Entries Tagged 'Stocks' ↓

Yesterday Goldman Sachs, the most important financial institution on Wall Street, reported a profit for the second quarter of $3.4 billion, up a whopping 89%. The size of the profit caught many analysts by surprise, with some saying it was one of the most tangible signs that the financial crisis is nearing an end.

Despite Goldman’s stellar quarter, the results of other banks are less encouraging. Georges Ugeux, Chairman of Galileo Global Advisors, is of the opinion that to assess the recovery of financial system we must evaluated health of commercial banks, not investment banks.

“To see if the financial system was repaired, we must analyze the impact of the crisis at banks that are engaged in private credits”, says Ugeux. “The bank results may be less encouraging.”

One example is CIT Group, which today is struggling with bankruptcy. For this reason, the financial results of JP Morgan and Morgan Stanley this week will be more telling.

Chairman of Galileo Global Advisors, Ugeux is Dr. in Law and Bachelor of Economics at the Catholic University of Louvain in Belgium. He was a banker at Societe Generale, Morgan Stanley, Kidder Peabody, President of the European Investment Fund and Chairman of International Division NYSE. Galileo Global Advisors is a bank and consulting business founded by him.

Many seniors are now selling their life insurance policies to raise cash, according to a recent issue of Kiplinger’s. In 2006, a whopping $6.1 billion in life insurance policies with death benefits changed hands.

Here’s how it works: when you sell your policy to a stranger, that person pays you a cash sum and continues to pay the premiums on the policy to keep it current. Here’s where it gets weird: the stranger to whom you sold your policy only profits when you die.

These transactions are called life settlements and they are becoming more common. Huge banks like JPMorgan Chase and Goldman Sachs invest in packages of life settlements because the return is not correlated with the stock market. So as an investor, life settlements can be a great way to diversity and hedge your stock market exposure.

Investors in life settlement policies prefer people over 65 who are insured for at least $500,000 or more. So would you sell your life insurance policy to a stranger?

U.S. banks have returned to profit in the first quarter, after dismal 2008 and in particular a disastrous fourth quarter. But these profits are only on paper while the reality is completely different, warn a number of economists.

Major Banks in the United States say that they are on the point of return and is rushing to return money received from the state to make face the crisis broke out in September after the bankruptcy of Lehman Brothers.

The five of them were in first quarter on profit, shares and prices are rising, KBW Bank Index and the doubling of March 6. U.S. Treasury Secretary Timothy Geithner stated at the beginning of May, after implementation of stress tests designed to determine the capacity of 19 banks to face the deterioration of economic conditions, as Americans can be confident in the stability and soundness of banks.

However, this return could be short, writes Bloomberg. Analysts who have examined quarterly profits and government tests say that the changes made in terms of accounting rules and optimistic estimates make institutions to seem stronger than they are.

Bank of America, the largest bank in the U.S., plans to repay 45 billion dollars to the U.S. Treasury. Other leading banks such as Goldman Sachs, JP Morgan Chase and Morgan Stanley have announced a similar intention in recent days.

The reason of the Bank of America is the desire to eliminate the debts created by state aid collected. A good sign we would say, if keep in mind that the amounts are part of a plan to support banks in difficulty.

Reimbursement will be supported including the capital increase. Worth over 35 billion dollars, it would take place by the end of September, according to sources cited by the publication “Financial Times” taken by Reuters.

Through a bond issue, Bank of America has already obtained a capital increase of 13.47 billion dollars and concludes, therefore, an important step in the goal set by the U.S. government after the application of stress tests in the banking system.

Regulatory authorities in Washington have announced that 10 banks are in need of additional capital in the amount of $74.6 billion to restore confidence in the banking sector and to survive the recession, write Reuters.

The results of stress tests, organized by the U.S. central bank, Federal Reserve have drawn a line between the banks with a better financial situation and those facing problems, indicating the amounts they need to stabilize finances.

The tests have shown that 10 banks needed additional capital to make against future losses, if the recession will worsen. Bank of America needs 33.9 billion U.S. dollars, while Citigroup needs 5.5 billion dollars.

Also, Wells Fargo must collect 13.7 billion U.S. dollars, and GMAC 11.5 billion U.S. dollars. Obama Administration hopes that these banks will fill gaps from private sources, although the Fed chief, Ben Bernanke, said that the government is prepared to take action, if it’s necessary.

“Government, through Treasury, is prepared to provide additional capital necessary to ensure that the bank will cross this tough economic period, “said Bernanke.