market share.The acquisition of Enerbank is likely to expand the bank’s strategy of acquiring businesses, which help reinforce customer relationships by serving more of their needs via new channels, products and capabilities. Some of the recent deals, including the acquisition of equipment finance lender, Ascentium Capital LLC, in April 2020, and the August 2019 acquisition of Highland Associates — a leading institutional investment firm, are steps in the same direction.Regions Financial continues to explore opportunities for bolt-on acquisitions, primarily in mortgage servicing rights and adding capabilities in the wealth management unit. In line with this, the company is currently working on a digital advisory solution, which is likely to be deployed in late 2021 or early 2022. As it is committed to diversifying its revenue streams and meeting customer needs via diverse services, we believe that such endeavors will support the company’s growth prospects in the long term.Shares of Regions Financial have gained 7.3%, outperforming 5.1% growth of the industry it belongs to. Image Source: Zacks Investment Research Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Similar Expansion Efforts by Other BanksAt present, banks have resorted to mergers and acquisitions to dodge the heightened costs of investments in technology and counter lower rates.Recently, Southern Missouri Bancorp Inc. SMBC announced that it will acquire Fortune Financial Corporation in a stock and cash transaction worth $30 million.Last month, in an effort to diversify revenues, Valley National Bancorp VLY signed a deal to acquire Bank Leumi Le-Israel B.M.’s U.S. banking arm — Bank Leumi USA — for $1.15 billion. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Regions Financial Corporation (RF): Free Stock Analysis Report CMS Energy Corporation (CMS): Free Stock Analysis Report Valley National Bancorp (VLY): Free Stock Analysis Report Southern Missouri Bancorp, Inc. (SMBC): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 4th, 2021

Regions (RF) Launches Checking Account With No Overdraft Fees

Regions' (RF) new checking account will include the convenience of modern banking, while eliminating overdraft fees. Regions Financial Corporation’s RF subsidiary, Regions Bank, has announced a new checking account with no overdraft fees, Regions Now Checking account. The account will include the convenience of modern banking, while eliminating overdraft fees.The new account meets the Cities for Financial Empowerment Fund’s national standards for Bank On certification. This indicates that it meets the specific affordability criteria for low-income people.Regions Now Checking account will charge   a low, flat $5 monthly fee, and offer traditional checking account features like check writing, and mobile and online banking with bill pay. Customers will not be charged fees for non-sufficient funds. Also, the account can be linked to other accounts of the bank for overdraft protection, with no fees for overdraft protection transfer. Given the affordable and convenient features, the effort is likely to spike the interest of the underbanked population.The account complements the company’s “Now Banking” suite of financial solutions, which include Regions Now card, Regions Now savings account and check cashing service.Scott Peters, head of the Consumer Banking group for Regions Bank, noted, “Regions Now Checking is a natural extension of our commitment to making banking easier by helping people manage and grow their finances through innovative and convenient options.” The move will facilitate customers to easily access and manage their money affordably and safely, which has become increasingly important amid the pandemic.Checking account aside, Regions has made other advancements in its consumer banking operations. This includes the reduction of the number of overdraft and non-sufficient fund fees, charged on customers’ other account types every day. Also, it improved account alerts to update customers on transaction and account balances.Our TakeTo navigate the low-interest rate environment, Regions has been exploring alternative avenues for growth. Recently, it completed the previously announced deal to acquire the specialized home improvement lender, EnerBank USA, from its parent, CMS Energy Corporation CMS, thereby, augmenting its presence in the homeowners lending space.Regions also remains competitive by reserving nearly 10-11% of revenues for technology spend. In 2020, the company redesigned its mobile application and remains on track for further enhancements in both its online and mobile platforms. Apart from this, the company has digitized the sales process.Shares of Regions have gained 7.3%, outperforming 5.1% growth of the industry it belongs to. Image Source: Zacks Investment Research Currently, Regions carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks hereCompetitive LandscapeFollowing the U.S. Senate hearings in May into how banks charge overdraft fees and criticized the practice during the pandemic, banks have started removing the fees and rolled out alternatives at low costs.In June, Ally Bank, an indirect, wholly-owned banking subsidiary of Ally Financial Inc. ALLY, announced eliminating overdraft fees on all accounts, with no requirements or restrictions. In the same month, Toronto Dominion Bank’s TD subsidiary TD Bank, underlined plans to introduce TD Essential Banking, offering a low-cost, no-overdraft-fee deposit account. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Regions Financial Corporation (RF): Free Stock Analysis Report CMS Energy Corporation (CMS): Free Stock Analysis Report Toronto Dominion Bank The (TD): Free Stock Analysis Report Ally Financial Inc. (ALLY): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 4th, 2021

CIT Group (CIT), First Citizens (FCNCA) Extend Merger Agreement

CIT Group (CIT) and First Citizens (FCNCA) agree to extend their previously announced merger agreement from Oct 15, 2021, to Mar 1, 2022. CIT Group Inc. CIT and First Citizens BancShares, Inc. FCNCA have agreed to extend their merger agreement from Oct 15, 2021, to Mar 1, 2022. In October 2020, the companies announced a merger agreement, which will lead to the creation of the 20th largest bank in the United States in terms of assets.In July 2021, the proposed transaction received approval from the Federal Deposit Insurance Corporation. The Office of the North Carolina Commissioner of Banks also consented to the transaction. The deal has also received shareholder approval.Action by the Federal Reserve is the only remaining regulatory approval required to complete the merger, and both parties are committed to seeking approval.The merger will compile First Citizens’ low-cost retail deposit franchise and suite of banking products with CIT Group’s national commercial lending expertise and strong market position.It will result in enhanced scale, improve profitability and boost shareholder value. The combined company will have more than $100 billion in assets and approximately $80 billion in deposits.Terms of the Deal & Financial ImpactAt the time of deal announcement, it was agreed that shareholders of CIT Group will get 0.0620 shares of First Citizens’ common stock for each of their own shares held. First Citizens’ shareholders will own 61% of the combined firm and the remaining 39% will be owned by CIT Group’s stockholders.Pro forma, the deal is expected to result in combined non-interest expense savings of 10% or $250 million (fully phased-in). Merger-related costs are expected to be $445 million.Over the long term, the deal will help in driving shareholder value through tangible book value growth. Upon closing of the deal, tangible book value per share accretion is expected to be more than 30%.On a pro-forma basis, the combined firm expects to deliver top-tier operating performance, with a return on tangible common equity (ROTCE) of 13%. At closing, the combined company is expected to have a Tier I common equity ratio in excess of 9.4%.Notably, the combined firm, which will be headquartered in Raleigh, NC, will operate under the First Citizens name.So far this year, shares of CIT Group have gained 44.7%, while that of First Citizens have rallied 46.8%. Image Source: Zacks Investment Research Currently, CIT Group carries a Zacks Rank #2 (Buy), while First Citizens has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.At present, several banks are moving toward consolidation to dodge the heightened costs of investments in technology and counter lower rates in a bid to remain competitive. In an effort to diversify revenues, Valley National Bancorp VLY has signed a deal to acquire Bank Leumi Le-Israel B.M.’s U.S. banking arm — Bank Leumi USA — for $1.15 billion.In August, Seacoast Banking Corporation of Florida SBCF announced two separate merger agreements. It agreed to acquire Sabal Palm Bancorp, Inc. and Business Bank of Florida, Corp. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. You know this company from its past glory days, but few would expect that it's poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks' Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CIT Group Inc. (CIT): Free Stock Analysis Report First Citizens BancShares, Inc. (FCNCA): Free Stock Analysis Report Seacoast Banking Corporation of Florida (SBCF): Free Stock Analysis Report Valley National Bancorp (VLY): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 1st, 2021

3 Reasons for JPMorgan"s (JPM) Recent Acquisition Spree

JPMorgan's (JPM) recent buyout spree is a way to diversify revenues beyond traditional banking services. Today, we will try to find out the primary reasons for the expansion initiatives. Of late, JPMorgan JPM has been expanding through on-bolt acquisitions, both domestic and international. Over the past several months, the Wall Street giant has announced several buyouts that are an attempt to find revenue streams beyond traditional banking services.Some of the notable transactions are approximately 75% stake in Volkswagen AG's VWAGY payment arm – Volkswagen Financial Services – and OpenInvest, Frank, and 55ip (all FinTech start-ups). JPMorgan has already launched its digital retail bank Chase in the U.K. while announcing deals to acquire 40% stake in Brazil's C6 Bank, and the U.K.-based robo-advisor Netmeg. Earlier in 2019, JPMorgan had acquired InstaMed, which has enabled it to expand into the lucrative U.S. healthcare payments market.Apart from these, JPMorgan, along with other global banks including Citigroup C, Morgan Stanley MS, UBS Group AG, and Goldman Sachs, is trying to capitalize on the opportunity to expand in China’s $53-trillion financial market, which is now open to foreign firms following the removal of restrictions on ownership. This August, it received regulatory approval to obtain full ownership of its China securities joint venture – J.P. Morgan Securities (China) Co.At that time, CEO Jamie Dimon had stated, “China represents one of the largest opportunities in the world for many of our clients and for JPMorgan Chase. Our scale and global capabilities give us a unique ability to help Chinese companies grow internationally and also support global investors as they expand into China’s maturing capital markets.”Per the data available from Refinitiv, Dealogic, and media reports, it is estimated that JPMorgan has acquired and invested in more than 30 companies so far this year. This is the most since 2012 when this Zacks Rank #2 (Buy) bank had inked more than 35 deals. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.While so much is being discussed about JPMorgan’s recent expansion plans, today we are trying to understand the reasons for its recent binge.1. Counter Low Interest Rates: Since March 2020, the Federal Reserve has kept the interest rates at near-zero to support the U.S. economy from the coronavirus-related mayhem. Though in its September FOMC the central bank hinted at raising rates in late 2022, the low interest rate environment and continued weak demand for loans have hurt JPMorgan’s net interest income (NII) growth and resulted in the contraction of net yield on interest-earning assets over the past several quarters. For 2021, management anticipates NII to be approximately $52.5 billion, down almost 4% from the 2020 level.While this dismal macroeconomic scenario is not expected to reverse anytime soon, JPMorgan is making efforts to boost non-interest income, which supported its financials in 2020. Last year, non-interest income grew 12% on the back of a boom in trading and investment banking (IB) operations. While trading is normalizing, IB business and other fee-generating operations are expected to keep up the momentum, at least over the next few quarters.2. Compete With FinTechs: Banking sector as a whole is facing competition from FinTechs. Several big tech names including Amazon, Google, and Square Inc., among others, are trying to come up with some sort of business that will compete with traditional banks. Though it is well-known that these firms can’t directly serve clients by providing banking services thanks to strict banking regulations, banks like JPMorgan are increasingly facing pressure to technologically upgrade offerings. Thus, the company is heavily investing in artificial intelligence and other digital platforms, and even partnering/acquiring providers of such services as there has been a significant rise in demand for these amid the coronavirus pandemic.3.Scale Up Operations: With its huge size (more than 4,800 branches) and global presence, JPMorgan has all the means to further scale up its businesses. However, given its size, the company is not allowed to take over another bank owing to regulations. Now, the COVID-19 pandemic has given the company an opportunity to leverage its scale by filling up gaps in its offerings by undertaking such smaller deals, which doesn’t attract much regulatory scrutiny. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis Report Volkswagen AG (VWAGY): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 30th, 2021

Yields Climb on Likely Interest Rate Hike: 3 Bank Stock Picks

The treasury yield rally, a sooner-than-expected interest rate hike and the central bank's bond tapering on the horizon have put banks like JPM, STT and OZK in the bright spot. Since last week, the 10-year treasury yield have continued to rally. It reached 1.56% yesterday, the highest level since June. This along with the expectation of the Federal Reserve’s likely hawkish stance have sparked the interest of traders in bank stocks, with the KBW Nasdaq Bank Index climbing 6.4% over the past five days. With this, the index has gained 36.3% in the year-to-date period.Specifically, at the end of two-day FOMC meeting on Sep 22, the Fed signaled that interest rates could increase in 2022, a year earlier than expected, and an official tapering decision to scale back bond-buying might be announced at the November 2021 meeting, if the recovery progress remains on track. This time, it left the policy rate unchanged at near-zero and announced maintaining the pace of asset purchasing at the current level.Further, going by the Fed’s latest Summary of Economic Projections, the U.S. economy will grow at 5.9% for 2021, down from the previously mentioned 7%. Nonetheless, the projections for 2022 and 2023 have improved to 3.8% and 2.5% from the earlier mentioned 3.3% and 2.4%.Based on the updated economic projections, the central bank now expects inflation to be 4.2% this year, above its target of 2%, and significantly higher than the previously projected rate of 3.4%. Nonetheless, it said that economic growth has “continued to strengthen” and it expects the unemployment rate to continue to fall through the rest of 2021 and into the next two years.Thus, after facing a challenging operating backdrop from the onset of the pandemic, U.S. bank stocks are now well-poised to stage a robust recovery, thanks to the central bank’s slightly hawkish stance. This is likely to lift all boats for banks and boost lenders’ profits.Here’s How Developments are Setting the Stage for BanksThe current low-rate backdrop has been affecting net interest margins for banks, as they hesitate to invest excess cash for the long term, and rather bulk up liquidity in short-term cash and cash equivalents that offer low earnings. With an interest rate hike in the cards, banks are likely to shift their earning-asset mix away from such low-yielding investments, providing some upside to margins and improving investor sentiments for banks.The Fed hinting at a rate hike in 2022 is going to support banks’ financials over time, as we know that banks prosper in a rising interest rate environment. Further, the steepening of the yield curve and a gradual rise in demand for loans are expected to aid interest income growth, which constitutes a major portion of banks’ revenues as well as margin growth.Additionally, the Fed’s retraction of its asset purchases indicates the first step toward considering an eventual increase in short-term rates, which brightens the outlook for banks’ net interest margins and profitability.Lastly, the central bank’s more favorable economic growth projections for 2022 and 2023 are indicative of robust economic growth. The improvement of the overall health of the nation is also likely to strengthen banks’ financials. Given the current backdrop of the likelihood of a higher interest rate environment going forward, numerous banks have been making deliberate efforts to increase their asset sensitivity. This is also likely to fuel growth.3 Bank Stocks to Buy NowConsidering the discussion above, it might be an opportune time to rack up fundamentally strong bank stocks.  While this might be a daunting task, we have shortlisted three bank stocks with the help of the Zacks Stock Screener.These companies have an earnings growth projection of more than 10% for 2021. The companies carry a Zacks Rank # 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Moreover, these banks have a market capitalization of $5 billion or more, and have witnessed price appreciation of 15% or more so far this year. Image Source: Zacks Investment Research JPMorgan Chase & Co. JPM: One of the biggest global bank, with assets valued at $3.68 trillion, has been making efforts to strengthen its loan portfolio and acquiring the industry's best deposit franchise.The banking giant is also expanding its footprint in new regions by opening branches and is also on acquisition spree to diversify revenues. These will help it to snap up cross-selling opportunities by increasing its presence, and benefit from growth in the card and auto loan sectors amid the continued normalization of the trading business.Its capital deployment activities also seem impressive, with the recent 11.1% dividend hike and share repurchase authorization of $30 billion for 2021.  It has a market cap of around $499 billion. The company’s earnings are projected to jump 58.2% this year.State Street Corporation STT: Interest rate and economic growth tailwinds might bolster the bank’s interest income while efforts to strengthen fee income sources are also encouraging.Its global exposure, a broad array of innovative products and services, and business servicing wins and inorganic growth strategy might support fee revenues, thereby, aiding top-line growth. The company is also taking inorganic expansion route to boost top line.For the third quarter, the company anticipates year-over-year overall fee revenue growth of 7-8%, with servicing and management fee growth of 7-9% each. The net interest income is expected to be $460-$470 million. It has a market cap of $32.4 billion. The company’s earnings are projected to grow 10.8% this year.Bank OZK OZK:  The company’s business restructuring and branch consolidation initiatives are expected to continue supporting revenue growth.Amid the challenging backdrop in 2020, it exited from Alabama and South Carolina, while closed three branches in Arkansas and one in Florida. With the help of its expansion strategy, Bank OZK has been able to steadily grow deposit and loan balances. With a more favorable operating backdrop, the company is well-poised to continue these trends.In July 2021, it hiked the dividend for the 44th consecutive quarter. Also, the company announced a share repurchase program to buy back shares worth up to $300 million through Jul 1, 2022. Such impressive capital deployment activities boost shareholder confidence in the stock. It has a market cap of $5.7 billion. The company’s 2021 earnings are projected to surge 86.3%. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report State Street Corporation (STT): Free Stock Analysis Report Bank OZK (OZK): Free Stock Analysis Report To read this article on click here......»»

Category: topSource: zacksSep 29th, 2021

Here"s Why You Should Hold Citizens Financial (CFG) Stock Now

While acquisitions to beef up the presence and strengthen the banking business will enhance Citizens Financial's (CFG) balance sheet, shirking margins and rising expenses are worrisome. Citizens Financial Group CFG has been making inorganic moves to diversify its presence and businesses. This is backed by the company’s decent liquidity position. However, continued cost escalations are limiting its bottom-line growth, while the low interest rate environment is affecting the net interest margin (NIM).In early September, the company clinched a definitive merger agreement with JMP Group LLC JMP in an all-cash transaction. This marks the company’s fourth purchase since May. The company also closed the acquisition of Willamette Management Associates, which is expected to amplify Citizens Financial’s corporate financial advisory competencies.As part of its depository acquisitions advance strategy, In July, Citizens Financial announced a definitive agreement to acquire Investors Bancorp, Inc., ISBC, and entered an agreement to acquire 80 East Coast branches and the national online deposit business from HSBC Bank U.S.A, N.A — the America subsidiary of the U.K.-based HSBC Holdings plc HSBC — in May. The acquisitions of Investors combined with HSBC create a strong franchise in the greater New York City and the Philadelphia Metro areas, and New Jersey by adding 234 branches. Apart from this, the move is expected to add $29 billion of deposits and $24 billion of loans, creating a strong foundation for revenue growth.The company’s organic growth measures also remain encouraging. Citizens Financial’s loans and deposits witnessed a compound annual growth rate (CAGR) of 3.4% and 7.6%, respectively, over the last five years (2016-2020). We believe that it is well-positioned to grow further, backed by gradually improving the U.S. economy.Citizens Financial also remains on track for the execution of its revenue and efficiency initiatives. The most recent “Tapping Our Potential” (TOP) program — TOP 6 — is expected to deliver $400-$425 million in pre-tax run-rate benefit by 2021 end. Identifying better transformational efficiency opportunities, it is now developing the TOP 7 Program. These efforts are likely to result in expense savings and alleviate the bottom-line pressure.Shares of this Zacks Rank #3 (Hold) company have rallied 26.9% over the past six months compared with the industry’s growth of 15.2%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Image Source: Zacks Investment Research However, the company’s NIM has been shrinking due to the decline in the interest rates to the near-zero level in 2019 and 2020 in order to protect the economy from the coronavirus-led mayhem. Notably, the declining trend continued in the first six months of 2021. Despite decent loan demand, NIM is expected to continue being impacted in the near term due to the Federal Reserve’s accommodative policy stance.A significant portion of Citizens Financial’s loan portfolio comprises majorly commercial and real estate loans (72% of loans and leases and loans held for sale as of Jun 30, 2021). Such lack of diversification and high exposure can be risky for the company if the real estate sector weakens.Lastly, Citizens Financial’s non-interest expenses witnessed a CAGR of 4.5% over the last five years (2016-2020), with an increasing trend in the first six months of this year. Costs are likely to remain elevated due to investments in newer technologies and building fee income capabilities organically. Time to Invest in Legal Marijuana If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027. After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%. You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers FREE >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JMP Group LLC (JMP): Free Stock Analysis Report Investors Bancorp, Inc. (ISBC): Free Stock Analysis Report HSBC Holdings plc (HSBC): Free Stock Analysis Report Citizens Financial Group, Inc. (CFG): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 24th, 2021

Rabobank: We"re In A Charlton Heston Movie, But Which One?

Rabobank: We're In A Charlton Heston Movie, But Which One? By Michael Every of Rabobank We're in a Charlton Heston movie: which one? A reference to Charlton Heston means I lose readers who, despite having the sum of human knowledge at their fingertips, don’t know much recent history. Yet we are all in a Heston movie regardless – we just don’t know which one yet. That’s because markets, who also have the sum of human knowledge at their fingertips, don’t know much recent history either. I will run through the news Heston-ally, and suggest what that means for the movie we are all in. Let’s start with the good news on Covid. Bad as it gets, we are not in 1971’s ‘The Omega Man’, about the last-survivor of a Sino-Soviet biological war. However, the Fed flagged QE tapering. Philip Marey expects a formal announcement in November, with the actual start in December. FOMC Chair Powell expects tapering to end around mid-2022, implying a $20bn reduction in QE per meeting. The Fed’s dot plot shifted upward and moved closer to a first rate hike in 2022, with the participants evenly split between zero and 1-2 hikes; after 2022, it’s a steady pace of 3 hikes per year. The economic projections suggest the FOMC is still confident inflation spikes will be over by Q4 2022 – despite a record 73 ships waiting at LA/LB ports. (For the full report, please see here.) The market reaction, after initial confusion, was short US yields up,…and longer yields down and USD up. Recall how Minsky debt dynamics work - the change in the change is what matters; recall how pyramid schemes work; and recall how each previous attempt to normalize away from QE in an economy stronger than it is now has worked out. Taper tantrum fears? Not in DM, because there is no sign of any strength – thus the flattening curve. But for EM, inflation, stagflation, and policy-error deflation all now stalk the land. (Brazil just hiked rates to 6.25%, as expected: see here for more). See the key scene of 1968’s ‘The Planet of the Apes’ – with a lag. In October we could also see both a US government shutdown and a debt default if the spending and debt bill approved by the House of Representatives yesterday does not pass the Senate. As Philip also notes, this is a game of chicken in which the Democrats try to force the Republicans to share the blame for suspending the debt limit in light of the midterm elections in 2022. He adds that this stand-off is completely unnecessary, and if the Republicans don’t blink, the Democrats can still raise the debt limit and adopt a spending patch through budget reconciliation. However, this will raise the internal pressure in the Democratic Party regarding Biden’s legislative agenda by adding another time constraint (see here). See the chariot race in 1959’s ‘Ben Hur’- but which charioteer is President Biden? “China’s Evergrande to be saved!” says Bloomberg, quoting someone else. “Saved” means being split into three firms and nationalized, with no indication of which investors get how much money back. Given today the struggling firm has to repay $83.5m to USD debt holders, who won’t want cement, unfinished flats, or a nudge-nudge-wink-wink, we shall soon find out. Few observers saw a direct risk of a Lehman moment, despite the dynamic referred to above at play, because there are no truly free actors in Chinese markets. However, this ‘salvation’ is in line with a “Marxification” of the economy. The implications for China and the world are something markets refuse to consider because it would give them indigestion. See the end of 1973’s ‘Soylent Green’ - when markets prefer to see the ‘soy’ and the ‘green’. Energy prices continue to soar, despite official assurances the authorities saw this coming, aren’t surprised, and have clear plans for what to do about it. UK energy firms are toppling, and European economies that were preaching the need for immediate shifts in climate policy are suddenly subsidizing fossil fuels again to prevent a looming 1970’s recessionary-style energy-price shock. Which means other people have to pay more instead. Russia is meanwhile laughing all the way to the bank. See 1976’s ‘The Two-Minute Warning’ - and if you are conversant in Cockney, see 1953’s ‘The Pony Express’. The Biden administration is reportedly to nominate Saule Omarova to run the Office of the Comptroller of the Currency, the bureau within the Treasury that charters, regulates, and supervises all national banks and thrift institutions and the federally licensed branches and agencies of foreign banks in the US. Omarova is a law professor who has criticized crypto, and advocates for the government to have a much larger role in banking. That comes after the SEC’s Gensler’s comments this week on stablecoins. See 1974’s ‘Earthquake’ or 1975’s imaginatively titled ‘Airport 1975’. US President Biden and French President Macron are attempting to build bridges burned over AUKUS. The French ambassador is now to return to DC, and Biden to come to Europe for talks next month. However, word on the street is that France, and French agriculture, now have the excuse to kick the planned Australia – EU FTA into the long grass even if the rest of the EU is in favour. The UK has also been sent scuttling from any thoughts of joining the USMCA. However, geopolitics leads and trade usually follows in today’s atmosphere. Japan’s outgoing PM Suga has also been exceptionally forthright, stating China’s rapidly growing military influence and unilateral changing of the status quo could present a risk to Japan. That’s ahead of a first in-person Quad meeting to be held on Friday at the White House. See 1976’s ‘The Last Hard Men’ (and for those who prefer fantasy to Western, see ‘“Orcs”, Elves/Hobbits, and Dragons’). In short, the overall market backdrop is perfect for Heston. Yes, the world has changed dramatically from the epoch where a card-carrying member of the NRA and the Republican Party could be a major Hollywood celebrity. But today is again epic; and gritty; and dystopian; with disease; and economic crises; energy crises; political crises; geopolitical crises; ideological crises; inflation; stagflation; and the backdrop of a shift in the global financial architecture. Not that this doesn’t mean most markets, and modern movies, don’t want to ignore it all and keep partying on as in 1992’s “Wayne’s World”, in which Heston also made a guest-appearance. Try doing that with less QE, less gas, less crypto, and more Marxism and geopolitical risks though. “It's been quite a ride. I loved every minute of it.” Charlton Heston (1923 - 2008) Tyler Durden Thu, 09/23/2021 - 10:25.....»»

Category: blogSource: zerohedgeSep 23rd, 2021

JPMorgan (JPM) Buys College Financial Planning Platform Frank

JPMorgan (JPM) acquires the college financial planning platform, Frank. JPMorgan JPM has acquired the college financial planning platform, Frank. The acquisition adds to the many deals entered by the bank over the past few months in a bid to compete with technology firms.The entire business of Frank, including its Easy FAFSA, Classfinder College Course Marketplace, Scholarships & Employment tools, and Financial Education and Careers content, is being acquired by the bank.Serving more than five million students at more than 6,000 higher education institutions, Frank’s simple online portal allows students to apply for financial aid in minutes and enroll in its catalog of affordable online college courses.Jennifer Piepszak, co-CEO of JPMorgan, stated, “We want to build lifelong relationships with our customers. Frank offers a unique opportunity for deeper engagement with students. Together, we’ll be able to expand our capabilities for students and their families, helping them financially prepare for college and other major moments in their future.”The founder and CEO of Frank, Charlie Javice, said, “We launched Frank to make college more accessible for students and their families, and have already helped millions across the nation. We look forward to joining the Chase family to further this mission. Together, we can multiply our impact to help more students and their families achieve their financial goals and education dreams.”The buyout is expected to accelerate JPMorgan’s strong foundation with students, including products, content and guidance for students of all ages, with branches and ATMs on or in close proximity to more than 300 college campuses across the country.Our TakeOf late, JPMorgan has been undertaking several strategic buyouts. The company has been on an expansion spree for a long time now. In a bid to expand into the dining business, recently, JPMorgan agreed to acquire the popular restaurant recommendation website, The Infatuation. Also, it signed a deal with Volkswagen AG’s VWAGY subsidiary, Volkswagen Financial Services, in a bid to enter the automotive industry and bolster digital payment competencies.A few other notable buyouts in recent months include that of OpenInvest, a 40% stake in Brazil's C6 Bank and 55ip. The deals are expected to help boost JPMorgan’s fee income.Further, as part of its plan of establishing a banking presence in the U.K., JPMorgan acquired one of the largest robo advisory firms of the U.K., Nutmeg. Also, it has recently launched its long-planned digital retail bank Chase in the region.While the bank’s expansion in the U.K. will help it in capitalizing on the acceleration of the digital banking boom, it is expected to face tough competition from the large traditional banks like HSBC Holdings HSBC and Barclays BCS, which are looking to expand digital offerings.So far this year, shares of JPMorgan have gained 20.4% compared with 23.8% growth recorded by the industry.2 Image Source: Zacks Investment Research Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Barclays PLC (BCS): Free Stock Analysis Report HSBC Holdings plc (HSBC): Free Stock Analysis Report Volkswagen AG (VWAGY): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2021

Futures Bounce On Evergrande Reprieve With Fed Looming

Futures Bounce On Evergrande Reprieve With Fed Looming Despite today's looming hawkish FOMC meeting in which Powell is widely expected to unveil that tapering is set to begin as soon as November and where the Fed's dot plot may signal one rate hike in 2022, futures climbed as investor concerns over China's Evergrande eased after the property developer negotiated a domestic bond payment deal. Commodities rallied while the dollar was steady. Contracts on the S&P 500 and Nasdaq 100 flipped from losses to gains as China’s central bank boosted liquidity when it injected a gross 120BN in yuan, the most since January... ... and investors mulled a vaguely-worded statement from the troubled developer about an interest payment.  S&P 500 E-minis were up 23.0 points, or 0.53%, at 7:30 a.m. ET. Dow E-minis were up 199 points, or 0.60%, and Nasdaq 100 E-minis were up 44.00 points, or 0.29%. Among individual stocks, Fedex fell 5.8% after the delivery company cut its profit outlook on higher costs and stalled growth in shipments. Morgan Stanley says it sees the company’s 1Q issues getting “tougher from here.” Commodity-linked oil and metal stocks led gains in premarket trade, while a slight rise in Treasury yields supported major banks. However, most sectors were nursing steep losses in recent sessions. Here are some of the biggest U.S. movers: Adobe (ADBE US) down 3.1% after 3Q update disappointed the high expectations of investors, though the broader picture still looks solid, Morgan Stanley said in a note Freeport McMoRan (FCX US), Cleveland- Cliffs (CLF US), Alcoa (AA US) and U.S. Steel (X US) up 2%-3% premarket, following the path of global peers as iron ore prices in China rallied Aethlon Medical (AEMD US) and Exela Technologies (XELAU US) advance along with other retail traders’ favorites in the U.S. premarket session. Aethlon jumps 21%; Exela up 8.3% Other so-called meme stocks also rise: ContextLogic +1%; Clover Health +0.9%; Naked Brand +0.9%; AMC +0.5% ReWalk Robotics slumps 18% in U.S. premarket trading, a day after nearly doubling in value Stitch Fix (SFIX US) rises 15.7% in light volume after the personal styling company’s 4Q profit and sales blew past analysts’ expectations Hyatt Hotels (H US) seen opening lower after the company launches a seven-million-share stock offering Summit Therapeutics (SMMT US) shares fell as much as 17% in Tuesday extended trading after it said the FDA doesn’t agree with the change to the primary endpoint that has been implemented in the ongoing Phase III Ri-CoDIFy studies when combining the studies Marin Software (MRIN US) surged more than 75% Tuesday postmarket after signing a new revenue-sharing agreement with Google to develop its enterprise technology platforms and software products The S&P 500 had fallen for 10 of the past 12 sessions since hitting a record high, as fears of an Evergrande default exacerbated seasonally weak trends and saw investors pull out of stocks trading at lofty valuations. The Nasdaq fell the least among its peers in recent sessions, as investors pivoted back into big technology names that had proven resilient through the pandemic. Focus now turns to the Fed's decision, due at 2 p.m. ET where officials are expected to signal a start to scaling down monthly bond purchases (see our preview here).  The Fed meeting comes after a period of market volatility stoked by Evergrande’s woes. China’s wider property-sector curbs are also feeding into concerns about a slowdown in the economic recovery from the pandemic. “Chair Jerome Powell could hint at the tapering approaching shortly,” said Sébastien Barbé, a strategist at Credit Agricole CIB. “However, given the current uncertainty factors (China property market, Covid, pace of global slowdown), the Fed should remain cautious when it comes to withdrawing liquidity support.” Meanwhile, confirming what Ray Dalio said that the taper will just bring more QE, Governing Council member Madis Muller said the  European Central Bank may boost its regular asset purchases once the pandemic-era emergency stimulus comes to an end. “Dovish signals could unwind some of the greenback’s gains while offering relief to stock markets,” Han Tan, chief market analyst at Exinity Group, wrote in emailed comments. A “hawkish shift would jolt markets, potentially pushing Treasury yields and the dollar past the upper bound of recent ranges, while gold and equities would sell off hunting down the next levels of support.” China avoided a major selloff as trading resumed following a holiday, after the country’s central bank boosted its injection of short-term cash into the financial system. MSCI’s Asia-Pacific index declined for a third day, dragged lower by Japan. Stocks were also higher in Europe. Basic resources - which bounced from a seven month low - and energy were among the leading gainers in the Stoxx Europe 600 index as commodity prices steadied after Beijing moved to contain fears of a spiraling debt crisis. Entain Plc rose more than 7%, extending Tuesday’s gain as it confirmed it received a takeover proposal from DraftKings Inc. Peer Flutter Entertainment Plc climbed after settling a legal dispute.  Here are some of the biggest European movers today: Entain shares jump as much as 11% after DraftKings Inc. offered to acquire the U.K. gambling company for about $22.4 billion. Vivendi rises as much as 3.1% in Paris, after Tuesday’s spinoff of Universal Music Group. Legrand climbs as much as 2.1% after Exane BNP Paribas upgrades to outperform and raises PT to a Street-high of EU135. Orpea shares falls as much as 2.9%, after delivering 1H results that Jefferies (buy) says were a “touch” below consensus. Bechtle slides as much as 5.1% after Metzler downgrades to hold from buy, saying persistent supply chain problems seem to be weighing on growth. Sopra Steria drops as much as 4.1% after Stifel initiates coverage with a sell, citing caution on company’s M&A strategy Despite the Evergrande announcement, Asian stocks headed for their longest losing streak in more than a month amid continued China-related concerns, with traders also eying policy decisions from major central banks. The MSCI Asia Pacific Index dropped as much as 0.7% in its third day of declines, with TSMC and Keyence the biggest drags. China’s CSI 300 tumbled as much as 1.9% as the local market reopened following a two-day holiday. However, the gauge came off lows after an Evergrande unit said it will make a bond interest payment and as China’s central bank boosted liquidity.  Taiwan’s equity benchmark led losses in Asia on Wednesday, dragged by TSMC after a two-day holiday, while markets in Hong Kong and South Korea were closed. Key stock gauges in Australia, Indonesia and Vietnam rose “A liquidity injection from the People’s Bank of China accompanied the Evergrande announcement, which only served to bolster sentiment further,” according to DailyFX’s Thomas Westwater and Daniel Dubrovsky. “For now, it appears that market-wide contagion risk linked to a potential Evergrande collapse is off the table.” Japanese equities fell for a second day amid global concern over China’s real-estate sector, as the Bank of Japan held its key stimulus tools in place while flagging pressures on the economy. Electronics makers were the biggest drag on the Topix, which declined 1%. Daikin and Fanuc were the largest contributors to a 0.7% loss in the Nikkei 225. The BOJ had been expected to maintain its policy levers ahead of next week’s key ruling party election. Traders are keenly awaiting the Federal Reserve’s decision due later for clues on the U.S. central banks plan for tapering stimulus. “Markets for some time have been convinced that the BOJ has reached the end of the line on normalization and will remain in a holding pattern on policy until at least April 2023 when Governor Kuroda is scheduled to leave,” UOB economist Alvin Liew wrote in a note. “Attention for the BOJ will now likely shift to dealing with the long-term climate change issues.” In the despotic lockdown regime that is Australia, the S&P/ASX 200 index rose 0.3% to close at 7,296.90, reversing an early decline in a rally led by mining and energy stocks. Banks closed lower for the fourth day in a row. Champion Iron was among the top performers after it was upgraded at Citi. IAG was among the worst performers after an earthquake caused damage to buildings in Melbourne. In New Zealand, the S&P/NZX 50 index rose 0.3% to 13,215.80 In FX, commodity currencies rallied as concerns about China Evergrande Group’s debt troubles eased as China’s central bank boosted liquidity and investors reviewed a statement from the troubled developer about an interest payment. Overnight implied volatility on the pound climbed to the highest since March ahead of Bank of England’s meeting on Thursday. The British pound weakened after Business Secretary Kwasi Kwarteng warnedthat people should prepare for longer-term high energy prices amid a natural-gas shortage that sent power costs soaring. Several U.K. power firms have stopped taking in new clients as small energy suppliers struggle to meet their previous commitments to sell supplies at lower prices. Overnight volatility in the euro rises above 10% for the first time since July ahead of the Federal Reserve’s monetary policy decision announcement. The Aussie jumped as much as 0.5% as iron-ore prices rebounded. Spot surged through option-related selling at 0.7240 before topping out near 0.7265 strikes expiring Wednesday, according to Asia- based FX traders.  Elsewhere, the yen weakened and commodity-linked currencies such as the Australian dollar pushed higher. In rates, the dollar weakened against most of its Group-of-10 peers. Treasury futures were under modest pressure in early U.S. trading, leaving yields cheaper by ~1.5bp from belly to long-end of the curve. The 10-year yield was at ~1.336% steepening the 2s10s curve by ~1bp as the front-end was little changed. Improved risk appetite weighed; with stock futures have recovering much of Tuesday’s losses as Evergrande concerns subside. Focal point for Wednesday’s session is FOMC rate decision at 2pm ET.   FOMC is expected to suggest it will start scaling back asset purchases later this year, while its quarterly summary of economic projections reveals policy makers’ expectations for the fed funds target in coming years in the dot-plot update; eurodollar positions have emerged recently that anticipate a hawkish shift Bitcoin dropped briefly below $40,000 for the first time since August amid rising criticism from regulators, before rallying as the mood in global markets improved. In commodities, Iron ore halted its collapse and metals steadied. Oil advanced for a second day. Bitcoin slid below $40,000 for the first time since early August before rebounding back above $42,000.   To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September. Market Snapshot S&P 500 futures up 0.4% to 4,362.25 STOXX Europe 600 up 0.5% to 461.19 MXAP down 0.7% to 199.29 MXAPJ down 0.4% to 638.39 Nikkei down 0.7% to 29,639.40 Topix down 1.0% to 2,043.55 Hang Seng Index up 0.5% to 24,221.54 Shanghai Composite up 0.4% to 3,628.49 Sensex little changed at 59,046.84 Australia S&P/ASX 200 up 0.3% to 7,296.94 Kospi up 0.3% to 3,140.51 Brent Futures up 1.5% to $75.47/bbl Gold spot up 0.0% to $1,775.15 U.S. Dollar Index little changed at 93.26 German 10Y yield rose 0.6 bps to -0.319% Euro little changed at $1.1725 Top Overnight News from Bloomberg What would it take to knock the U.S. recovery off course and send Federal Reserve policy makers back to the drawing board? Not much — and there are plenty of candidates to deliver the blow The European Central Bank will discuss boosting its regular asset purchases once the pandemic-era emergency stimulus comes to an end, but any such increase is uncertain, Governing Council member Madis Muller said Investors seeking hints about how Beijing plans to deal with China Evergrande Group’s debt crisis are training their cross hairs on the central bank’s liquidity management A quick look at global markets courtesy of Newsquawk Asian equity markets traded mixed as caution lingered ahead of upcoming risk events including the FOMC, with participants also digesting the latest Evergrande developments and China’s return to the market from the Mid-Autumn Festival. ASX 200 (+0.3%) was positive with the index led higher by the energy sector after a rebound in oil prices and as tech also outperformed, but with gains capped by weakness in the largest-weighted financials sector including Westpac which was forced to scrap the sale of its Pacific businesses after failing to secure regulatory approval. Nikkei 225 (-0.7%) was subdued amid the lack of fireworks from the BoJ announcement to keep policy settings unchanged and ahead of the upcoming holiday closure with the index only briefly supported by favourable currency outflows. Shanghai Comp. (+0.4%) was initially pressured on return from the long-weekend and with Hong Kong markets closed, but pared losses with risk appetite supported by news that Evergrande’s main unit Hengda Real Estate will make coupon payments due tomorrow, although other sources noted this is referring to the onshore bond payments valued around USD 36mln and that there was no mention of the offshore bond payments valued at USD 83.5mln which are also due tomorrow. Meanwhile, the PBoC facilitated liquidity through a CNY 120bln injection and provided no surprises in keeping its 1-year and 5-year Loan Prime Rates unchanged for the 17th consecutive month at 3.85% and 4.65%, respectively. Finally, 10yr JGBs were flat amid the absence of any major surprises from the BoJ policy announcement and following the choppy trade in T-notes which were briefly pressured in a knee-jerk reaction to the news that Evergrande’s unit will satisfy its coupon obligations tomorrow, but then faded most of the losses as cautiousness prevailed. Top Asian News Gold Steady as Traders Await Outcome of Fed Policy Meeting Evergrande Filing on Yuan Bond Interest Leaves Analysts Guessing Singapore Category E COE Price Rises to Highest Since April 2014 Asian Stocks Fall for Third Day as Focus Turns to Central Banks European equities (Stoxx 600 +0.5%) trade on a firmer footing in the wake of an encouraging APAC handover. Focus overnight was on the return of Chinese participants from the Mid-Autumn Festival and news that Evergrande’s main unit, Hengda Real Estate will make coupon payments due tomorrow; however, we await indication as to whether they will meet Thursday’s offshore payment deadline as well. Furthermore, the PBoC facilitated liquidity through a CNY 120bln injection whilst keeping its 1-year and 5-year Loan Prime Rates unchanged (as expected). Note, despite gaining yesterday and today, thus far, the Stoxx 600 is still lower to the tune of 0.7% on the week. Stateside, futures are also trading on a firmer footing ahead of today’s FOMC policy announcement, at which, market participants will be eyeing any clues for when the taper will begin and digesting the latest dot plot forecasts. Furthermore, the US House voted to pass the bill to fund the government through to December 3rd and suspend the debt limit to end-2022, although this will likely be blocked by Senate Republicans. Back to Europe, sectors are mostly firmer with outperformance in Basic Resources and Oil & Gas amid upside in the metals and energy complex. Elsewhere, Travel & Leisure is faring well amid further upside in Entain (+6.1%) with the Co. noting it rejected an earlier approach from DraftKings at GBP 25/shr with the new offer standing at GBP 28/shr. Additionally for the sector, Flutter Entertainment (+4.1%) are trading higher after settling the legal dispute between the Co. and Commonwealth of Kentucky. Elsewhere, in terms of deal flow, Iliad announced that it is to acquire UPC Poland for around USD 1.8bln. Top European News Energy Cost Spike Gets on EU Ministers’ Green Deal Agenda Travel Startup HomeToGo Gains in Frankfurt Debut After SPAC Deal London Stock Exchange to Shut Down CurveGlobal Exchange EU Banks Expected to Add Capital for Climate Risk, EBA Says In FX, trade remains volatile as this week’s deluge of global Central Bank policy meetings continues to unfold amidst fluctuations in broad risk sentiment from relatively pronounced aversion at various stages to a measured and cautious pick-up in appetite more recently. Hence, the tide is currently turning in favour of activity, cyclical and commodity currencies, albeit tentatively in the run up to the Fed, with the Kiwi and Aussie trying to regroup on the 0.7000 handle and 0.7350 axis against their US counterpart, and the latter also striving to shrug off negative domestic impulses like a further decline below zero in Westpac’s leading index and an earthquake near Melbourne. Next up for Nzd/Usd and Aud/Usd, beyond the FOMC, trade data and preliminary PMIs respectively. DXY/CHF/EUR/CAD - Notwithstanding the overall improvement in market tone noted above, or another major change in mood and direction, the Dollar index appears to have found a base just ahead of 93.000 and ceiling a similar distance away from 93.500, as it meanders inside those extremes awaiting US existing home sales that are scheduled for release before the main Fed events (policy statement, SEP and post-meeting press conference from chair Powell). Indeed, the Franc, Euro and Loonie have all recoiled into tighter bands vs the Greenback, between 0.9250-26, 1.1739-17 and 1.2831-1.2770, but with the former still retaining an underlying bid more evident in the Eur/Chf cross that is consolidating under 1.0850 and will undoubtedly be acknowledged by the SNB tomorrow. Meanwhile, Eur/Usd has hardly reacted to latest ECB commentary from Muller underpinning that the APP is likely to be boosted once the PEPP envelope is closed, though Usd/Cad is eyeing a firm rebound in oil prices in conjunction with hefty option expiry interest at the 1.2750 strike (1.8 bn) that may prevent the headline pair from revisiting w-t-d lows not far beneath the half round number. GBP/JPY - The major laggards, as Sterling slips slightly further beneath 1.3650 against the Buck to a fresh weekly low and Eur/Gbp rebounds from circa 0.8574 to top 0.8600 on FOMC day and T-1 to super BoE Thursday. Elsewhere, the Yen has lost momentum after peaking around 109.12 and still not garnering sufficient impetus to test 109.00 via an unchanged BoJ in terms of all policy settings and guidance, as Governor Kuroda trotted out the no hesitation to loosen the reins if required line for the umpteenth time. However, Usd/Jpy is holding around 109.61 and some distance from 1.1 bn option expiries rolling off between 109.85-110.00 at the NY cut. SCANDI/EM - Brent’s revival to Usd 75.50+/brl from sub-Usd 73.50 only yesterday has given the Nok another fillip pending confirmation of a Norges Bank hike tomorrow, while the Zar has regained some poise with the aid of firmer than forecast SA headline and core CPI alongside a degree of retracement following Wednesday’s breakdown of talks on a pay deal for engineering workers that prompted the union to call a strike from early October. Similarly, the Cnh and Cny by default have regrouped amidst reports that the CCP is finalising details to restructure Evergrande into 3 separate entities under a plan that will see the Chinese Government take control. In commodities, WTI and Brent are firmer this morning though once again fresh newsflow for the complex has been relatively slim and largely consisting of gas-related commentary; as such, the benchmarks are taking their cue from the broader risk tone (see equity section). The improvement in sentiment today has brought WTI and Brent back in proximity to being unchanged on the week so far as a whole; however, the complex will be dictated directly by the EIA weekly inventory first and then indirectly, but perhaps more pertinently, by today’s FOMC. On the weekly inventories, last nights private release was a larger than expected draw for the headline and distillate components, though the Cushing draw was beneath expectations; for today, consensus is a headline draw pf 2.44mln. Moving to metals where the return of China has seen a resurgence for base metals with LME copper posting upside of nearly 3.0%, for instance. Albeit there is no fresh newsflow for the complex as such, so it remains to be seen how lasting this resurgence will be. Finally, spot gold and silver are firmer but with the magnitude once again favouring silver over the yellow metal. US Event Calendar 10am: Aug. Existing Home Sales MoM, est. -1.7%, prior 2.0% 2pm: Sept. FOMC Rate Decision (Lower Boun, est. 0%, prior 0% DB's Jim Reid concludes the overnight wrap All eyes firmly on China this morning as it reopens following a 2-day holiday. As expected the indices there have opened lower but the scale of the declines are being softened by the PBoC increasing its short term cash injections into the economy. They’ve added a net CNY 90bn into the system. On Evergrande, we’ve also seen some positive headlines as the property developers’ main unit Hengda Real Estate Group has said that it will make coupon payment for an onshore bond tomorrow. However, the exchange filing said that the interest payment “has been resolved via negotiations with bondholders off the clearing house”. This is all a bit vague and doesn’t mention the dollar bond at this stage. Meanwhile, Bloomberg has reported that Chinese authorities have begun to lay the groundwork for a potential restructuring that could be one of the country’s biggest, assembling accounting and legal experts to examine the finances of the group. All this follows news from Bloomberg yesterday that Evergrande missed interest payments that had been due on Monday to at least two banks. In terms of markets the CSI (-1.11%), Shanghai Comp (-0.29%) and Shenzhen Comp (-0.53%) are all lower but have pared back deeper losses from the open. We did a flash poll in the CoTD yesterday (link here) and after over 700 responses in a couple of hours we found only 8% who we thought Evergrande would still be impacting financial markets significantly in a month’s time. 24% thought it would be slightly impacting. The other 68% thought limited or no impact. So the world is relatively relaxed about contagion risk for now. The bigger risk might be the knock on impact of weaker Chinese growth. So that’s one to watch even if you’re sanguine on the systemic threat. Craig Nicol in my credit team did a good note yesterday (link here) looking at the contagion risk to the broader HY market. I thought he summed it up nicely as to why we all need to care one way or another in saying that “Evergrande is the largest corporate, in the largest sector, of the second largest economy in the world”. For context AT&T is the largest corporate borrower in the US market and VW the largest in Europe. Turning back to other Asian markets now and the Nikkei (-0.65%) is down but the Hang Seng (+0.51%) and Asx (+0.58%) are up. South Korean markets continue to remain closed for a holiday. Elsewhere, yields on 10y USTs are trading flattish while futures on the S&P 500 are up +0.10% and those on the Stoxx 50 are up +0.21%. Crude oil prices are also up c.+1% this morning. In other news, the Bank of Japan policy announcement overnight was a non-event as the central bank maintained its yield curve target while keeping the policy rate and asset purchases plan unchanged. The central bank also unveiled more details of its green lending program and said that it would immediately start accepting applications and would begin making the loans in December. The relatively calm Asian session follows a stabilisation in markets yesterday following their rout on Monday as investors looked forward to the outcome of the Fed’s meeting later today. That said, it was hardly a resounding performance, with the S&P 500 unable to hold on to its intraday gains and ending just worse than unchanged after the -1.70% decline the previous day as investors remained vigilant as to the array of risks that continue to pile up on the horizon. One of these is in US politics and legislators seem no closer to resolving the various issues surrounding a potential government shutdown at the end of the month, along with a potential debt ceiling crisis in October, which is another flashing alert on the dashboard for investors that’s further contributing to weaker sentiment right now. Looking ahead now, today’s main highlight will be the latest Federal Reserve decision along with Chair Powell’s subsequent press conference, with the policy decision out at 19:00 London time. Markets have been on edge for any clues about when the Fed might begin to taper asset purchases, but concern about tapering actually being announced at this meeting has dissipated over recent weeks, particularly after the most recent nonfarm payrolls in August came in at just +235k, and the monthly CPI print also came in beneath consensus expectations for the first time since November. In terms of what to expect, our US economists write in their preview (link here) that they see the statement adopting Chair Powell’s language that a reduction in the pace of asset purchases is appropriate “this year”, so long as the economy remains on track. They see Powell maintaining optionality about the exact timing of that announcement, but they think that the message will effectively be that the bar to pushing the announcement beyond November is relatively high in the absence of any material downside surprises. This meeting also sees the release of the FOMC’s latest economic projections and the dot plot, where they expect there’ll be an upward drift in the dots that raises the number of rate hikes in 2023 to 3, followed by another 3 increases in 2024. Back to yesterday, and as mentioned US equity markets fell for a second straight day after being unable to hold on to earlier gains, with the S&P 500 slightly lower (-0.08%). High-growth industries outperformed with biotech (+0.38%) and semiconductors (+0.18%) leading the NASDAQ (+0.22%) slightly higher, however the Dow Jones (-0.15%) also struggled. Europe saw a much stronger performance though as much of the US decline came after Europe had closed. The STOXX 600 gained +1.00% to erase most of Monday’s losses, with almost every sector in the index ending the day in positive territory. With risk sentiment improving for much of the day yesterday, US Treasuries sold off slightly and by the close of trade yields on 10yr Treasuries were up +1.2bps to 1.3226%, thanks to a +1.8bps increase in real yields. However, sovereign bonds in Europe told a different story as yields on 10yr bunds (-0.3bps), OATs (-0.3bps) and BTPs (-1.9bps) moved lower. Other safe havens including gold (+0.59%) and silver (+1.02%) also benefited, but this wasn’t reflected across commodities more broadly, with Bloomberg’s Commodity Spot Index (-0.30%) losing ground for a 4th consecutive session. Democratic Party leaders plan to vote on the Senate-approved $500bn bipartisan infrastructure bill next Monday, even with no resolution to the $3.5tr budget reconciliation measure that encompasses the remainder of the Biden Administration’s economic agenda. Democrats continue to work on the reconciliation measure but have turned their attention to the debt ceiling and government funding bills.Congress has fewer than two weeks before the current budget expires – on Oct 1 – to fund the government and raise the debt ceiling. Republicans yesterday noted that the Democrats could raise the ceiling on their own through the reconciliation process, with many saying that they would not be offering their support to any funding bill. Democrats continue to push for a bipartisan bill to raise the debt ceiling, pointing to their votes during the Trump administration. If Democrats are forced to tie the debt ceiling and funding bills to budget reconciliation, it could limit how much of the $3.5 trillion bill survives the last minute negotiations between progressives and moderates. More to come over the next 10 days. Staying on the US, there was an important announcement in President Biden’s speech at the UN General Assembly, as he said that he would work with Congress to double US funding to poorer nations to deal with climate change. That comes as UK Prime Minister Johnson (with the UK hosting the COP26 summit in less than 6 weeks’ time) has been lobbying other world leaders to find the $100bn per year that developed economies pledged by 2020 to support developing countries as they reduce their emissions and deal with climate change. In Germany, there are just 4 days to go now until the federal election, and a Forsa poll out yesterday showed a slight narrowing in the race, with the centre-left SPD remaining on 25%, but the CDU/CSU gained a point on last week to 22%, which puts them within the +/- 2.5 point margin of error. That narrowing has been seen in Politico’s Poll of Polls as well, with the race having tightened from a 5-point SPD lead over the CDU/CSU last week to a 3-point one now. Turning to the pandemic, Johnson & Johnson reported that their booster shot given 8 weeks after the first offered 100% protection against severe disease, 94% protection against symptomatic Covid in the US, and 75% against symptomatic Covid globally. Speaking of boosters, Bloomberg reported that the FDA was expected to decide as soon as today on a recommendation for Pfizer’s booster vaccine. That follows an FDA advisory panel rejecting a booster for all adults last Friday, restricting the recommendation to those over-65 and other high-risk categories. Staying with the US and vaccines, President Biden announced that the US was ordering 500mn doses of the Pfizer vaccine to be exported to the rest of the world. On the data front, there were some strong US housing releases for August, with housing starts up by an annualised 1.615m (vs. 1.55m expected), and building permits up by 1.728m (vs. 1.6m expected). Separately, the OECD released their Interim Economic Outlook, which saw them upgrade their inflation expectations for the G20 this year to +3.7% (up +0.2ppts from May) and for 2022 to +3.9% (up +0.5ppts from May). Their global growth forecast saw little change at +5.7% in 2021 (down a tenth) and +4.5% for 2022 (up a tenth). To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September. Tyler Durden Wed, 09/22/2021 - 08:05.....»»

Category: blogSource: zerohedgeSep 22nd, 2021

Houston-area bank buys more branches in Texas

Conroe-based Spirit of Texas Bancshares Inc. (Nasdaq: STXB), the holding company for Spirit of Texas Bank, is making another acquisition. The bank agreed to acquire four branch offices from Simmons Bank, a subsidiary of Arkansas-based Simmons Fir.....»»

Category: topSource: bizjournalsDec 23rd, 2019

Bar Harbor Bankshares to acquire 8 Maine bank branches

See the rest of the story here. provides the latest financial news as it breaks. Known as a leader in market intelligence, The Fl.....»»

Category: blogSource: theflyonthewallJul 8th, 2019

$66B banking merger would create new national financial powerhouse

BB&T Corp. — which has more than a dozen branches and millions of dollars of deposits in Austin — plans to merge with SunTrust in to create the nation's sixth-largest bank......»»

Category: topSource: bizjournalsFeb 7th, 2019