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The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
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| The surge continues for banks and financial stocks... Since President Donald Trump's election in November 2016, the financial sector – as tracked by the Financial Select Sector SPDR Fund (XLF) – has crushed the overall market. As you can see in the following chart, financials have gained almost 50%, compared with a little more than 30% in the S&P 500 Index... These companies have benefited from an improving regulatory environment and rising interest rates. This trend likely has further to run... But you may not realize it by recent headlines in the financial media. You see, many of these firms reported big profit declines this month as fourth-quarter earnings season kicked off... For example, JPMorgan Chase (JPM) reported earnings of $4.2 billion, compared with $6.7 billion in the fourth quarter of 2016. Bank of America (BAC) said earnings were nearly cut in half, from $4.5 billion to $2.4 billion. Goldman Sachs (GS) lost $1.9 billion, compared with a net profit of $2.3 billion. And Citigroup (C) suffered a massive $18.3 billion loss – one of its largest quarterly losses in history – versus earnings of $3.6 billion last year. All told, the financial sector reported a $29.2 billion quarterly decline in net profit, according to market-data firm FactSet Research Systems (FDS). And it was the only sector in the S&P 500 to suffer a year-over-year decline in earnings last quarter. What's going on here? It has to do with Congress' new tax law. First is something called "deferred tax assets." During the financial crisis, banks suffered massive losses from bad bets on mortgages and other debt instruments. While these losses were terrible for shareholders at the time, there was a "silver lining" of sorts... Under U.S. tax law, the banks could convert those losses into credits to offset gains and lower their taxes in the future. As we've discussed, the new law slashed the corporate tax rate from 35% to just 21%. This is good news for most U.S. companies, including financials. But it has an unusual consequence for these firms... Because the top corporate rate is now significantly lower, the value of those tax credits is now lower, too. According to generally accepted accounting principles, these firms are required to write down the value of these credits, creating a "loss" in the process. As Bloomberg columnist Matt Levine explained last week...
Some of the big banks are also taking charge-offs related to cash held overseas. That's because the law also includes a one-time 15.5% tax rate on the repatriation of foreign earnings. This money can then be used to boost capital spending or be returned to shareholders. In short, despite these one-time paper losses, the new law should be another big bullish tailwind for banks. ----------Recommended Link---------
Of course, banks aren't the only companies that stand to benefit from the new tax law... Any firm with a big pile of overseas cash could be among the biggest winners, too. And at least one – iPhone maker Apple (AAPL) – is already taking advantage. As the Wall Street Journal recently reported...
Our colleague Dr. David "Doc" Eifrig has been following this trend closely... And he expects this "repatriation holiday" to drive a wave of cash back to U.S. investors. As he explained in a recent special report for his Retirement Millionaire subscribers...
Doc singled out nine other companies besides Apple set to reward shareholders the most from this one-time event... Of course, he and his team started by identifying those companies with the largest offshore cash piles. But that was just the beginning. More from the report...
That left Doc and his team with a diverse group of stocks among technology, health care, and other sectors. These are mostly large, well-established companies – as well as a few smaller names – whose share prices could surge higher virtually overnight. Learn more about this opportunity – and how to gain instant access to Doc's favorite repatriation opportunities – right here. Regards, Justin Brill Editor's note: For the first time in more than a decade, a one-time cash event will put billions of dollars directly in the hands of ordinary Americans... virtually overnight. Doc recently released a video presentation to explain how to get your share of this money. Get all of the details here. |
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