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  • IT news
    IT news, Декабрь, 18

    TipRanks gathers analyst ratings and ranks them based on accuracy over time. Here is a list of the top 20 Wall Street analysts of 2015, according to the platform's data. 1. Irina Rivkind Koffler

    Mizuho Securities

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  • IT news
    IT news, Декабрь, 8

    Say what you’d like about Uber and its controversial role in the transportation industry, but drama-laden or not, one thing is clear — the advent of services like Uber, Lyft, and other such ride-sharing services has made it easier than ever to get from Point A to Point B. And when Poi…
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  • IT news
  • IT news
    IT news, Сентябрь, 22

    Every time I take the Digital Trends superyacht out on the open seas, I do so with a sports car-shaped hole in my heart. It’s a nice boat, sure, but the salty air does a number on my brake calipers, so I end up having to leave the supercars at home. That, and it’s a real pain to hoist my Pagani o…
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  • IT news
    IT news, Июль, 1

    Summary Upon seeing FutureAdvisor's assets under management update I couldn’t help but think one name – Yodlee. Yodlee should absolutely look to merge with FutureAdvisor. FutureAdvisor is deployed entirely online and that makes it a perfect fit, in my opinion, for Yodlee – which is also deployed entirely online. I just feel like Yodlee’s customer base would take incredibly well to FutureAdvisor and vice-versa. I think the cross sell opportunity here could and would be huge. That obviously would be beneficial to both parties’ key metrics and would position the NewCo for immediate acquisition itself.

    Online wealth manager and financial advisor FutureAdvisor updated its assets under management figures, with it being private these public updates are important to follow, and I couldn't help but think one name - Yodlee (NASDAQ:YDLE). I think Yodlee should absolutely look to merge with FutureAdvisor. It absolutely has to not ask for a premium in merging, and it needs to do this as soon as possible.

    I'll explain.

    So, for those unfamiliar with Yodlee, Yodlee provides a platform where it hosts and licenses on a subscription basis to its direct customers (for use of its direct customer's customers) a wide spectrum of services. These services include providing financial and demographic data aggregation, personal finance management for consumers and business customers, online bill pay, data products and services for direct customers (both financial institutions and Internet service providers), and account verification services for quasi financial institutions that are based online (think PayPal).

    Basically Yodless's platform provides online personal/business financial management and payment solutions. I understand that sounds like a much commoditized service, but it isn't - or at least it hasn't shown to be in the early-going.

    This is an example of what YDLE's platform might look like depending on what portal you're accessing it through. Meaning, if you're a Bank of America (NYSE:BAC) customer and you use the "My Platform" option of your online bank the YDLE platform will look substantially different than this example but it is in fact the YDLE platform.

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  • IT news
    IT news, Июнь, 22

    Summary Wm. Mack Terry explained the basics of how rates impact bank stocks at Bank of America in 1974. Net income goes up, margins go up, and stock price goes down. We value a bank by replication, assembling a series of Treasury securities with the same financial characteristics as a bank. All of Mr. Terry's conclusions are correct. A more technical analysis and references are provided. Correlations with 11 different Treasury yields are added in Appendix A. Finally, a worked example is given in Appendix B.

    We want to thank our readers for the very strong response to our June 17, 2015, note "Bank Stock Prices and Higher Interest Rates: Lessons from History." For those readers who asked "is the correlation between Treasury yields and bank stock prices negative at other maturities besides the 10 year maturity?" - we include Appendix A. Appendix A shows that for all nine bank holding companies studied, there is negative correlation between the bank's stock price and Treasuries for all maturities but two. One exception is the 1-month Treasury bill yield, which is the shortest time series reported by the U.S. Department of the Treasury. The 1-month Treasury bill yield has only been reported since July 31, 2001. The correlation between the longer 3-month Treasury bill yield series and the stock prices of all nine bank holding companies is negative. The other series that occasionally has positive correlations is the 20 year U.S. Treasury yield, which is the second shortest yield series provided by the U.S. Department of the Treasury.

    In this note, we use modern "no arbitrage" finance and a story from 1974 to explain why there is and there should be a negative correlation between bank stock prices and interest rates. We finish with recommendations for further reading for readers with a very strong math background.

    Wm. Mack Terry and Lessons from the Bank of America, 1974

    In the summer of 1974 I began the first of two internships with the Financial Analysis and Planning group at Bank of America (NYSE:BAC) in San Francisco. My boss was Wm. Mack Terry, an eccentric genius from MIT and one of the smartest people ever to work at the Bank of America. One day he came to me and made a prediction. This is roughly what he said:

    "Interest rates are going to go up, and two things are going to happen. Our net income and our net interest margins are going to go up, and our senior management is going to claim credit for this. But they'll be wrong when they do so. Our income will only go up because we don't pay interest on our capital. Shareholders are smart and recognize this. When they discount our free cash flow at higher interest rates, even with the increase on capital, our stock price is going to go down."

    Everything Mack predicted came true. The 1-year U.S. Treasury yield was in the 8 percent range in the summer of 1974. It ultimately peaked at 17.31% on September 3, 1981. The short run impact of the rate rise was positive at Bank of America, but the long run impact was devastating. By the mid-1980s, the bank was in such distress that my then employer First Interstate Bancorp launched a hostile tender to buy Bank of America.

    The point of the story is not the anecdote about Bank of America per se. Why was Mack's prediction correct? We give the formal academic references below, but we can use modern "no arbitrage" financial logic to understand what happened. We model a bank that's assumed to have no credit risk by replication, assembling the bank piece by piece from traded securities. This was the approach taken by Black and Scholes in their famous options model, and it's a common one in modern "no arbitrage" finance. We take a more complex approach in the "Technical Notes" section. For now, let's make these assumptions to get at the heart of the issue:

    We assume the bank has no assets that are at risk of default.All of its profits come from investing at rates higher than U.S. Treasuries and by taking money from depositors at rates lower than U.S. Treasury yieldsWe assume that the bank borrows money in such a way that all assets financed with borrowed money have no interest rate risk: the credit spread is locked in. We assume the net interest margin is locked in at a constant dollar amount that works out to $3 per share per quarter.We assume this constant dollar amount lasts for 30 years.With the bank's capital, we assume the bank either buys 3-month Treasury bills or 30-year fixed rate Treasury bonds. We analyze both cases.We assume taxes are zero and that 100% of the credit spread cash flow is paid out as dividends to keep things simple.We assume the earnings on capital are retained and grow like the proceeds of a money market fund.

    We use the U.S. Treasury curve of June 18 to analyze our simple bank. The present value of a dollar received in 3 months, 6 months, 9 months, etc. out to 30 years can be calculated using U.S. Treasury strips (zero coupon bonds) whose yields are shown here:

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  • IT news
    IT news, Июнь, 19

    Summary Many on Wall Street and in the executive suites of major bank holding companies argue that higher interest rates are good for bank shareholders. Using daily price histories for stock prices and the 10-year U.S. Treasury, we analyze their correlation. On average, when rates go up, bank stock prices fall. For all 9 major bank holding companies studied using 3 decades of data, stock prices and interest rates have a strong negative correlation ranging from more than 40% to 90%.

    Two years ago, then Wells Fargo (NYSE:WFC) Chief Financial Officer Tim Sloan was quoted as saying higher interest rates are good for Wells Fargo, commenting "The current backup in rates we think is attractive and will allow us to invest." The same sentiment is being echoed all over Wall Street today, and Mr. Sloan's views are shared by many. As someone who has spent more than a few decades in interest rate risk management, I can say that the feeling that higher rates are good for banks is not shared by all. This note presents some lessons from history that show higher interest rates over the last few decades have been harmful to bank stock prices. A companion piece still in the works will present the analytics that confirm the historical facts we show here for 9 major bank holding companies.


    About a decade ago, I was at a meeting of the risk managers of most of the largest bank holding companies in the United States and Canada. Whether or not higher rates were good for bank stocks was the topic of the day, and opinions varied widely. I much prefer facts to opinions, because facts are usually in short supply, so I undertook a study of the issue with the encouragement of the group. We looked at the stock prices of the 100 largest U.S. bank holding companies quarterly over a 10-year period. We asked the question, "When interest rates go up, what happens to the stock price of each of these 100 bank holding companies?" The answer for the median of the 100 banking firms was that a 1 percentage point rise in rates lowered the stock price by one percent. Silicon Valley Bank (SVB) was a notable exception, with a stock price boosted by in the money options of technology firms who had been borrowers from the bank.

    The Analysis

    Our objective in this note is much more modest. We take the longest daily stock price history we can find on 9 large bank holding companies:

    Bank of America Corporation (NYSE:BAC)

    Bank of New York Mellon (NYSE:BK)


    Citigroup Inc. (NYSE:C)

    JPMorgan Chase & Co. (NYSE:JPM)

    State Street (NYSE:STT)

    Sun Trust (NYSE:STI)

    U.S. Bancorp (NYSE:USB)

    Wells Fargo & Company

    We combine the stock price history with a daily time series on U.S. Treasury yields from the U.S. Department of the Treasury. We focus on the 10 year U.S. Treasury yield in this note. Our conclusion is strong: both including and excluding data from the heart of the credit crisis, higher interest rates have a strong negative correlation with bank stock prices. On average, when interest rates go up, bank stock prices go down. This is consistent with the financial analysis that we will present in part 2 of this series and with the results of the statistical study done a decade ago. We now review the results for each of the banks in turn.

    Bank of America Corporation

    For each of the bank holding companies, we use the adjusted closing stock price provided by Yahoo Finance. The adjustments include the impact of dividends and stock splits. We use the longest daily time series available. The history of the adjusted Bank of America Corporation stock price and the 10 year Treasury yield are shown here from 1986 onward.

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  • IT news
    IT news, Июнь, 14

    Summary Bank of America has been one of my favorite ideas for the past two years, but has been stuck in a trading range of late. Investors have looked for rising interest rates to serve stocks in the financial sector and they appear to be finally helping now. But the real reason BAC is about to break out has as much to do with its improved ability to lend more freely now after meeting Federal Reserve capital requirements. We are seeing evidence of increased bank lending in broader economic data, including the most recent motor vehicle sales report. As a result, BAC should break out finally this year.

    May Motor Vehicle Sales offered fantastic evidence of robust business activity for Bank of America (NYSE: BAC). That fact is not just because the bank does a good deal of auto lending generally, but because it implies banks and BAC are lending more freely now after meeting the Fed's raised capital requirements. While the interest rate outlook is certainly a support for the banks, this driver of lending activity will serve the top and bottom lines in an important manner. Thus, Bank of America remains of one my favorite long ideas.

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  • IT news
    IT news, Июнь, 11

    Summary There is a certain quirk in accounting conventions for deposit-taking banks. Separating accounting charges from economic reality. The significance…
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  • IT news
    IT news, Июнь, 10

    Summary BAC shares have taken off higher in recent days as rates have moved up. We'll have to wait and see if the move in rates is sustainable but sentiment is improving for BAC as well. I think BAC has some upside to its current earnings targets and as analyst upgrades come rolling in, that should provide some fuel for the stock.

    Perennial battleground stock Bank of America (NYSE:BAC) has been one that I've been quite bullish on for a while now. For several quarters I've been telling you that rising rates are coming and that BAC's balance sheet and prudent lending model would send earnings skyward. Unfortunately, those things came much later than I thought they would as owning BAC has proven to be quite frustrating. The spike in rates that has occurred in the last couple of weeks, however, has sent BAC and other rate sensitive stocks soaring so in light of the new level in rates, I'll reassess BAC's valuation to see if there is more left in the tank in this rally.

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