When America’s “Too Big to Fail” banks released Q1 2016 earnings, I told you that all was not what it seemed, and that rosy-seeming earnings were actually a huge red flag.
Judging by the headline financial news these days, however, the “Too Big to Fail” banks are back. They’ve almost all reported earnings beats this quarter, some by a good amount, and analysts are saying the hard row’s been hoed and they’ve planted fresh seeds. And when you look at their stock prices, some of the TBTF banks look like downright bargains.
But price doesn’t tell you anything. There’s a lot more to look at with the big banks.
And if you look really closely, well, you won’t believe what you really see…
Analysts Are In on the Game
The big banks are looking better, but they’re not exactly looking good.
Sure they’re beating on their earnings, but that’s not a big deal. In fact, it’s a bad deal.
Banks are notorious for “working” the analyst community. How’s that, you wonder?
Think about it. Where do Wall Street analysts that you see on TV mostly come from? The big banks. They know the game, they all play it. The truth is, they invented it. I’m talking about the earnings beat game.
All the analysts know each other. It’s easy for them to let each other know that their own “Too Big to Fail” banks aren’t going to be great. That causes other analysts to start ratcheting down their earnings estimates.
Then when earnings come out – BANG – they beat “consensus analysts’ estimates.”
And their stocks usually enjoy a pop. It’s such a lame game that you’d think the investing public would have caught on by now.
But they haven’t – it just happened again.
If you want a clear view of banks’ earnings, you can’t look to the analysts because most of them are in the pocket of the “Too Big to Fail” banks. You have to look backwards.
