Microsoft and Google Report Yet the Foundation Weakens
First Republic Bank is the tip of the spear
Both Microsoft and Google reported earning last night.
Microsoft:
Earnings: $2.45 per share, vs. $2.23 per share
Revenue: $52.86 billion, vs. $51.02 billion
Earnings: $1.17 per share vs. $1.07 per share
Revenue: $69.79 billion vs. $68.9 billion expected
Net income fell to $15.05 billion, or $1.17 per share, from $16.44 billion, or $1.23 per share.
Even though Microsoft and Google produce a good Q1 for 2023, the foundation that they achieved this on is still fractured or some would say, crumbling similar to a sinkhole.
M2 money supply is the calculation of money supply that includes cash, checking deposits and currency in circulation and overnight deposits. In the last 12 months, the rate of change compared to 12 months ago has not need seen since the 1926-1931. This was during the Great Depression.
Referencing the chart above, the Feds massive QE injections since 2020 has cause the biggest liquidity bubble. Today, Fed Chairman Powell is reversing that.
First Republic Bank
First Republic Bank (FRC) has been experiencing funding cost problems since the first quarter of 2022, which have worsened in the first quarter of 2023. This has led to the near-failure of the institution, with other banks having to support it. The wealthy clientele that banked at FRC had no loyalty to any particular financial advisor, and when liquidity risk arose, the affluent and mobile nature of the bank's client base enabled them to run. Moreover, the bank's portfolio had a high reliance on non-core funding, which was used to grow its loan book. This made it difficult for the bank to maintain profitability.
The recent movement of the bond market has reduced the visible unrealized losses on securities owned by banks, but the fundamental problem of mispricing of risk remains unresolved.
The Federal Open Market Committee's massive purchases of securities created an existential market risk that is yet to be resolved. Despite this, the Financial Stability Oversight Council, chaired by Treasury Secretary and former Fed Chair Janet Yellen, sees risk lurking in every corner but the one that actually matters. It never mentions the impact of quantitative easing or “QE” on financial institutions and markets.
Conclusion
Even though Apple and Google both reported Earnings that would beat the street, the underlying foundation of our economic system is greatly in question. Yet those who created this problem starting with chairman, Ben Bernanke, US Treasury secretary Janet Yellen, and Federal Chairman Jerome Powell haven’t and won’t come out and admit quantitative easing was a bad idea. if they were to do so, the sinkhole would open up to the sky and crush our financial system.
Article referenced: Who Killed First Republic Bank https://www.theinstitutionalriskanalyst.com/post/who-killed-first-republic-bank?postId=7801b676-ca06-407f-bcf5-e2fbf96e7350&utm_campaign=7a0787d6-cac9-4e2a-a94b-53a9228b07dd&utm_source=so&utm_medium=mail&utm_content=74a7c92a-516c-4fd7-87a6-f148220f5586&cid=3fbcfa67-8f12-47bb-a56b-a770b25c9203