Drowning in analyst tears

Few topics to discuss this week…

Retail sales for March rose a mind boggling 9.8%, which blew away consensus forecasts at 6.1%. And if you’re thinking this is due to the government sending checks in the mail, pat yourself on the back. But what’s encouraging is that it appears that these checks are being used to pay down debt first and spend later:

For those skeptical of survey data (like me), here is some hard data to back that up:

Americans have less credit card debt today than they did in 2007, despite an economy that’s almost 50% larger. I’ve never seen an unforced deleveraging like this before. Admittedly, it’s mostly because many Americans won’t leave their homes but whatever.

That’s great for consumer balance sheets, but if we aren’t borrowing like we used to, does that mean banks are hurting? Based on earnings reported this week, the answer is “no.”

Since 88% of our economy is spending, banks are the gatekeepers to economic growth because most large purchases are done on credit. When people buy a house, most get a mortgage. Same thing with a car. So, it’s really important for banks to be happy, because if they aren’t, then the economy cannot grow all that fast.

And the earnings released from J.P. Morgan and Goldman Sachs this week indicate that banks are very happy. They reported phenomenal numbers. Now, it’s important to remember that bank earnings are laughably vague and easily manipulated, but this is still a big deal.

Earnings were also strong across the board. Mega-banks are so big and diversified that they rarely fire on all cylinders. For example, if loan growth is doing well then trading or equity capital markets (taking companies public) may be weak. The diversification is meant to keep the business somewhat consistent across the entire business cycle.

But the reports coming out are showing strength everywhere – loan loss reserves falling, trading soaring, IPOs, SPACs, etc. It’s all positive… Unless you are Credit Suisse.

Lastly, speaking of banking, here’s a pro tip for all those aspiring financiers out there. In a job interview, the absolute worst question to ask a prospective employer in financial services is about the work – life balance. You may as well not even show up for the interview because there’s no reason to pursue a career in finance if you want to have anything that resembles a life for the first 5-10 years of your career.

A few weeks ago, a story broke about Goldman Sachs analysts whining about working too hard. I mostly left this one alone, but given the stellar bank earnings, it’s a perfect time to address it.

The presentation is pretty funny. Aside from the irony of these analysts finding the time to survey peers and compile a detailed presentation to complain about having no free time, the biggest mistake this cohort made was failing to know their audience. This is literally the second rule of sales, and they dropped the ball (perhaps because they were too tired?).

Anyone in a managerial position at a top investment bank went through way worse to get in that seat, and if these analysts think for a second that someone this psychotically focused on their career and status is concerned about analysts having enough free time to maintain their Instagram accounts, they are sorely mistaken.

That’s why memes like these are floating around financial Twitter. Because Goldman’s management has told them to go pound sand in as HR-friendly of a manner as possible.

Even if management chose instead to wipe away these analyst tears, there’s the bigger threat lurking from peers that want that seat more than they do. This is one of the most competitive businesses on the planet, and when you’re not in the gym, Michael Jordan and Tom Brady are.

Furthermore, when literally every department in a big bank is en fuego, why on earth would you want to be doing anything other than banking?!?! Talk about the opportunity of a lifetime. I’d murder a puppy to be in their shoes right now – back in my 20s, living in NYC, making that much money, and having this type of glidepath ahead of me.  Giddy up!

The fact that this cohort knows this but would still rather spend their Sunday afternoons toasting Aperol spritzes while dining on $32 avocado toasts in the West Village tells me that management should be ignoring them because they aren’t going to last long in this business anyway.

Enjoy the weekend…