What Bank Earnings Tell Us About the Economy

2020-10-23T21:36:25+00:00October 23rd, 2020|Banks, Earnings Season|

It’s been a wild ride for the Select Bank Revenue(.BLXSBR) and Select Bank Earnings(.BLXSBE) indexes. Revenue for the sector dropped slightly as the Covid-19 crisis started, but remained well above levels from a couple years ago.BLX Select Bank Revenue Index

Bank earnings, however, dropped sharply as banks increased their loan loss provisions in expectation of large future losses:

BLX Global Select Bank Earnings

Last quarter banks complemented their dismal results with gloomy outlooks. Analysts scrambled […]

Dividend volatility and earnings derivatives

2020-07-29T13:53:15+00:00July 29th, 2020|Earnings Season|

One second order impact of Covid-19 has been a reduction in stock buybacks. It is possible that companies will buy back less stock for the foreseeable future. Obviously there will be a temporary reduction in share buybacks, at least until the virus is under control. There is also the reasonable possibility that the reduction in buybacks is long term.  This has interesting implications for capital markets in general, and earnings derivatives in particular.

Why would buyback reductions be longer lasting this time around? Criticism of share buybacks is now a near […]

Brace Yourself for 2020Q2 Earnings

2020-07-13T15:53:04+00:00July 9th, 2020|Earnings Season|

The future’s uncertain and the end is always near.

-The Doors, Roadhouse Blues

The second quarter of 2020 was one of the ugliest quarters in US Economic history. Most lockdowns related to the Covid-19 outbreak did not take effect until late March.  Consequently Q2 is bearing the brunt of the economic impact. It’s no surprise that there have been record high cuts to earnings forecasts. How bad will earnings be? It turns out the companies themselves don’t know.

Analysts have been forced to make forecasts with less help from company management. According […]

Earnings Season Will Never be the Same

2020-06-02T19:05:37+00:00June 2nd, 2020|Earnings Derivatives, Earnings Season|

Recent media coverage highlighting big changes coming to capital markets as a result of earnings derivatives: “Earnings Derivatives” Could Change Wall Street Earnings Season. 

From the article:


What has played out over the last few months is a stock market that has been subject to whipsawing prices based on news headlines, political uncertainty and the daily whims of market sentiment. Some stocks are having unexplainable plunges or surges in price.

One company has stepped in to provide a solution by creating an investment product that gives funds and portfolio managers […]

FAANG Earnings: Is Optimism Justified?

2020-04-28T11:33:46+00:00April 21st, 2020|Earnings Season, Indexes|

FAANG earnings are expected to be one of the few bright spots in a brutal earnings season.    Sell-side analysts have revised forecasts down, but are still expecting continued growth in revenue and earnings for the group.  Yet, given the extreme uncertainty in the market right now,  buyside investors likely have different views.   This is likely setting up an investment opportunity using earnings derivatives linked to the BLX FAANG Revenue Index or the BLX FAANG Earnings Index.

Netflix will report earnings after market close today.   Facebook, Apple, Amazon, and […]

Airline Earnings Are Bad- So What Can You Do?

2020-04-28T11:29:30+00:00April 20th, 2020|Earnings Season, Indexes|

There is no question that airline earnings are going to be terrible this quarter. The key questions for investors are : (1) How bad will they be? (2) How long till they recover; and most importantly, (3) What should investors do about it?

How bad and how long?

TSA Checkpoint traffic started to drop off precipitously towards the end of the first quarter.


TSA Checkpoint data provides preview of airline earnings

As we move through the second quarter, US air traffic is around 10% of normal.


Earnings Uncertainty: The Old Tools Don’t Work Anymore

2020-04-20T12:58:44+00:00April 20th, 2020|Earnings Derivatives, Earnings Season|

This is the most challenging earnings season in history.    Amidst the covid-19 induced earnings uncertainty, the old tools for trading earnings season won’t work anymore.  How can investors adapt?

Investing in a time of suspended earnings guidance

Most publicly traded companies have traditionally provided earnings guidance to help investors forecast near term performance, and estimate company valuation.  Although this practice is far from perfect, many investors rely on it in order to build forecast models and make decisions.  Yet management teams at most companies have no way of predicting how […]

Here Come Bank Earnings: There Simply is no Precedent

2020-04-13T20:53:38+00:00April 13th, 2020|Banks, Earnings Season|

Bank earnings reports provide a key vantage point from which to understand the economy.   In the past few years, most banks have consistently grown earnings, and consistently exceeded  analyst estimates. However, analysts have had a difficult time predicting bank earnings in the time of coronavirus.

As Chris Kotowski of Oppenheimer wrote:

This earnings preview is the most difficult to write in our careers because there is simply no precedent

On the one hand, increased market volatility will drive higher trading revenue. On the other hand, banks will need […]

FAANG Earnings Trends and Portfolio Strategy

2019-10-30T16:30:38+00:00October 30th, 2019|Earnings Season|

The FAANG stocks -Facebook, Amazon, Apple, Netflix and Google- have defined this market era. In spite of recent stumbles, FAANG Earnings reports consistently show how these companies have consolidated power in their respective markets.

The BLX FAANG Revenue index tracks changes in the trailing twelve month aggregate revenue of the FAANG stocks as a group. Since 2014, it has gone nearly straight up, illustrating the rapid growth of these businesses.

FAANG Earnings Reports Show Continued Revenue growht

FAANG earnings have gone […]

3 Key Themes From Bank Earnings Reports

2019-10-24T03:24:37+00:00October 24th, 2019|Banks, Earnings Season, Indexes|

Earnings season is now in full swing. Banks led the way with a flurry of earnings reports reflecting key themes in the global economy:

  • The trade war is a constant worry for corporate clients and we are just beginning to see the financial markets impact.   
  • The US consumer economy is strong, but bank executives are seeing signs of growing unease. 
  • Banks are in a technological arms race that will require significant ongoing investment to stay competitive

BLX Bank Indexes

Against […]

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