Thursday, April 9, 2009

Good Bank/Bad Retailer

It's a variation on theme. I'm tired of good bank/bad bank.
Good cop/bad cop
Good dog/bad dog
and so on...

Oh the Wells Fargo earnings are a comin' down the street...
Wells Fargo led the way to the promised land of huge earnings quite unexpectedly. Earlier this quarter Citibank and a number of others said they were making money - and not with printing presses; that's the Fed's job. Hey 0-0.25% interest rates from the Fed are good for something. 

Bank earnings- from red ink to red herring?
Still, in the wake of this change on the accounting rules according to St Mark we still have to ponder this: good asset/bad asset?  One can only wonder how much -if any- of the Wells Fargo loans are in the money due to our friend Mr Mark-to-market being sent off to his room? Some? Any? None? Inquiring minds would like to know. Since no one reports all of us can guess... markets did their usual schtick by buying the rumor of better results, we'll see what happens when the facts are released. 

Good Fed/Great Fed!
Low rates have prompted a spurt in refinancing. The California market has jumped to life but much of the sales improvement is on foreclosures and house prices have dropped more sharply in the West as a region than anywhere else. Hard to imagine that sort of thing 'helped' bank profits because you have to write-off the foreclosed property before you can mortgage it and collect the fee. I was a bit suspicious of Wells when I saw the press release say there had been a reduction in the number of loans that Wells deemed to be unrecoverable. Was that mark to market at work or the step-up in foreclosures or something else? Once we know more we can assess this notion of better earnings with greater certainty. 

Good consumer/bad consumer
Meanwhile, retailers are stepping back from the good start in early 2009 this month to tend to their wounds. Wal-Mart was disappointed with a 1.4% SSS gain while Saks Fifth Ave, took the fifth then drank it, over its 23.4% drop in sales. Target's SS sales dropped by 6.3% almost grounds for a celebration toast compared to Saks. .

Good Easter/Bad Easter
So retailing is still on the rocks and blaming Easter. Easter is one of those migratory holidays that is lunar in nature and so does not meld well with our Gregorian calendar. It's timing appears as well, looney. As a rule Easter meanders all over the calendar and retailers always seem to find it a problem. 

Good Car Sales/Bad Store Sales
This year with a very troubled consumer, retailing is more of an issue than usual. We sure hope Easter is a mere hiatus for the consumer. Retail sales should not be too bad since the vehicle sales will keep things up for the overall total. But we are not out of the woods and for now I'd rather see Good Retailer/Bad Bank since the former can help to pull the latter out of trouble. But a good bank or better bank, as far as earnings go, won't do a thing to bring people into retailing establishments.  I don't want banks to crumble and we do need them to improve but the consumer is the key to recovery, make no mistake about it. 

Good stocks/bad stocks
At least the pop in bank stocks helped to get the stock market up. That's a continuing breath of fresh air that will help to stir the debate. Good stock market or bad stock market? Bull market or rally-in-a-bear market? By the time the pessimists are won over it will be time to sell again. 

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