I’m shifting to a “Thursday File” again this week, since most markets will close down for Good Friday and I’ll be traveling again… so, what’s going on? I’ve got a few updates to share from the Real Money Portfolio, including two companies down at the bottom of the portfolio which I sold today, a little early Spring pruning to make room for new growth, and I’ve got a few big-picture thoughts and some other company news to share as well.

Earnings season has technically begun, particularly for the big banks, and that’s likely to begin to shape how we think about the profitability of banking as inflation hits new highs, and will probably impact investor sentiment more broadly… though the stocks I own in the Real Money Portfolio won’t really start giving their updates for another week or two.

So far, the operating performance of the big banks has been pretty similar to what was expected, the big investment banks are mostly coming down from their pandemic highs, but still doing well and enjoying some improvement to net interest income as rates rise (the pandemic brought windfall trading and capital markets revenue for the investment banks, but near-zero interest rates and easy Fed money have depressed lending income for more traditional banks for years, they benefit mostly from the net interest margin, the difference between the short-term rates at which they can borrow and the long-term rates at which they lend). The commentary flowing around that has been mostly about how those banks are dealing with risk and inflation — JP Morgan set aside a big chunk of reserves to prepare for higher inflation, a possible recession driven by interest rate increases, and the losses coming out of Russia, while Wells Fargo, which is a more traditional bank and less reliant on Wall Street activity, went the other way and released some of the reserves they had set aside, noting that their net interest income could grow very nicely if the Fed keeps raising rates, though rising rates could also reduce activity in the real estate market — we’ll at least see refinancing dry up as a major activity driver, and it could be that home buying (and home prices) will slow their growth as rates rise, too.

This week has been a reminder that investors are in the business of reading tea leaves and quickly ...