Shore Leave

"Short of the outbreak of World War III, the ship sinking, being attacked by a giant octopus, I'd like to be undisturbed for the next thirty minutes."
--Capt Frank Ramsey (Crimson Tide)

After studying Q2 earnings reports of financial firms, Minyan Peter concludes that banks et al used the run up in asset prices during the quarter to sell their winners--those positions that sported gains.

He also notes that loan portfolios continued to reflect broad credit deterioration.

The Big Bet is that markets recover from here. Indeed, if prices continue to rise, then selling winners today while pushing losses out may appear smart.

But if prices resume their decline, then banks will have tied future earnings potential, and perhaps solvency, to an anchor cast overboard.

no positions