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The Call of Earnings Humility


Banks' record results will only reinforce populist suspicion.

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community.

Financials continue to trade strong today based on Wells Fargo's (WFC) "record" quarterly earnings and rumors that Goldman (GS) will report its second best quarterly earnings in history +/- $12 billion.

To my article earlier today, I would offer that if I were a bank CEO right now, I would be trying to figure out how my bank could make a penny this quarter - no more and no less, not how I could hit the ball out of the park.

Don't get me wrong, I understand TARP-bank CEO's frustration with Washington and the desire to show strength. But record earnings should reflect strong underlying fundamentals, not accounting gimmicks and Government benevolence.

For banks to declare victory at this point reminds me of the Bush Administration's "Mission Accomplished" celebration of the Iraq War - far too premature. There are trillions of dollars of debt yet to be written off. Banks should use this hurricane eye to prepare, not to brag.

At a minimum, bank CEOs run the risk of being labeled "Henny Penny." Worse, their record results will only reinforce populist suspicion that wins are one-sided and all losses are borne by the people - making future government support all the more punitive.

For all involved, what we need today is earnings humility.
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