A set of mostly solid earnings reports from “big tech” helped the market feel a little more comfortable this week, though the continuing struggles of First Republic (FRC) and challenges at similar banks are also giving investors plenty of jittery feelings about a banking crisis. Personally, my guess continues to be that we won’t have a real banking crisis that rolls over into the rest of the economy… but it’s probably going to be pretty hard for anyone but the largest megacap banks to be very profitable.
Banks won’t take down the economy or the whole stock market this time, in other words, and I’m not worried about my bank deposits… but with the rate curve still inverted, and with commercial real estate dropping in value, they might well take down themselves. The stocks have fallen so much that I can see investors reaching for appealing discounts in the banking sector, and maybe that will work out, but I’m not at all tempted. The banking sector just looks lousy, with a decent probability that it’s going to stay lousy for a long time if interest rates are really going to reset at these higher levels for a while (alternatively, if the Fed has to cut rates at the end of the year the banks might look much better… though in that situation, the economy would presumably be hurting, too). That doesn’t give me much pleasure, a healthy banking sector is important for a healthy economy and nobody really wants a half-dozen megabanks to squeeze out the regionals and smaller local banks, but that’s the path we seem to be on.
What’s going on with the stocks in the Real Money Portfolio? Quite a few updates this week, so let me get to it… this gets to be a bit long, so I’ll try to give my quick summation of each company, in the blocked off part at the top of each section, then go into more detail for those who want more… and while the excitement this week was mostly around the big tech reports from Alphabet, Amazon and others, I’m going to start with the boring stuff to lull you into sleep, so let’s talk insurance.
Insurance brokerage Brown & Brown (BRO) is still chugging right along — they posted a gentlemanly “beat” of the analyst forecasts (84 cents in earnings vs. 81 cents predicted, ...