Bank of America Reports They are Screwed
The BAC earnings report was a surprise to me in that they posted a profit at all. Nice job guys!
Bank of America's 1Q profit shrinks amid economic worries
Monday April 21, 4:24 pm ET By Ieva M. Augstums, AP Business Writer
Bank of America's profit falls 77 percent in first quarter, economic worries loom
CHARLOTTE, N.C. (AP) -- If the 77 percent drop in Bank of America's first-quarter earnings is any indication, the economy may have a long way to go before it works out the problems that began with the subprime mortgage crisis.
--So, an admission that subprime is not contained?
The nation's largest retail bank on Monday quintupled the money it set aside for loans that go sour, and hinted that consumer weakness and the housing slump means that things will not get better for it, or for the economy, for some time.
"I think first it would be too early to strike up the band and sing happy days are here again," Chief Executive Ken Lewis said on a conference call with analysts during which he said the situation in the capital markets was particularly tough in March.
--Ken Lewis? That name sounds alot like Ken Lay!
"It still remains unclear what ramifications the housing downturn, higher energy costs and subprime crisis will ultimately have and how long the downturn will persist," Chief Financial Officer Joe Price said on a conference call with analysts.
--Hey Joe price, I can answer your open question; the housing bust, higher energy costs,and continuing PRIME mortgage crisis is going to be bad for Bank of America. Your Welcome.
Going over the conference call, I give full credit to the BAC team. They were pretty blunt about future prospects. They were very clear about their precarious situation should the credit issues continue. There was no attempt to sugar coat or play the "its the bottom of the ninth inning" game like Mozillo used to play.
If the market chooses to ignore a clear and stark presentation of the troubles big banks are facing, that is their problem. I mean it is our problem as the taxpayer when we will have to make such fools whole again after they lose their butts!
You Know The Worst is Behind us When...
I thought as a change of pace I might try and play the whole "worst is over" game and try and set up a list of reasons or markers that would confirm the worst is over. Like a David Letterman Top Ten Reasons List, here is a collection of things one has to think is either happening right this second, or very soon for the worst to be over:
- Home Price declines over
- Unemployment going back down
- Consumers get access to some store of free and easy cash
- Foreclosure numbers going down
- Lenders loosen qualification guidelines for mortgages
- Commercial real estate will not crack
- Consumer debt defaults creep into credit card space
There is no proof at all any of the above is occurring right this minute. As for the possibility that any of the list items will occur anytime soon, it does not seem likely.
To be in the "Hope" camp right now takes pure self delusion and a bit of pure effort to ignore the current data. Take a look again at the list above and compare it with the headlines. Using the BAC, WB, WFC and C earnings results and conference calls, can any of the listed items be seriously considered as happening soon?
Now I know the market is a forward looking magical carpet ride that is never wrong, but if we are talking six months to a year out the market is still wrong at this point. A 5 year (minimum) bubble build-up will not be done and over with in 8-10 months. Something has to give, and soon.
Have a good night.