Entering text into the input field will update the search result below

Nightmare on Wall Street? Upcoming Bank Earnings Could Rock World Markets

Jun. 28, 2009 8:54 AM ETSDS, SDK34 Comments
Cliff Wachtel profile picture
Cliff Wachtel

Forget the movies. Forget the roller coasters. This summer’s real excitement: the coming second quarter bank earnings announcements, and their potential effect on world stocks, currencies, and commodities markets.

Having followed all these markets for a while now, it’s a lot like any classic horror or action flick. You know the basic plot, but it can still get you sweating.

Introduction: Chronicle of a Crisis

All major market shifts since 2007 have begun with the U.S. banks. With them the crisis began, with them the rallies began. With them may come the next move down, and only from their true recovery will there arise a genuine recovery. Amen.

Their coming earnings announcements, and the ensuing government responses, are likely to be the economic event of the summer.

Let’s quickly go through a brief chronicle of the crisis:

The current world economic crisis began as a self-inflicted U.S. banking crisis.

The still-alive March rally in stocks and commodities began when the big financial institutions announced first quarter profits. As repeatedly noted by this author and others, this feat required an unprecedented collaboration/conspiracy involving Washington and Wall Street. These profits were not from genuine ongoing operating results likely to be repeated, but were rather a result of a combination of some rather irregular activities, including:

  • fabricated hyper-profitable fixed income department trades with AIG, which by themselves were large enough to outweigh the enormous real operating losses
  • overstated asset values aided and abetted by bank regulators and the suspension of market to market accounting

When that rally faltered, Washington announced more help in the form of the Public-Private Investment Program (PPIP), another thinly disguised bank welfare program, paid for by U.S. taxpayers. That maintained optimism about the banks, and thus the market, and forced the massive shorts to unwind, thus continuing the low volume meander up to 30% gains.

This article was written by

Cliff Wachtel profile picture
Cliff Wachtel, CPA, MBA, former Chief Global Markets Analyst, Director of Market Research, New Media and Training for a number of leading online Forex and CFD brokerages. His focus includes global market drivers, forex, currency hedged and diversified income investing, and related topics like MLPs, REITS, BDCs, etc. He is also the author of The Sensible Guide To Forex , [https://www.amazon.com/Sensible-Guide-Forex-Smarter-Survive/dp/1118158075 ] a book dedicated to providing safer, simpler ways for active traders and passive long term income investors to use forex markets to limit risk of your currency being debased by central bank policies. Since the Great Financial Crisis began in 2007, Cliff was among the first financial writers to focus on stocks that provide steady, high yields currency diversification for insurance against currencies being steadily devalued. Articles focus on both top income stocks for exposure to multiple quality currencies, and safer, simpler less demanding types of longer term forex trades than commonly covered on other forex sites. He also posts a variety of articles on topics ranging from weekly strategic global market analysis, conservative forex trading, assorted special reports, currency diversified income investing, binary options, and trader training articles via multiple websites. His home sites include: globalmarkets.anyoption.com, thesensibleguidetoforex.com, caesartrade.com, globalmarkets.com, and others. Most can also be found at leading financial websites like seekingalpha.com, businessinsider.com, and forex sites like forexfactory.com and fxstreet.com. His work is regularly translated into numerous languages, including Spanish, French, Italian, Turkish and Russian, Arabic, German, and Chinese, often with his express knowledge and permission! He has appeared in a variety of offline publications including Forex Journal, and John Nyaradi’s book, Super Sectors, in which he was interviewed along with other market experts like Jim Rodgers, Dr.Marc Faber, John Mauldin, Robert Prechter, and Tom Lydon. Prior to his current positions, he was Chief Analyst at avafx.com, and a 30+ year financial market veteran as investor, trader, writer, analyst and advisor to private clients and institutions. He attended Vassar College and Cornell University, and is a certified public accountant. He’s married with 5 children and lives in Jerusalem, Israel, where he can follow Asian markets in the early morning, Europe through the workday, and the Americas at night.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.