Tag: America


Bank Of America Beats The $15 Minimum Wage Movement


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Bank of America is jumping ahead of the $15 minimum wage movement. Beginning May 1st, it will hike its minimum wage to $17, and to $20 by 2021. Other big banks like JPMorgan Chase have already announced plans to hike the minimum wage to $18.

As of 2017, Bank of America was the fourth 
largest employer
 in the banking sector in the US, with more than 142,000 employees. 

Bank

Number of Employees

Wells Fargo

232,321

JPMorgan Chase

191,929

Citibank

169,092

Bank of America

142,412

Source: Statista.com

What drives Bank of America’s
generosity to its employees? Several things. One of them is a tight labor market that has companies competing for a smaller pool of qualified employees.


In recent months we’ve seen Target, Amazon, Walmart, McDonalds and others all indicate they’re willing to pay a $15 an hour minimum wage as the price to hire good workers from a steadily shrinking labor pool,” says
Jeff Yastine, Senior Equities Analyst at BanyanHill Publishing
. “So
it’s
not surprising that Bank of America would as well. In fact, given the need for bank workers with strong math ability and other specialized skills,
it’s
more surprising that the bank didn’t commit to paying $15 a year or two earlier.”

 

Then there are the layoffs and the bad rap banks have with the millennial generation, according to
Yastine.

 

“Given the number of layoffs in past years as banks closed branches, and the overall ‘bad rep’ that banks have in general with millennials, my prediction is that BofA and other institutions may find themselves playing catchup, and upping wages still further, in order to attract the necessary people to offset retirements from baby boomers,” he adds. 

And there’s the rising profitability of big banks, following a string of interest rises by the Federal Reserve, which boosted the “interest rate spread.”
 That’s the difference between
what banks receive on the interest they charge borrowers and the interest they pay depositors.
 

This week, Bank of America reported strong financial results
as did JPMorgan Bank last week. Both banks cited the favorable interest rate environment as the driver of profitability.

BoA and JPM Sharers YTD

Koyfin

BoA Net Income Margin

Koyfin


The Bank itself is doing pretty well from a balance sheet perspective and also wanted to reinvest into their business, outside from the common stock buy-back we’ve seen from the bigger companies,” says Jordan Awoye, Managing Partner at Awoye Capital.

 

Lastly, there’s a public ploy issue by celebrity executives to reform capitalism w
ith the richest man in the world, Jeff Bezos, “calling out its competition to raise its minimum wage in his annual shareholder letter,” adds Awoye. “From the public’s eye, Bank of America is part of this push to tip the scale for the employee market, which ultimately can be amazing PR for the bank.”

 

 

Provided, of course, that the economy continues to grow for years to come, defying historical norms.

 

 

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America Should Stop Supporting The Lavish Life Of Pakistan’s Rich


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Photographer: Asad Zaidi/Bloomberg

© 2018 Bloomberg Finance LP

America should stop providing aid to Pakistan, which ends up supporting the country’s rich and powerful.

It should let China and Saudi Arabia do it.

Providing financial aid to poor countries around the world makes a great deal of sense for America, both on humanitarian and geopolitical grounds.The trouble is that in some cases, American foreign aid ends up supporting the lifestyles of
the elite rather than the lives of the poor.

Pakistan is a case in point.
For decades, Washington has been very generous to
that South Asian nation
, according to Akbar Zaidi, a Karachi-based political economist and Columbia University Visiting Scholar. It helped the country deal with chronic debt crisis.

 

“Washington support is often reflected in its endorsement of Pakistan’s applications for aid from international financial institutions such as the International Monetary Fund and the World Bank,” says Zaidi. “It helps to have the United States as an ally when it comes to seeking assistance from multilateral sources.”

 

Pakistan’s Corruption Index

Koyfin

Like back in December 2001, when Washington brokered
a $12 billion IMF debt relief package for Islamabad, in exchange f
or
support to fight Islamic militancy in the region.

 

So w
hy Pakistan is running into debt problems that require foreign aid to solve them?

 

Because the country’s elite is refusing to pay its fair share of taxes, according to Zaidi.

 

“These problems are perennial—it would be incorrect to call them a “crisis”—largely because of the Pakistani elite’s ability to avoid taxing itself,” says Zaidi. “Instead, successive governments have preferred to leverage Islamic militancy, ignoring the risks of doing so) while relying on financial aid from outside countries with geopolitical interests in the region from international financial institutions.”

 

The Pakistani elite
, he continues, “
frightens foreigners into proving funds to stabilize the country against  a self-created, false threat of extremists taking over a nuclear state.”

 

Meanwhile, foreign aid allows the country’s elite to live a lavish life. “This is a classic moral hazard problem: the luxury of always being
bailed out
has allowed the Pakistani elite to live with great impunity. Beyond responsibility in cocoons of lavish unaccountability. They feel little need to undertake structural reforms of the economy and institutions that would result in a fairer, more just, and more equitable form of government and representation.”

 

Instead, they prefer
London, New York, and Dubai more than
they do
Karachi 

when it comes to investing and partying with their money, that is.

 

That’s according to the former director of United Nations Development Programme (UNDP) for Pakistan
,
 Marc-André Franche.  

 

“You cannot have an elite that takes advantage of very cheap and uneducated labour when it comes to making money, and when it is time to party is found in London
;
when it’s time to buy things, in Dubai; and when it’s time to buy property it invests in Dubai or Europe or New York. The elite needs to decide do they want a country or not,” Franche 
stated
 in an 
interview
 with the 
Business
 Recorder.

 

All good reasons why
America should let China and Saudi Arabia, Pakistan’s new allies, support the lifestyle of
their
rich and powerful.

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Bank Parade Continues with Bank of America as Netflix Earnings Await Investors After Close


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The bank earnings parade continues Tuesday, and this time Bank of America (BAC) is in the spotlight. Later today, however, focus could shift to Netflix (NFLX) as it becomes the first “FAANG” sighting of the season.

At the same time, major indices took on a positive tone early in the day amid what appeared to be more hopes of a U.S. tariff deal with China. That situation remains fluid as every little rumor draws attention. Today the rumors are positive and the market is looking stronger. Tomorrow it could be the opposite. For investors, it might go back to paying attention to earnings and listening for company outlooks.

After some mixed bank results Monday from Citigroup (C) and Goldman Sachs (GS), Bank of America kicked off the day by beating third-party consensus earnings per share estimates but coming up just shy in the revenue department. Earnings of $0.70 a share beat the $0.66 average analyst estimate, while revenue of $23 billion was slightly under the $23.33 billion that analysts had expected.

Strength in BAC mostly appeared to come from the retail side. In its press release, BAC said “economic and consumer activity in the U.S. continue to be solid,” and that businesses of every size are borrowing. It called the capital markets environment “challenging,” however. Shares of the company gyrated around unchanged in pre-market trading.

BAC’s positive comments about consumer activity and the U.S. economy offer more evidence of how healthy consumers are in the driver’s seat. You may not consider consumers as the major driving force behind bank earnings, but today they might have been.

The healthy consumer also might have been one factor helping to give Johnson & Johnson (JNJ) a boost in Q1 as the company beat third-party consensus for both earnings and revenue. Shares rose in pre-market trading.

BAC wasn’t the only big financial firm reporting Tuesday. BlackRock (BLK) also surpassed analysts’ profit expectations while assets under management also climbed. Shares rose nearly 2% in pre-market trading.

The last big bank to report will be Morgan Stanley (MS), tomorrow morning. Before that, focus might turn to the Communication Services sector, where Netflix (NFLX) gets ready to share results after the close today. For NFLX, positive economic drivers have likely played a role in its recent performance. Last quarter, the company posted results that beat Street estimates for earnings and subscriber numbers, but fell a bit short on revenue. It offered guidance for Q1 that was more modest than third-party analysts expected.

It’s a busy earnings afternoon, with Netflix (NFLX), IBM (IBM), CSX (CSX), and United Continental (UAL) all unveiling their Q1 results after the close. Basically, that could give people a taste of how a bunch of different parts of the economy are coming along, and CEO comments, as they often are, could be worth listening to. NFLX is the first “FAANG” of the season, and it’s limping a little going into reporting day as investors assessed a new streaming threat from Walt Disney (DIS). More on that below.

Meanwhile, investors are steeling themselves for key data on retail sales and housing later this week, and the next Fed meeting isn’t far away, either, due at the end of the month.

We’re still early in earnings season, but so far companies reporting have been roughly in line with the historic average as far as beating Wall Street’s expectations, FactSet reported.

Financials Lose Ground To Start Week

The takeaway from Monday might be, “it could have been worse.” After all, two big banks reported lower-than-expected Q1 revenue to start the day, and Financials stayed under pressure most of the session. However, major indices charged back to finish well off their lows.

Earnings from Goldman Sachs (GS) and Citigroup (C) were kind of a mixed picture despite revenue weakness. Both beat analysts’ expectations on earnings per share, but left some analysts wondering if they can find ways to pick up the pace as the year continues. Many face some growth challenges, including the Fed’s low interest rate policy and investors who’ve retreated a bit from trading the markets after last year’s Q4 washout.

GS has made a move toward the consumer banking and is working hard to control costs. C, meanwhile, has been buying back shares and paying dividends to shareholders. The question might be whether this sort of activity can get investors excited about buying the stocks even as some industry fundamentals retreat. That’s something that only can be answered over time.

The Tiger Effect?

On the subject of time, it had been 14 years since Tiger Woods last won the Masters, but his victory over the weekend appeared to quickly have an impact on the athletic apparel sector as shares of Nike (NKE) and Foot Locker (FL) both jumped Monday. That had some analysts talking about a possible “Masters bounce” for the industry.

Another industry getting a bounce Monday was solid waste, where a bunch of stocks ticked higher following the biggest acquisition in a decade for the sector. Waste Management’s (WM) announcement that it’s buying Advanced Disposal Services (ADSW) for $3 billion appeared to help both stocks clean up for their respective shareholders. Sometimes when there’s a big deal announced you see shares of the acquiring company take a dip, but that wasn’t the case Monday with WM, maybe in part because the company said the deal would be immediately accretive to cash flow and adjusted earnings. The deal expands WM’s footprint into certain Midwest states, The Wall Street Journal noted.

Looking down from 30,000 feet, it wasn’t a really dramatic way for markets to start the week. Financials, Real Estate, and Energy were among the biggest market losers Monday, while Consumer Staples and Health Care led. For Health Care, that represented a turn-around after sharp losses last week as uncertainty about health policy swirled. One thing worth noting is how biotech stocks have diverged from other Health Care sub-sectors like insurers so far this year. Biotech has been pretty powerful, but Health Care is at the bottom of the sector leaderboard.

One day is never a trend, but the way things shaped up Monday, it looked like investors moved into more cautious territory after the S&P 500 Index (SPX) climbed above 2900 Friday for the first time since last fall. Today and tomorrow it could be interesting to see if the cyclicals get their game back ahead of the long weekend, as the market is closed Friday for the Good Friday holiday. Volatility, which had been sinking to new lows for the year, dialed back up a bit, but did pull back from early session highs.

If caution was the watchword in stocks Monday, it didn’t seem to extend much into the Treasury market. The 10-year yield was barely lower, ending the day right near 2.55%. This followed remarks early in the day by Chicago Fed President Charles Evans, who said risks “from the downside” currently outweigh “upside” risks. He added he’d be happy to keep rates at their current level until the fall of 2020 if that helps inflation reach a sustainable level.

Evans’ comments didn’t appear to have much influence on the U.S. Dollar Index, which was flat and finished a few points below 97. The dollar has been pretty range-bound recently but hasn’t retreated all that much from the year’s highs. That might be a sign of investors hanging on to something they see as a security blanket as overseas economic growth lags and trade talks continue with no end date in sight.

FIRST FAANG: With Netflix (NFLX) the first FAANG scheduled to report after the close today, here’s a look at how FAANGs have performed since the start of the year. They’re up more than 20%, which is roughly even with the Nasdaq (COMP). However, weakness in NFLX over the last few days along with a brief halt in Apple’s (AAPL) upward progress have pressured FAANGs lately. Data Source: ICE. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

thinkorswim

Slicing the Apple: Looking away from earnings for a moment, Apple (AAPL) shares had a choppy time late last week and again Monday after getting upgraded by one analyst and downgraded by another. One school of thought says it’s good to see AAPL gaining market share in China, but the other theory is that market share gains are coming because AAPL had to cut prices, which could put the squeeze on its margins. AAPL shares briefly climbed above $200 a share Friday and have had a great year so far, but sometimes it feels like $200 could be a mental barrier for the stock. That looked like the case again Monday as shares pulled up just 15 cents short of the big round number. For the FAANGs in general, especially after NFLX’s weak performance Friday and more weakness Monday amid competitive worries, the question remains whether they can regain their mojo.

Tariffs Hit Tokyo: It’s not just the U.S. and Europe’s economies remaining in kind of a holding pattern amid the U.S./China trade battle. Japan is also feeling the impact, Bank of Japan (BOJ) President Haruhiko Kuroda told CNBC in an interview over the weekend. He said Japan’s exporters are feeling some pain from lack of Chinese demand as the tariff negotiations go on. Info tech exports are among the Japanese products seeing  a negative impact, he added. The next BOJ meeting takes place next week, and Kuroda told reporters earlier this month that the BOJ has tools to loosen monetary policy further if needed. Japan’s inflation rate hasn’t hit the BOJ’s 2% target despite years of easing policy.

Why care about Japan’s economy if you’re a U.S. investor? Well, the U.S. exported $114 billion in goods to Japan in 2017, making the country our fourth-largest trading partner. The main U.S. exports include agricultural products, machinery, aircraft, and optical and medical instruments, according to the U.S. Trade Representative. This might help explain why a resolution to the China tariff situation could have such a wide impact on many industries.

Stream Wars, Episode One: A New Entry: If there’s one key takeaway from last week’s announcement by The Walt Disney Company (DIS) that it would be launching its own streaming service, it’s that the mantra of iconic former CEO Michael Eisner still rings true today: “Content rules.” The big news—namely that the Disney+ service will launch November 12, that the company would be pulling all of its content from streaming giant Netflix (NFLX), and that its subscription price would undercut the competition, at least initially—sent shares of DIS up 10% and shares of NFLX down 3%. With all the content from its $71 billion asset acquisition from Twenty-First Century Fox, plus its 90-plus years of original content, DIS seems to be changing the rules of engagement regarding video streaming. When one considers that a handful of firms controls the vast majority of media content in the U.S., it’s possible that, in the future, we could see media partitioned into a few behind-the-subscription-wall streaming services. This is certainly a trend worth watching.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

 

 

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North America Could Continue To Weigh On Halliburton’s Results


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Attendees pass in front of the Halliburton Co. booth during the 2018 Offshore Technology Conference (OTC) in Houston, Texas. Photographer: Aaron M. Sprecher/Bloomberg

© 2018 Bloomberg Finance LP

Halliburton, the second-largest oilfield services provider, is expected to publish its Q1 2019 results on April 22. This note discusses Trefis’ expectations, as well as consensus estimates, for the company’s earnings.

What to expect from Halliburton in Q1 2019?

  • Consensus earnings expectations stand at ~ $0.22 per share, marking a 45% decline year
  • Consensus revenue expectations of $5.5 billion represent a slight year-over-year decline

What trends will drive the company’s results?

  • Halliburton is likely to underperform in the North American market (which accounted for ~60% of 2018 revenue), although international operations will fare better.
  • Average North American rig count over the quarter down 1% year-over-year, versus growth of 6% in international rig count
  • While crude oil prices also saw a modest recovery over the quarter, it is unlikely to have benefited results.

Why Is North America expected to underperform?

  • In the on-shore U.S. market, operators are looking to align investments to their cash flows, likely reducing oilfield services spending.
  • Operators could be focusing on spending on the inventory of drilled but uncompleted wells, reducing drilling-related activity.
  • Pipeline capacity in the Permian – the largest U.S. shale basin – is likely to remain a constraint until H2’19, weighing on activity in the region.
  • There has also been a meaningful decline in Canadian activity, with the average rig count down 30% year-over-year.

What about international markets?

  • Weather-related seasonality and the roll-off of higher-margin year-end product/software sales will result in a sequential decline in international revenue.
  • However, there could be a year-over-year improvement, driven by rising activity in markets such as Africa and the Asia Pacific
  • Moreover, equipment availability is expected to be tightening, potentially helping pricing.

View our interactive dashboard analysis on What’s Driving Our Price Estimate For Halliburton. You can change key drivers to arrive at your own price estimate for the company. In addition, you can see all our data for Energy Companies here.

Like our charts? Explore example interactive dashboards and create your own.

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What To Expect From Bank Of America On Tuesday


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The Bank of America branch on South Rochester Road, Rochester Hills, Michigan. Bank of America is an American financial services company and the second largest in America by deposits.

Getty

Bank of America Corp. is scheduled to release earnings before Tuesday’s open. The stock hit a record high of $55.08/share in 2006 and is currently trading near $30/share. The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock can easily gap down. To help you prepare, here is what the Street is expecting:

Earnings Preview:

Bank of America is expected to report $0.65/share on $23.29 billion in revenue. Meanwhile, the so-called Whisper number is $0.67. The Whisper number is the Street’s unofficial view on earnings.

Company Profile & Various Businesses:

Here is a brief company profile courtesy of Thomson Reuters Eikon:

Bank of America Corporation, incorporated on July 31, 1998, is a bank holding company (BHC) and a financial holding company. The Company is a financial institution, serving individual consumers, small- and middle-market businesses, institutional investors, corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services. The Company, through its banking and various non-bank subsidiaries, throughout the United States and in international markets, provides a range of banking and non-bank financial services and products through its business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, Global Markets and All Other.

Competition:

The Company competes with other financial services companies such as: JP Morgan, Wells Fargo, Morgan Stanley, Goldman Sachs, and Citigroup, just to name a few.

Pay Attention To How The Stock Reacts To The News:

From where I sit, the most important trait I look for during earnings season is how the stock reacts to the news.  

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NCT 127 To Perform On ‘Good Morning America’ As K-Pop’s Latest Mainstream Morning-Show Move


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LOS ANGELES, CA – OCTOBER 08: Taeyong, Jaehyun, Winwin, Doyoung and John Seo of boy band ‘NCT 127’ are seen performing at ‘Jimmy Kimmel Live’ on October 08, 2018 in Los Angeles, California. (Photo by BG017/Bauer-Griffin/GC Images)

Getty

Morning news shows are one of America’s strongest entertainment traditions and NCT 127 becomes the latest K-pop act brought into the fold.

The 10-member boy band will make their U.S. morning-show debut on Thursday, April 18 for a performance in GMA‘s Times Square studio. The show’s Strahan and Sara, the third hour of the program, also shared on Twitter that the outfit will perform during their segment. Previous to this appearance, NCT 127 performed on U.S. television in 2018 when they were guests on the Jimmy Kimmel Live! late-night talk show (where they delivered the first-ever live performance of their English single “Regular”) as well had a slot in the lineup for ABC’s Mickey’s 90th Spectacular special (performing alongside Josh Groban, Meghan Trainor and more).

As the No. 1 morning show both in audience viewership and in key demographic ratings, NCT 127’s GMA booking is impressive but not without warrant. Last year, the act sent their first full-length LP Regular-Irregular to the main Billboard 200 albums chart, peaking at No. 86, at the time becoming America’s highest-charting Korean boy band after BTS. The guys have used that platform to continue earning impressive chart stats as well as launch their first-ever U.S. tour days after their GMA debut, kicking off with opening night at the massive
Prudential
Center arena.

As the third K-pop act booked on Good Morning America following BTS and BLACKPINK, NCT 127’s performance also comes as yet another nod to the increasing mainstream awareness about the Korean-music scene and how more traditional media platforms, like morning shows, are embracing and becoming more open-minded with their musical booking—in particular, embracing the K-pop scene and its traditionally diverse and younger audience.

Tune in to Good Morning America at 7 a.m. ET.



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America Has A Monopoly Problem


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Without realizing it, we’ve become a nation of monopolies. A large and growing part of our economy is “owned” by a handful of companies that face little competition.

They have no incentive to deliver better products or to get more efficient. They simply rake in cash from people who have no choice but to hand it over.

This would be impossible if we had true capitalism.

Even if we admit some businesses are natural monopolies, most aren’t. Most of them found some non-capitalistic flaw to exploit.

In theory, this problem should solve itself as technology and consumer preferences change. Yet it isn’t happening. Axios outlined the problem in a recent article on farm bankruptcies.

Across industries, the U.S. has become a country of monopolies.

  • Three companies control about 80% of mobile telecoms. Three have 95% of credit cards. Four have 70% of airline flights within the U.S. Google handles 60% of search. The list goes on. (h/t The Economist)
  • In agriculture, four companies control 66% of U.S. hogs slaughtered in 2015, 85% of the steer, and half the chickens, according to the Department of Agriculture. (h/t Open Markets Institute)
  • Similarly, just four companies control 85% of U.S. corn seed sales, up from 60% in 2000, and 75% of soy bean seed, a jump from about half, the Agriculture Department says. Far larger than anyone — the American companies DowDuPont and Monsanto.

As we have reported, some economists say this concentration of market power is gumming up the economy and is largely to blame for decades of flat wages and weak productivity growth.

Gummed-Up Economy

“Gumming up the economy” is a good way to describe it.

Competition is an economic lubricant. The machine works more efficiently when all the parts move freely. We get more output from the same input, or the same output with less input.

Take away competition and it all begins to grind together. Eventually friction brings it to a halt… sometimes a fiery one.

Normally, companies grow their profits by delivering better products at lower prices than their competitors. It is a dynamic process with competitors constantly dropping out and new ones appearing.

Joseph Schumpeter called this “creative destruction,” which sounds harsh but it’s absolutely necessary for economic growth.

Today, the creative destruction isn’t happening. And as companies refuse to die and monopolies refuse to improve, we struggle to generate even mild economic growth.

I think those facts are connected.

Uncreative Destruction

Some of this happened with good intentions.

Creative destruction means companies go out of business and workers lose their jobs. Maybe a new competitor will hire them eventually, but they suffer in the meantime.

Politicians try to help but finding the right balance is hard.

I assign greater blame to the central bankers, not just the Fed but its peers as well. For whatever reason, they kept short-term stimulus measures like QE and near zero rates (or negative in some places) for far too long.

The resulting flood of capital bypassed the creative destruction process.

A lot of this happens under the radar. You’ve probably seen stories about the Lyft IPO and other unicorns that will soon go public. This is news because it’s now so unusual.

The number of listed companies is shrinking because (a) cheap capital lets them stay private longer and (b) the founders and VCs often “exit” by selling to a larger, cash-flush competitor instead of going public.

An economy in which it is easier and cheaper to buy your competitors rather than out-innovate them is probably headed toward stagnation.

Drive for Scale

My usually bearish friend, hedge-fund manager Doug Kass, wrote last week that Amazon will be at $3,000 within a few years and $5,000 by 2025.

If it was anybody but Doug Kass, I would have probably ignored such a massively bullish analysis. But when Doug makes a case, I take notice.

Doug’s prediction got me thinking about scale. How do you compete with that?

It is like watching the small farmer disappear. Your heart is with them but the market demands scale. Can small farmers producing locally grown food survive? Absolutely. But it is a niche market.

And as the world demands scale, cheap money helps it go even faster. Understand this: Cheap money is not going away. Neither is technology and the drive for scale.

We can cheer for the “small farmer,” but the reality is that the world is moving to fewer competitors and larger businesses.

And as I write that, I literally find myself sighing. I hate writing those words. But I can’t avoid reality. The world is changing, and we must deal with it.

 

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