{"id":102947,"date":"2017-03-06T10:05:58","date_gmt":"2017-03-06T15:05:58","guid":{"rendered":"http:\/\/countingpips.com\/?p=102947"},"modified":"2017-03-06T07:06:28","modified_gmt":"2017-03-06T12:06:28","slug":"armageddon-forecast-fed-releases-2017-adverse-scenario-report","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/03\/armageddon-forecast-fed-releases-2017-adverse-scenario-report\/","title":{"rendered":"Armageddon Forecast: Fed Releases 2017 \u201cAdverse Scenario\u201d Report"},"content":{"rendered":"<div id=\"inves-214152458\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">March 6, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/03\/0317_forecast_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/03\/0317_forecast_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/03\/0317_forecast_feature-300x155.jpg 300w\" alt=\"Armageddon Forecast: Fed Releases 2017 &quot;Adverse Scenario&quot; Report\" width=\"580\" height=\"300\" \/><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-louis-basenese.jpg\" alt=\"Louis Basenese\" width=\"85\" height=\"100\" align=\"left\" \/>Let\u2019s address a very specific, downright apocalyptic economic scenario today.<\/p>\n<p>Just please don\u2019t call it a \u201cforecast.\u201d<\/p>\n<p>I\u2019ll tell you why in a moment.<\/p>\n<p>First off, prepare for the following three major shifts in the global economy\u2026<\/p>\n<p><strong>Shift #1:<\/strong> Be ready for higher long-term interest rates\u2026<\/p><div id=\"inves-1166082428\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p><strong>Shift #2:<\/strong> A steeper yield curve, and\u2026<\/p>\n<p><strong>Shift #3:<\/strong> Regionally concentrated episodes of deflation \u2014 more pronounced in Japan, less severe in the euro area and developing Asia and absent in the United Kingdom and United States.<\/p>\n<p>How can I be so specific?<\/p>\n<p>It\u2019s simple, really.<\/p>\n<p>The Federal Reserve just released its \u201cAdverse Scenario\u201d for 2017 upon which major U.S. banks will be stress-tested against.<\/p>\n<p>The three above-mentioned shifts are brand-new inclusions into this year\u2019s \u201cscenario.\u201d Just don\u2019t call it a \u201cforecast,\u201d says the Fed.<\/p>\n<p>Below, I\u2019ve summarized the Fed\u2019s apocalyptic scenario for you\u2026 that is, according its <a href=\"https:\/\/www.federalreserve.gov\/newsevents\/press\/bcreg\/bcreg20170203a5.pdf\" target=\"_blank\"><strong>new report<\/strong><\/a><u>:<\/u><\/p>\n<ul>\n<li>The level of U.S. real GDP begins to decline in the first quarter of 2017 and reaches a trough in the second quarter of 2018 that is about 6.5% below the pre-recession peak<\/li>\n<li>The unemployment rate increases by about 5.25%, to 10%, by the third quarter of 2018<\/li>\n<li>Short-term Treasury rates fall and remain near zero through the end of the scenario period<\/li>\n<li>Financial conditions in corporate and real estate lending markets are stressed severely<\/li>\n<li>Equity prices fall by 50% through the end of 2017, accompanied by a surge in equity market volatility, which approaches the levels attained in 2008<\/li>\n<li>House prices and commercial real estate prices also experience large declines, with house prices and commercial real estate prices falling by 25% and 35%, respectively, through the first quarter of 2019<\/li>\n<li>Severe recessions hit in the euro area, the United Kingdom and Japan \u2014 and a marked growth slowdown in developing Asia<\/li>\n<li>All foreign economies included in the scenario experience a decline in consumer prices<\/li>\n<li>The U.S. dollar appreciates against the euro, the pound sterling and the currencies of developing Asia \u2014 but depreciates modestly against the yen because of flight-to-safety capital flows.<\/li>\n<\/ul>\n<p>I tend to favor Martin Hutchinson\u2019s Armageddon scenario.<\/p>\n<p>If you missed Hutch handicap the odds of a global economic collapse, and how to protect yourself, be sure to <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/02\/13\/bitcoin-foreshadowing-something-scary\/\"><strong>check it out<\/strong><\/a>.<\/p>\n<p>Today, on the heels of the Fed\u2019s new report, I asked Hutch to drill down into the banking sector.<\/p>\n<p>Is it possible that a few bullish opportunities exist?<\/p>\n<p>As it turns out, he discovered a real banking gem hiding in plain sight.<a name=\"video\"><\/a><\/p>\n<p>The details are below.<\/p>\n<p>Smart investing,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <em>Wall Street Daily<\/em><\/p>\n<hr \/>\n<p><script src=\"\/\/fast.wistia.com\/assets\/external\/E-v1.js\" async><\/script><\/p>\n<div class=\"wistia_responsive_padding\" style=\"padding: 56.88% 0 0 0; position: relative;\">\n<div class=\"wistia_responsive_wrapper\" style=\"height: 100%; left: 0; position: absolute; top: 0; width: 100%;\">\n<div class=\"wistia_embed wistia_async_rcl716t5vh videoFoam=true\" style=\"height: 100%; width: 100%;\"><\/div>\n<\/div>\n<\/div>\n<hr \/>\n<p><strong>Question:<\/strong> Martin, what\u2019s something that\u2019s flying under the radar? Sometimes these are the best opportunities, the ones that the media haven\u2019t picked up and are just completely going unnoticed by the press. What\u2019s going on in your world?<\/p>\n<p><strong>Martin Hutchinson: <\/strong>Well, I\u2019d like to talk about regional banks this week because there\u2019s a number of winds that are blowing very much in their direction. I think they look attractive.<\/p>\n<p><strong>Question:<\/strong> Let\u2019s do it then. Where did you want to start?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Firstly, you\u2019ve got interest rates rising. That\u2019s very good for banks with retail customers. Because retail customers tend to have checking accounts with zero interest on them \u2014 or very low interest. If rates rise, the bank\u2019s spreads rise because they make more on their lending.<\/p>\n<p>Secondly, the economy is stronger. That\u2019s good for loan generation. Thirdly, lower corporate tax rates. That\u2019s important because the smaller corporations that regional banks deal with actually pay full corporate tax, not like the GEs of this world.<\/p>\n<p>Therefore, lower tax rates really help them do more business and generate more loan volume.<\/p>\n<p>Then there\u2019s deregulation, which will help the regionals more than the too-big-to-fails. That\u2019s because it\u2019ll reduce the huge reporting and compliance burden that\u2019s been imposed on regional banks. The independent bankers have been complaining about this for the last few years.<\/p>\n<p>Finally, there\u2019s the statistic that I think is very interesting: New bank formation has only gone up one per year since 2010 \u2014 versus an average of 130 per year before 2007.<\/p>\n<p><strong>Question:<\/strong> Why such a slowdown, Martin?<\/p>\n<p><strong>Martin Hutchinson: <\/strong>I think it\u2019s largely regulations. It\u2019s also that banking isn\u2019t very profitable with zero interest rates. So as we\u2019re getting away from zero interest rates, that\u2019ll improve it. Since 2,000 banks have disappeared since 2010, it also means that on the smaller end of the banking business the competition\u2019s got less fierce.<\/p>\n<p>That\u2019s given some opportunities for midsize and smaller regional banks.<\/p>\n<p><strong>Question:<\/strong> Let\u2019s talk about those opportunities. What are you seeing?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> They\u2019re less exposed to investment banking and derivatives than the big guys. Also, surprisingly less leveraged, which is a very good thing if you want them to be stable. You can pick your favorite region where there\u2019s some decent economic growth.<\/p>\n<p>One region I particularly like is the Dallas Metro area, which is Texas\u2019 main banking center historically. All the biggest banks there went bust in the late \u201980s and got bought up by New York banks. The result is you had a bunch of people running banks around Texas \u2014 the branches didn\u2019t disappear. These people were from 1,000 miles away and didn\u2019t understand the local market.<\/p>\n<p>Dallas real estate was a quiet market until 2000 \u2014 and never really suffered in the 2007\u201308 downturn, because it hadn\u2019t gone up much. It\u2019s now pretty strong, and that means there are real loan generation possibilities for a Dallas bank. Of course, Texas in general is a business-friendly state with decent growth.<\/p>\n<p><strong>Question: <\/strong>Cool, so we know we like regional banks. If we\u2019re going to home in on an area, it really sounds like you\u2019re bullish on Dallas\/Fort Worth. What should we do with this information, Martin?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I\u2019ve got a particular bank that I like, which is Independent Bank Group (IBTX). It\u2019s a $6 billion bank with 42 branches in Dallas\/Fort Worth, Austin and Houston. Its debt equity is 8, or 12 if you look at tangible equity \u2014 which is much lower than the big boys, which tend to be up around 30.<\/p>\n<p>It\u2019s on 18 times 2016 earnings and 1.8 times net asset value. It\u2019s just increased its quarterly dividend from 8 to 10 cents. But the interesting thing is the revenues are up 19% in the late quarter. It\u2019s got some real momentum going into 2017.<\/p>\n<p>It\u2019s just done another small acquisition of a thing called Carlile Bancshares. This is a Fort Worth bank and also is a broker that buys and sells other small banks \u2014 or arranges buying and selling of other small banks. Market cap of $1.2 billion, so it\u2019s at the larger end of the small-cap range. I just think this is very objective and poised to benefit from all the favorable winds that regional banks have right now.<\/p>\n<p><strong>Question:<\/strong> Martin, you told me offline that you love this as an income play, but could we also expect an element of capital appreciation?<\/p>\n<p><strong>Martin Hutchinson:<\/strong>\u00a0\u00a0\u00a0 I think we\u2019re going to see capital appreciation in this one, because I think the earnings are going up. It\u2019s acquiring other local banks in its area. But mostly, it should just be able to grow loans. And it can, of course, grow assets without having to take on more capital, because it\u2019s relatively underleveraged.<\/p>\n<p><strong>Question:<\/strong> Wow, so a stable regional bank with a nice dividend and some capital appreciation. You can\u2019t really beat that, can you?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I think that\u2019s right, yes. Looks pretty good to me.<\/p>\n<p><strong>Question:<\/strong> Thanks for your time today, Martin. This is <em>Wall Street Daily <\/em>signing off.<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Pleasure being with you.<\/p>\n<p>Good investing,<\/p>\n<p>Martin Hutchinson<br \/>\nSenior Analyst, <i>Wall Street Daily<\/i><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/03\/06\/feds-apocalyptic-forecast-everything-zombies\/\" rel=\"nofollow\">Armageddon Forecast: Fed Releases 2017 \u201cAdverse Scenario\u201d Report<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Let\u2019s address a very specific, downright apocalyptic economic scenario today. Just please don\u2019t call it a \u201cforecast.\u201d I\u2019ll tell you why in a moment. First off, prepare for the following three major shifts in the global economy\u2026 Shift #1: Be ready for higher long-term interest rates\u2026 Shift #2: A steeper yield curve, and\u2026 [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-102947","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/102947","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=102947"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/102947\/revisions"}],"predecessor-version":[{"id":102953,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/102947\/revisions\/102953"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=102947"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=102947"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=102947"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}