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Five Big Bank Stocks to Buy with Inflation Rising

Five big bank stocks to buy offer investors a way to avoid supply-chain and inflation-related headwinds. The five big bank stocks to buy are aided by favorable microeconomic conditions that should boost business opportunities for financial institutions…

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Five big bank stocks to buy offer investors a way to avoid supply-chain and inflation-related headwinds.

The five big bank stocks to buy are aided by favorable microeconomic conditions that should boost business opportunities for financial institutions and their borrowers. A recent rally in the sector should keep the five big bank stocks to buy on their current roll in the fourth quarter amid rising interest rates and an improved economic outlook due to reduced COVID-19 cases.

Big banks account for a significant portion of what pension fund chairman Bob Carlson called one of his “favorite value stock” investments. Carlson, who leads the Retirement Watch investment newsletter and serves as chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets, said Oakmark uses different valuation measures to assess companies in various industries. Those industries include financial services where big banks have offered value and profits for some time.

Retirement Watch chief Bob Carlson answers questions from Paul Dykewicz.

Five Big Banks to Buy Can Be Purchased Individually or in a Fund

Financial services account for 33.9% of Oakmark’s holdings and Citigroup Inc. (NYSE: C), a big bank in New York, is its fourth-largest position. Detroit-based Ally Financial (NYSE: ALLY) is the fund’s largest holding and comprises 3.9% of its portfolio.

When interest rates rise, big banks traditionally can widen the spreads they earn between what they pay for deposits compared to what they can collect in higher interest rates from borrowers. However, a problem can arise later if banks retain too many fixed-rate loans that can lose their luster if interest rates keep rising.

Floating rate business lending, specialty mortgage real estate investment trusts (REITs), property REITs, real estate trusts, covered-call blue-chip stock funds, private equity and convertible debt are just some of the asset classes to own when rates and inflation are ticking higher, said Wall Street veteran Bryan Perry. As the leader of the high-yield-focused Cash Machine investment newsletter and the Premium Income, Quick Income Trader, Breakout Profits Alert and Hi-Tech Trader services, Perry seeks to move into stocks when their operating conditions ripen.

Paul Dykewicz interviews Bryan Perry about investing opportunities.

BofA Boosts EPS Estimates for Mega Banks by an Average of 3% 

BofA recently raised its earnings per share estimates (EPS) for the big banks it follows by an average of 3%. Since rising earnings typically are correlated to increasing share prices, the improved outlook is meaningful.

The management teams at big banks generally have been offering guidance about expecting increased fee revenue, according to BofA. The investment firm’s estimates anticipate another quarter of credit-driven earnings per share (EPS) outperformance.

Loan growth/spread revenue and macro-economic trends likely will be two key drivers for the big bank stocks, BofA wrote in a recent research report. Further signals of big bank performance will come from the results of non-financials in the coming weeks to show whether supply chain disruptions are easing and whether consumers and businesses are spending, BoA added.

Five Big Banks to Buy Include Citigroup

New York-based Citigroup earned a $200 price objective from BoA. The investment bank assigned valuation multiples below the bank’s peers due to its lower return metrics.

Risks to Citigroup attaining that target include an economic downturn, further scrutiny of the financials industry and increased expenses tied to a consent order. To top those expectations, Citigroup would need better-than-expected credit performance, i.e., lower loan losses, and continued market share gains that drive revenue growth, BofA wrote.

Citigroup’s management recently offered guidance that it could face increased expenses. But Citigroup’s pursuit of the sale of its consumer businesses in 13 countries across the Asia-Pacific (APAC) region and other factors could skew its risk/reward to the upside, BofA added.

Chart courtesy of www.stockcharts.com

Goldman Sachs Gains Berth Among Five Big Bank Stocks to Buy

New York’s Goldman Sachs (NYSE: GS) received a $455 price objective from BofA. The investment firm wrote the valuation was in line with historical levels.

To exceed that outlook, stronger capital markets activity would be required, BofA wrote. Risks to meet that estimate are a weaker economy, macroeconomic or geopolitical issues, competition, structural pressures, tougher global regulation and litigation, BofA added.

Goldman Sachs has underperformed its peers since the September Federal Open Market Committee (FOMC) meeting. Goldman’s underperformance started with the announcement of its acquisition of Atlanta-based GreenSky, the largest fintech platform for home improvement consumer loan originations. The all-stock transaction is valued at approximately $2.24 billion.

In announcing the deal on Sept. 15, Goldman issued a statement that GreenSky’s differentiated lending capabilities and “market-leading” merchant and consumer ecosystem will help accelerate efforts to create a consumer banking platform of the future. A key goal is to help tens of millions of customers take control of their financial lives and drive higher, more durable returns.

A BofA research note mentioned some Goldman investors seemed unsure about the consumer strategy. However, BofA opined that the “negative sentiment” could be overdone and its “buy” rating on Goldman remains intact. I personally have owned Goldman’s stock for more than a year and have no plans to sell.

Chart courtesy of www.stockcharts.com

JPMorgan Chase & Co. Gains Spot Among Five Big Banks to Buy

New York-based JPMorgan Chase (NYSE: JPM) received a $190 price objective from BofA. Possible risks to JPMorgan Chase reaching BofA’s price objective are macro risks such as slower-than-expected rate increases, additional regulatory requirements and scrutiny of the financial industry.

“While historically, the stock has tended to sell-off post earnings, we believe that JPM still offers an attractive risk/reward,” BofA wrote in its recent research note. “Importantly, the market appears willing to look past JPM’s premium valuation and add exposure to the stock given the optionality to higher interest rates, to rebounding credit card balances and the potential for continued momentum in the capital markets business.”

The bank could outperform its outlook with better-than-expected credit quality, i.e., lower loan losses, and better interest rate defensibility, BofA wrote. 

Chart courtesy of www.stockcharts.com

Morgan Stanley (MS) Wins Place Among Five Big Banks to Buy

A $105 price objective for New York’s Morgan Stanley takes into account a rising valuation multiple due to an increased recurring revenue mix and rising return on equity due to a strategic shift in its business. Potential outperformance of that target would depend on stronger wealth and asset management trends and capital markets activity, as well as higher rates, BofA wrote.

Risks to reach that goal include weak economy and capital markets, low rates for longer, increased macro issues, tougher regulation and litigation.

Chart courtesy of www.stockcharts.com

Wells Fargo & Company Takes Place Among Five Big Banks to Buy

Wells Fargo (NYSE: WFC), of San Francisco, gained a $60 price target from BofA. The investment firm described the valuation as in line with its peer average.

Risks to attaining the price objective are an economic slowdown, elevated expense trajectory and slower-than-expected resolution of its consent orders. To top the price target of BofA for the bank, the catalysts could include better-than-expected credit quality, i.e., loan losses, and material expense management that improves visibility on future earnings.

Our conversations with investors suggest some concern around franchise attrition the longer Wells is required to operate under the asset-cap,” BofA wrote. “The path to stock outperformance is not straightforward, but at the current valuation, we see the risk/reward skewed to the upside.”

Chart courtesy of www.stockcharts.com

Improving COVID-19 Case Numbers Could Help Five Big Banks to Buy

The Delta variant of COVID-19 has proven to be a highly transmissible threat, but the number of current cases are sliding as the adult population increasingly is vaccinated and mask wearing occurs in hot spots for the virus. Plus, the U.S. Food and Drug Administration (FDA) recently issued emergency use authorization (EUA) for a single booster shot of the Pfizer-BioNTech COVID-19 vaccine for high-risk groups.

A booster shot of the Pfizer-BioNTech vaccine can be given to people aged 65 years and older at least six months after they receive a second dose of that vaccine to guard against COVID-19. The booster also is approved for those aged 18 years and older who have underlying medical conditions and people aged 18 and older who live or work in high-risk settings.

The Centers for Disease Control and Prevention (CDC) reported on Oct. 12 that  217,403,897 people, or 65.5% of the U.S. population, have received at least one dose of a COVID-19 vaccine. The fully vaccinated total 187,714,829 people, or 56.5%, of the U.S. population, according to the CDC.

COVID-19 cases worldwide totaled 238,678,058 cases and led to 4,864,825 deaths, as of Oct. 12, according to Johns Hopkins University. U.S. COVID-19 cases hit 44,561,383 and caused 716,470 deaths. America has the dubious distinction as the nation with the most COVID-19 cases and deaths.

The five big bank stocks to buy give investors a chance to earn much higher profits than they could receive from depositing money in an account at any of them.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of  StockInvestor.com and DividendInvestor.com,  a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for special pricing.

The post Five Big Bank Stocks to Buy with Inflation Rising appeared first on Stock Investor.

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International

Britain investigating Delta subvariant as possibly more transmissible

The UK Health Security Agency designated a Delta coronavirus subvariant called AY.4.2 as a "Variant Under Investigation," saying there was some evidence that it could be more transmissible than Delta.

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Britain says investigating Delta subvariant as possibly more transmissible

LONDON, Oct 22 (Reuters) – The UK Health Security Agency on Friday said it designated a Delta coronavirus subvariant called AY.4.2 as a “Variant Under Investigation”, saying there was some evidence that it could be more transmissible than Delta.

“The designation was made on the basis that this sub-lineage has become increasingly common in the UK in recent months, and there is some early evidence that it may have an increased growth rate in the UK compared to Delta,” UKHSA said.

FILE PHOTO: The word “COVID-19” is reflected in a drop on a syringe needle in this illustration taken November 9, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

“While evidence is still emerging, so far it does not appear this variant causes more severe disease or renders the vaccines currently deployed any less effective.”

Reporting by Alistair Smout; editing by James Davey

Our Standards: The Thomson Reuters Trust Principles.

 

Reuters source:

https://www.reuters.com/world/uk/britain-says-investigating-delta-subvariant-possibly-more-transmissible-2021-10-22

 

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Government

‘Build Back… You Know, The Thing’: Americans Have No Idea What’s In Biden’s Economic Plan

‘Build Back… You Know, The Thing’: Americans Have No Idea What’s In Biden’s Economic Plan

While Congressional Democrats spar over the ultimate size of President Biden’s "Build Back Better" economic plan, Bloomberg astutely points out that..

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'Build Back... You Know, The Thing': Americans Have No Idea What's In Biden's Economic Plan

While Congressional Democrats spar over the ultimate size of President Biden's "Build Back Better" economic plan, Bloomberg astutely points out that Americans have no clue what they're signing up for with their tax dollars. In fact, according to a CBS News poll published Oct. 10, just 10% of Americans say they know the specifics of the bill, while only 1/3 think it would benefit them directly.

What's more, "Not even Congress knows what the bill would accomplish, with the contents of the plan changing day-by-day as Democrats squabble over how much it should spend, who it should benefit and who should pay for it."

For example, on Tuesday, the White House suggested it would jettison free community college. The next day, Democrats were focused on proposed tax hikes after moderate Sen. Kyrsten Sinema (D-AZ) put her foot down over corporate and personal tax rates.

In an attempt to provide some clarity (don't hold your breath), Biden on Thursday night held a CNN town hall-style event (on the same night as Dune's US release).

In short, their messaging sucks.

"I will state the obvious, but they need to shift the focus away from process to policy. So far, the coverage around their proposal is all around Democratic divisions, which inevitably makes it impossible to sell," said former Marco Rubio communications director, Alex Conant. "Frankly, they need to talk about what their goals are," he added. "Why is this necessary?"

Republicans, on the other hand, are clear on their messaging; "Massive government spending leads to massive tax hikes," according to GOP strategist Ron Bonjean. "When you have a shifting number and shifting programs, it becomes confusing to follow."

Instead of focusing on the legislation’s new investments in child care, the elderly, education, healthcare and climate change, Democratic lawmakers have openly haggled over the price tag. A standoff between the party’s progressive and centrist factions has created cable news-ready drama.

Given how much is wrapped up in this package, it was always going to be a long and intense negotiation,”  said Ben LaBolt, a former spokesperson for President Barack Obama. “One way to start is to build the case for the way this will help middle class families and focus the public on those conversations, while at the same time preserving room for the closed-door negotiations to bring all of the elements of the party together for the biggest, most comprehensive approach possible.” -Bloomberg

In a Wednesday speech in Scranton, PA, Biden tried - and failed - to  convey how his economic agenda would help working class families - by intermingling stories about growing up in the area and programs contained in the legislation.

"Frankly, they’re about more than giving working families a break; they’re about positioning our country to compete in the long haul," said Biden, doing his usual poor job of reading a teleprompter. "Economists left, right, and center agree."

Meanwhile, Biden - let's face it, Biden's 'advisers' have failed to ink a final compromise between warring factions of Democrats. For the Build Back Better plan to pass, every single Senate Democrat must be on board. As moderates Sinema and Joe Manchin (D-WV) balk on the price tag and demanding deep cuts, progressive House Democrats are sure to similarly balk at passing the smaller, $1.2 trillion infrastructure package that's already passed the Senate.

While advocacy groups have started to spend heavily to promote policies in the plan, most of the discussion remains centered on its cost.

Biden’s advisers are banking on the presumption that ordinary Americans don’t pay much attention to the machinations of everyday Washington. Much as they were during the presidential campaign, the president’s aides are largely dismissive of what they call horse-race stories.

But Biden’s team had a much easier time selling his pandemic relief legislation, the American Rescue Plan, in March, with its convenient focus on three clear issues -- money for vaccines, money to re-open schools and checks sent directly to American households. -Bloomberg

"They haven’t laid out why we need this, other than Democrats are in power now and aren’t going to have it again for a long time," said Conant.

Good luck with that.

Tyler Durden Fri, 10/22/2021 - 08:51

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Government

Parents were fine with sweeping school vaccination mandates five decades ago – but COVID-19 may be a different story

Public health experts know that schools are likely sites for the spread of disease, and laws tying school attendance to vaccination go back to the 1800s.

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Children and parents lined up for polio vaccines outside a Syracuse, New York school in 1961. AP Photo

The ongoing battles over COVID-19 vaccination in the U.S. are likely to get more heated when the Food and Drug Administration authorizes emergency use of a vaccine for children ages 5 to 11, expected later this fall.

California has announced it will require the vaccine for elementary school attendance once it receives full FDA approval after emergency use authorization, and other states may follow suit. COVID-19 vaccination mandates in workplaces and colleges have sparked controversy, and the possibility that a mandate might extend to younger children is even more contentious.

Kids are already required to get a host of other vaccines to attend school. School vaccination mandates have been around since the 19th century, and they became a fixture in all 50 states in the 1970s. Vaccine requirements are among the most effective means of controlling infectious diseases, but they’re currently under attack by small but vocal minorities of parents who consider them unacceptable intrusions on parental rights.

As a public health historian who studies the evolution of vaccination policies, I see stark differences between the current debates over COVID-19 vaccination and the public response to previous mandates.

Compulsory vaccination in the past

The first legal requirements for vaccination date to the early 1800s, when gruesome and deadly diseases routinely terrorized communities. A loose patchwork of local and state laws were enacted to stop epidemics of smallpox, the era’s only vaccine-preventable disease.

Vaccine mandates initially applied to the general population. But in the 1850s, as universal public education became more common, people recognized that schoolhouses were likely sites for the spread of disease. Some states and localities began enacting laws tying school attendance to vaccination. The smallpox vaccine was crude by today’s standards, and concerns about its safety led to numerous lawsuits over mandates.

The U.S. Supreme Court upheld compulsory vaccination in two decisions. The first, in 1905, affirmed that mandates are constitutional. The second, in 1922, specifically upheld school-based requirements. In spite of these rulings, many states lacked a smallpox vaccination law, and some states that did have one failed to enforce it consistently. Few states updated their laws as new vaccines became available.

School vaccination laws underwent a major overhaul beginning in the 1960s, when health officials grew frustrated that outbreaks of measles were continuing to occur in schools even though a safe and effective vaccine had recently been licensed.

Many parents mistakenly believed that measles was an annoying but mild disease from which most kids quickly recovered. In fact, it often caused serious complications, including potentially fatal pneumonia and swelling of the brain.

With encouragement from the Centers for Disease Control and Prevention, all states updated old laws or enacted new ones, which generally covered all seven childhood vaccines that had been developed by that time: diphtheria, pertussis, tetanus, polio, measles, mumps and rubella. In 1968, just half the states had school vaccination requirements; by 1981, all states did.

Smiling boy rolls up his sleeve to get a shot from a nurse
Sometimes, students even received vaccinations from nurses at school. NIH U.S. National Library of Medicine, CC BY-ND

Expanding requirements, mid-20th century

What is most surprising about this major expansion of vaccination mandates is how little controversy it provoked.

The laws did draw scattered court challenges, usually over the question of exemptions – which children, if any, should be allowed to opt out. These lawsuits were often brought by chiropractors and other adherents of alternative medicine. In most instances, courts turned away these challenges.

There was scant public protest. In contrast to today’s vocal and well-networked anti-vaccination activists, organized resistance to vaccination remained on the fringes in the 1970s, the period when these school vaccine mandates were largely passed. Unlike today, when fraudulent theories of vaccine-related harm – such as the discredited notion that vaccines cause autism – circulate endlessly on social media, public discussion of the alleged or actual risks of vaccines was largely absent.

Through most of the 20th century, parents were less likely to question pediatricians’ recommendations than they are today. In contrast to the empowered “patient/consumer” of today, an attitude of “doctor knows best” prevailed. All these factors contributed to overwhelmingly positive views of vaccination, with more than 90% of parents in a 1978 poll reporting that they would vaccinate their children even if there were no law requiring them to do so.

Widespread public support for vaccination enabled the laws to be passed easily – but it took more than placing a law on the books to control disease. Vaccination rates continued to lag in the 1970s, not because of opposition, but because of complacency.

Thanks to the success of earlier vaccination programs, most parents of young children lacked firsthand experience with the suffering and death that diseases like polio or whooping cough had caused in previous eras. But public health officials recognized that those diseases were far from eradicated and would continue to threaten children unless higher rates of vaccination were reached. Vaccines were already becoming a victim of their success. The better they worked, the more people thought they were no longer needed.

In response to this lack of urgency, the CDC launched a nationwide push in 1977 to help states enforce the laws they had recently enacted. Around the country, health officials partnered with school districts to audit student records and provide on-site vaccination programs. When push came to shove, they would exclude unvaccinated children from school until they completed the necessary shots.

The lesson learned was that making a law successful requires ongoing effort and commitment – and continually reminding parents about the value of vaccines in keeping schools and entire communities healthy.

Add COVID-19 to vaccine list for school?

Five decades after school mandates became universal in the U.S., support for them remains strong overall. But misinformation spread over the internet and social media has weakened the public consensus about the value of vaccination that allowed these laws to be enacted.

adults and kids with signs protesting COVID-19 vaccines
Some anti-vaccination activists are vocal opponents of vaccine mandates for kids. Sarah Reingewirtz/MediaNews Group/Los Angeles Daily News via Getty Images

COVID-19 vaccination has become politicized in a way that is unprecedented, with sharp partisan divides over whether COVID-19 is really a threat, and whether the guidance of scientific experts can be trusted. The attention focused on COVID-19 vaccines has given new opportunities for anti-vaccination conspiracy theories to reach wide audiences.

[Over 115,000 readers rely on The Conversation’s newsletter to understand the world. Sign up today.]

Fierce opposition to COVID-19 vaccination, powered by anti-government sentiment and misguided notions of freedom, could undermine support for time-tested school requirements that have protected communities for decades. Although vaccinating school-aged children will be critical to controlling COVID-19, lawmakers will need to proceed with caution.

James Colgrove has received funding from the National Library of Medicine, the Greenwall Foundation, the Milbank Memorial Fund, and the William T. Grant Foundation.

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