Markets edged slightly higher midday Tuesday, as gains in the technology sector largely offset declines in the energy space.
Still, the markets were extraordinarily quiet today, as there wasn’t a whole lot of market-moving earnings, economic or political news that pushed traders in a material direction.
The relative lack of big, market-moving headlines gives us a chance today to look back at your comments from Monday’s Afternoon Edition, which generated a whole lot of buzz.
In fact, the feedback on our piece, “President Trump Determined to Dismantle Dodd-Frank,” reflected just how fired up readers are — both pro and con — about the issue of deregulating the financial sector.
Today, it’s your turn to shine, as we open up the digital forum to readers who’ve sent us comments on this issue.
So, readers, take it away …
Mike C. writes:
Trump claims that regulations cost banks “hundreds of billions of dollars” every year. Since he didn’t give an exact figure, let’s say $250 billion. Considering that the GDP of the entire USA is about $5 trillion a year, that would mean that 5% of the GDP is being spent just on bank regulations. That sounds pretty implausible to me.
Brad response: Great point, Mike. I think it’s hard to quantify precisely what the cost of Dodd-Frank is in terms of missed opportunity for economic growth. I do think it’s safe to say that a lot of credit-worthy businesses are having a hard time expanding operations and doing more capex spending because they cannot get the money from banks.
That said, some argue that it’s not a lack of supply that’s causing a lack of lending. Rather, it’s the lack of demand for loans.
While I suspect that’s true in some cases, I know firsthand and also from close friends and associates that getting a loan before Dodd-Frank was far easier than it is after Dodd-Frank.
Frequent contributor Broomy writes:
While easing Dodd-Frank may encourage banks to lend more money, I’m not sure that’s necessarily what we want. Aren’t liar loans and home loans to anyone with a pulse, regardless of whether they could pay it back, what got us into the problems we’re still struggling to free ourselves from?
Brad response: I think Broomy is correct in terms of those “liar loans” that contributed mightily to the financial crisis. Yet the pendulum does seem to have swung in the opposite direction, and far enough to where the restrictions are hurting businesses and would-be homeowners, not helping the whole system.
Eleanor A. writes:
Based on the multitrillion-dollar deficit that we are facing in our economy, I don’t think that banks should have freedom to create more financial chaos than we had eight years ago. If they go back to their old tricks creating derivatives and bamboozling the public, the only people left standing at the end will be the 1%. On the other hand, a two-year delay in making those changes might mitigate the effect of bank exuberance. I think we need to be very careful and painstakingly slow about how we relieve bank restrictions.
Frequent contributor Billy writes:
The concern right off the top is: Are the Banking Elite trying to co-opt Trump by getting him to relax regulations — which would bring us back to the environment that led to immoral and unethical lending, bond rating, and mortgage-backed derivative creation — or does he see banking deregulation as key to kick-starting the economy? The MAJOR problem is the world is ALREADY AWASH IN MASSIVE AMOUNTS DEBT and, at this point, you are simply pushing on a string if you believe that lowering interest rates and relaxing lending standards is going to work.
Brad response: Like Eleanor, I also think we need to implement changes to banking regulations slowly. That is why the Trump executive order is essentially a call for ways to properly implement changes that will, ostensibly, correct the current law so that it offers the needed protections along with the loosening up of banks that will help the economy grow.
Billy also makes a great point about debt, as a world awash in debt is a very big problem for the economy. And while debt is a big issue on a macro level, when it comes to good companies struggling to expand and hire more workers, a well-placed, rational business loan is what is required.
So, we can talk about debt in the abstract as being too massive. But from a micro perspective, sometimes debt is just what the economic doctor ordered.
Let’s keep the discussion going! If you want to comment on this issue, or any of the issues we cover in the Afternoon Edition, all you have to do is leave me a comment on our website or send me an e-mail.
The Dow and Nasdaq notched a pair of record highs, at 20,090.29 (+0.2%) and 5,674.22 (+0.2%), respectively. Meanwhile the S&P 500 stayed flat, although the Energy SPDR (XLE) slid 1.4% thanks to weak gasoline demand and worries about higher U.S. shale production to come. This knocked crude oil down 1.6% for the day, with WTI closing at $52.17 a barrel.
• $100 billion: That’s how much the six biggest U.S. banks could return to investors, through dividends and share buybacks, if President Trump is successful in “cutting out a lot” of the Dodd-Frank Act’s rules as promised. (Wall Street Journal)
• Fox (FOXA) reported a 27% increase in profits during its recently ended fiscal Q2. It attracted big bucks from political advertisers and those looking to reach World Series watchers. (And advertisers paid up when Game 7 went into extra innings in November.) Revenues from Fox’s TV segment were up 12% last quarter. This translates into EPS of 53 cents on revenues of $7.7 billion.
• Fox drew an extra $20 million in ad revenue (for four spots) after the Super Bowl went into overtime Sunday night. This made it the company’s highest revenue day ever, and offers a great start to the company’s Q3. (Adweek)
• Drug prices rose 10.7% last year on average, per pharmacy benefits manager Express Scripts (ESRX) in its new Drug Trend Report. Employer costs rose 2.5% across all prescription drugs, while the Consumer Price Index rose 2.1%. ESRX notes that price inflation for common household items rose 14% since 2008, while the average brand-name drug tripled (to $307.86) in that time. (We recently wrote about the new war on drug prices.)
• Want to save gas? Don’t turn left: That’s what UPS Inc. (UPS) tells its drivers. Well, it actually instructs them not to turn through oncoming traffic, depending on the country. This might add some time or distance to drivers’ routes, but this policy saves the company on average 10 million gallons of gas a year. That translates to 22,000 tons of carbon dioxide that is not emitted, 1,100 trucks it doesn’t have to put on the roads and 350,000 MORE packages delivered a year. (Quartz)
Good luck and happy investing,
Uncommon Wisdom Daily