Juggling Dynamite

This clip is a good discussion of the present banking landscape in the midst of demographic and behavioral shifts that are dramatically truncating the profit prospects for their business model. Joshua Rosner, an analyst at Graham Fisher & Co., talks about the outlook for U.S. banks, financial regulation and the residential housing market, Neil Barofsky, former special inspector for the U.S. Treasury’s Troubled Asset Relief Program, joins in. Here is a direct link.

Shilling’s concerned about lower corporate earnings next year, which have the potential to drag on stock prices. His worries are three-fold: A global recession will occur, hurting revenue and by extension earnings; profit margins are about as good as they can get with companies having already implemented extensive cost-cutting; a strong dollar will weigh on U.S. corporations’ foreign profits and overseas operating expenses.

Shilling continues to remain bearish on the housing market because, as he sees it, the market has at least one major factor working against it.

Here is a direct link.

Preliminary reports suggest that US holiday sales for the key two months October to Dec, rose .7% this year. This compares with a 2% increase during the same period last year and a 3 to 4% increase that many retail analysts had expected. See: US Holiday Retail Sales Growth Weakest since 2008.

Disappointing sales have left retailers over-stocked heading into 2013. This suggests aggressive discounting in the days and weeks ahead as sellers focus on liquidating inventory. High debt levels, low savings rates, under-employment, fiscal worries and high profile tragedies all serve to make consumers selective with what they buy today. In addition even those who can afford to buy have caught on to the perks of a de-leveraging world: lots of supply and weak demand lead to lower and lower prices so there is no rush or urgency to buy discretionary items. Cash and patience are king. Good things come to those who can wait.