Unlocking the Market Secrets Hidden in Big Bank Earnings

You are receiving this as part of your free subscription to Tim Melvin's Max Wealth. To remove your email from this list, [unsubscribe here](. [Tim Melvin's Max Wealth] [Single-Digit Returns Got Your Portfolio Down? Do This Quickly]( If there's one market hack I wish I knew when I first started trading, [this is it](. Right now, it's locked up tight inside the 1450 Club's Live Trading Room. You can see everything from now until January 20 at midnight. After then, the subscription price to this research service will be doubled. [Don't miss out](. --------------------------------------------------------------- January 18, 2020 Unlocking the Market Secrets Hidden in Big Bank Earnings By Tim Melvin Dear Reader, We've seen the first of the big bank earnings report of the year, and for the most part, they weren't too bad. While I don't own any of them, I make it a point to read the earnings reports and call transcripts for all of the big banks. I don't own any of the big banks because the only time I'm ever interested in them is after a big crash like 2000-2003 or 2008-2009. They're too complex to value with any sense of certainty, and there is just too much that can go wrong. I prefer small banks that are very easy to understand, and trouble can be seen coming from miles away. I track the big banks because they see every dollar in the country at some point and have information about what is going on in the world and not just what people are telling us might happen. Over the course of my career, I've found that these unbiased, unfiltered numbers are among some of the best sources of information that we can use to help lead us to wildly profitable opportunities. Beyond the Headlines JP Morgan Chase & Co. ([NYSE:JPM]() started everything off, announcing earnings of $2.57, which was well above the analysts' estimates of $2.32. Bank of America Corp. ([NYSE:BAC]() quickly followed suit, reporting earnings at $0.74, which was also above the average estimate of $0.68. Wells Fargo & Co. ([NYSE:WFC](), the poster child for banking done wrong, has been the lone rough patch as their profits fell by more than 50% year over year and were much worse than analysts' estimates. Wells drew the short straw when examiners decided to dig deep into one of the big banks and picked them. The reputational hit has been hard for them to recover from in the past year. Now I know banks making profit may not seem like a bombshell of a story, but there's something very interesting underneath the surface of the numbers and the headlines. While falling net interest margins have made it harder for banks to make money, big banks like JP Morgan and Bank of America are still finding ways to grow profits and asset values. Both of these banks reported strong credit card profits while wealth management, investment banking, and trading helped drive the profit gains at both companies. The two industry titans are reporting excellent credit conditions, which tells me that in spite of all of the doom and gloom noise we've seen in the media for the last several months, the economy is in pretty good shape. Even in higher-risk loan portfolios like credit cards and automobiles, the numbers are still pretty good for the big banks. People are working and paying their debts, which says a lot about the state of the economy. Bank of America said in their release that nonperforming assets were still near historic lows. Even in this low interest rate world, it's a lot easier for a bank to make money when they're not writing off a chunk of bad loans every quarter. [This Strategy Has Quietly Taken the Market by Storm (and Now, It Can Make You a Killing)]( The Path to Growth Further along in their reports, both banks talked a lot about technology and the need for spending to keep up. Consumers demand digital and mobile today, but that's only part of the tech they need. There are payment and processing systems that can be sped up by new technology. Big data and artificial intelligence and help you discover who your customers are and what they need. Technology spending can lower costs dramatically and help keep the bottom line growing, and that was very much a part of the earnings picture for both banks. It's this growing need for technology spending that's going to drive merger and acquisitions downstream from the largest banks. While JP Morgan and Bank of America can spend tens of billions of dollars to install, replace, and upgrade to the newest and best tech offerings to make them bigger, better, and more efficient, the small and mid-size banks simply won't be able to keep up with that pace of spending. This is a big problem when you're the smaller guy competing against world-class banks. They're going to have to find a solution, and for a lot of the smaller banks that solution is going to be merging with competitors in order to spread the costs over a larger asset base. Those mergers and acquisitions are fantastic opportunities to rake in multiples of your investments when you [target quality businesses](, buy right, and stay patient aggressive. An Excellent Bill of Health There's a lot we can learn from earnings reports and calls. Every once in a while, JP Morgan CEO Jamie Dimon gets worked up on earnings calls and goes on epic rants about politics, the markets, the education system, the economy, and just about anything else that's on his mind. There weren't any rants this time, but he did offer us some very valuable insight saying "While we face a continued high level of complex geopolitical issues, global growth stabilized, albeit at a lower level, and resolution of some trade issues helped support client and market activity towards the end of the year. The U.S. consumer continues to be in a strong position, and we see the benefits of this across our consumer businesses." It's still early, and there are a lot of bank earnings reports left to review, but the initial reports show bankers are operating with a great deal of efficiency. Consumers are in good shape. Most of us are working and spending money, and people are paying their bills. Bankers are resisting the urge to do stupid things to squeeze out an extra dollar or two of profits. The economy may not be growing quickly, but it is growing. While many stocks look pricey to me, I'm still able to dig up bargains here at Max Wealth and at [Heatseekers]( that allow me to make recommendations that can deliver explosive gains and help you create a portfolio with life-changing potential. All in all, the world is nowhere near as gloomy as some talking heads are telling us. Have a great weekend, Tim Melvin Here's what else I'm following... --------------------------------------------------------------- [Forget 2008 - this could be much worse]( The market analyst who correctly forecasted both the 2008 and dot-com crashes is advising people to take cover once again. Because [this $6 trillion storm]( is destined to destroy everything in its path - including the entire U.S. economy. 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