Fed’s Generosity Manifesting in Quarterly Earnings

Abraham George Macro View

Jul 16, 2020

In my previous report, I’d talked about the earnings of various banks. I also highlighted the risks are on the upside and so it was. Between JP Morgan, Citi and Wells Fargo they made provisions of $26 billion for bad loans.

Goldman and JPM especially showed stellar rise in revenues. With the Fed now taking all the credit risks and flooding the markets with liquidity, it is a no-brainer for the banks to make money. But the rise in the markets yesterday was more pronounced in Caterpillar and Boeing.

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President Trump has made it clear yesterday that HK will be treated same as mainland China. No more privileges or technology transfer. Beijing in turn has confirmed that they will impose retaliatory sanctions against US individuals and entities for all the bad things US is doing towards them. China’s claim is that all HK affairs are their internal affairs and no foreign country has the right to interfere.

Equities

All indices rallied yesterday except for the utilities. Corrective moves can be very frustrating. No damage is done so far to change our thinking. So, patience is required to stay on in this last leg. When the move down starts, it could be swift and deep.

Bonds

No change in bonds except that there is a diminishing chance of testing its high of Apr 22 or slightly higher before turning down.

Euro

Prices moved to 1.1453 yesterday. The corrective up move must have been completed. A move below 1.1255 should open doors for more weakness.

Gold

There is nothing much to add on gold. Watch out for a move below 1790.

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