President Obama is preparing a banking levy to repay the US taxpayer its bailout money
The next seven days should give us a really good insight into what is going on as major US banks like Citigroup, Bank of America, American Express and the one we wait to see, Goldman Sachs prepare to release their numbers.
If the numbers we have already seen from JP Morgan Chase are anything to go by, we are in for a very interesting time.
The results from JP Morgan should have delighted…earnings quadrupled and were easily at the top end of the expectations…but the bank it seems is preparing for potentially rocky times. Look closely at the results and you realise that there are many dangers to be navigated, not least the rising tide of bad commercial real estate loans, bad consumer debts and a performance that even the CEO Jamie Dimon described as disappointing. Mr Dimon has his own word of preparation for the future, “caution”, as he continues to forecast rising losses on consumer debt for some time to come.
Keep in mind – JP Morgan is one of the good ones. If they are still having these problems what on earth will the likes of Citigroup and Bank of America look like when they report next week?
As the banks show their hands, we can also expect to hear a lot more about how much money they are preparing to pay by way of compensation and bonuses. And here the critics will want to see how much cash Goldman Sachs is putting in the vault. Having already stated that the top tier bankers will get their bonuses mainly in stock not cash, it will be telling to see how they will continue the public relations offensive to convince that they are part of the solution, not the problem
There is one other group that is preparing in the days ahead: the real estate agents and luxury goods manufacturers in the world’s financial capitals. As the bankers get their enhanced bonuses, be it in cash or stock, these retailers can expect a warming January surprise. In London, property prices which have already been frothy because of a shortage of stock, are getting ready for another heave-ho upwards as bonus recipients seek to trade up and buy larger homes.
These days only a fool would splash and spend, knowing that it is clearly not the done thing. But as any good financial adviser will tell you, it’s best to be prepared. Now…where did I put that brochure I put aside for that rainy day?
Next weekend I head to the Swiss mountains and Davos. I don’t expect it to be anywhere near as exciting as last year when we were in the darkest depths of the crises…no doubt the talk will all be about how to prepare, to prevent the crisis (or anything like it) happening again. Yes, that dreaded word, preparation. Again.
See you in Davos….
– End –
Richard Quest is a CNN correspondent based in London,
host of the weekday one-hour program “Quest Means Business”.
For program highlights and more, go to www.cnn.com/qmb
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