This Is a Horrid New Normal

 | Apr 16, 2013 | 11:07 AM EDT
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What do people really expect from some of these financial companies that are reporting?

Do they expect, in this crazy, ridiculous and unsure world, that some CEO of a company with any economic sensitivity will come out and say, "we see excellent earnings in the future?" Does anyone think that a CEIO will say, "this is just the beginning of what I think will be a sustained period of stronger earnings?"

Do you think bankers, after being nit over the head by repeated scandals and tremendous defaults, should come out and say, "this is a terrific time and it will only get better?"

Someone obviously does because the reaction to these banks earnings is about as near to negative as can be expected ,even as there are many lines of business that are just extraordinary. JPMorgan (JPM) blew away the wealth management business, which is so lucrative. It obviously is in terrific shape when it comes to reserves. The international business is very strong. But it didn't lend enough to home buyers. So it's no good and the stock goes down.

Wells Fargo (WFC) has the kind of growth from its "stores" that most retailers would kill for. You come into a Wells Fargo store you are more likely to leave with far more product than you might have been expected to buy and the product is annualized over a lifetime once it is taken home. I love that model so much. But the 13% of its business that is home mortgages didn't deliver what we expected and next thing you know it's disappointing. It's a killer number with great growth and it is disappointing.

Citigroup (C) actually does better than the number and truly gave the Street what it wanted and that's a good net interest margin.

The stock closes unchanged and we get a meager bounce back today.

Goldman Sachs (GS) cruises with a better-than-expected quarter, but hurts the cause with boilerplate about the nutty macro as this quarter included Cyprus's hammering of  Europe.

So, the stock gets hit.

Do you know what all of these conference calls and releases lacked? A statement that said "we see loan demand and overall business activity improving over time and we expect a strong second half from a variety of income lines."

Now, of course, if you are Coca-Cola (KO) you don't need to say anything about the future. You keep expectations low and you beat those expectations. It's the same with J&J (JNJ).

But the banks have to say things that would sound downright silly to move their stocks up and they can't do it. They would be taking on the authorities, particularly the Federal Reserve. They would be jeopardizing their position with banking nemesis Sen. Elizabeth Warren, who loves to grab a microphone. Even the president might want to attack them.

So why bother? But without that reassurance nobody really wants to own these stocks.

I sense they won't want to own any cyclical stock, any tech stock because the world isn't like the old days. These companies aren't in any position to be able to hold someone's hand and tell them not to worry. They have no visibility.

Think about it like this. Citigroup, JPMorgan, Goldman Sachs and Wells Fargo all reported remarkable quarters, far better than you would think possible given how lousy the economy is. If we get a better economy you are going to get a huge ramp in these stocks.

But the companies can't say that. It's the new, horrid normal where only the most consistent companies in the world can say anything good, particularly because there is declining inflation.

If you want to perform, these recession-resistant stocks are the only places to be and valuation means nothing to the buyers of these stocks. They have conviction because the CEOs have conviction and can be bold and offer visibility for multiple years.

But bank CEOs? Being optimistic and not cautious? After what they have been through? Don't be ridiculous. They can't reassure, they don't have good yield and they know better than to be bullish. And that's why they are so tough to own.

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