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It wasn't me who made a few tracks. I don't know these languages. Free money. The greatest book on behavioral investing and psychology. Music of investment models. Good evening, tribe. As I said yesterday, this is something you should definitely look at because one of you said that JP Morgan reported the highest quarterly profit of any U.S.
bank , and the stock fell. City Group beat all estimates and fell 4.7%. What's wrong with this market ? Well, the market is fine. Something is wrong with how most investors interpret a record quarter. And that's the lesson for today, because remember, the market is made up of people like you, me, and everyone else who invests.
And we are what makes the markets move the way they do together. That is, we are sometimes a little dissatisfied. First, a standard disclaimer. This video is not about buying or selling anything. I am not a registered SEB consultant or analyst. I'm only here to help you learn and understand, just like I do with my brother.
So this is financial education. So keep that in mind. Don't invest based on what you see in this video, that's all I'm trying to say. Facts first. On Tuesday morning, July 14, America's five largest banks reported their June quarter results within hours of each other , and each one beat expectations.
JP Morgan reported net income of $21.2 billion, up 41% from expectations, the highest quarterly profit in US banking history, with reported earnings per share of $7.7 and revenue of $58 billion, up 27%. Goldman Sachs posted record revenue of $20.34 billion and record earnings per share of $20.98, up from $10.98 a year earlier.
This is a colossal increase. And Citygroup achieved its highest revenue in a decade– $24.8 billion in profit, up 45% from expectations of $2.74, plus a $30 billion share buyback with a 12% dividend increase. Wells Fargo earned $2 per share compared to the expected $1.72. Bank of America also beat expectations, and the market reaction to that was perfection.
JP Morgan shares traded lower in premarket trading, while City Brook closed down 4.7%. Remember this reaction, because in the rest of this episode I will try to explain what happened. Lesson one: read the post before you get carried away by it. JP Morgan's $21.2 billion headline includes a $4.66 billion one-time gain on Visa stock.
Another 1 billion profit came from investments in stocks. If we discard these figures, the quarter would have a profit of 16.9 billion, $6.14, and growth of 13% instead of 41. Nevertheless, it is still a great quarter, but about 1/5 of the total profit came from items that will never be repeated again.
Keep this in mind. But here's what should worry you. None of this was hidden. This is directly stated in the bank's own press release. The headline said that history had been made up. The footnote was about how. And this is important. As always, it's very important, not the headlines. Isn't that right?
The point is at the end of the story. The beginning is a preamble. Never get carried away by the preamble. Observing facts rather than statements sometimes means comparing facts with other facts in the same document. Lesson two, this is also no less important. Know what profit was made from renting.
Where did this data actually come from ? JP Morgan's market revenue from trading and investment banking hit a record $12.1 billion, and shares rose 86%. Goldman Sachs' equities division earned $7.42 billion, up 72%, while JP Morgan's investment bank's fees rose 30% to their highest level since 2021.
That's why it happened in this particular quarter. In June, SpaceX completed the largest IPO in history, raising $86 billion at a valuation of $1.77 trillion. Reuters reported that the banks collected approximately $500 million in fees on the deal, with Goldman Sachs leading the charge. From an ideological perspective, or I would say from a dialectical perspective, the data shows that global investment banking revenues grew by 24% in the first half of the year.
These profits are real money. I do n't deny that. But they are rented. They don't belong to them. Trading department commissions and IPOs are cyclical income, and the peak of the cycle looks exactly like this. The behavioral trap is to treat rental income as if it were annuity income. Paying a record amount in a record year is discovering later that you are bucking the cycle twice.
This is where the structure for banks adapts. Filter five for an investment bank lender , who especially works to normalize earnings throughout the cycle, never during the last quarter, because it is in the last quarter that the cycle increases. Lesson three, and that's the point of this episode. Listen when a person downplays their own results.
Jamie Diamond talked about the best quarter in the history of his industry, and on the call he said he was almost hitting his best . We just don't know how long this will last. This means that the punch bowl can be taken away at any time. The music may stop. He listed the risks he sees: geopolitical stability, persistent inflation, rising sovereign debt and stretched asset valuations, and said they are shifting beneath the surface like tectonic plates.
And what do tectonic plates do? H, they create volcanoes and earthquakes, in my opinion. Now run a stimulus check. Charlie Mayer taught us. Damian had every incentive during this call to calibrate or celebrate. He decided to calibrate because it captures profits and records revenue for each business line the cameras are pointed at.
Instead, he chose caution. When management, with maximum incentive to brag, decides to warn, that statement takes on more weight, not less. Compare this to what typically happens during a cyclical peak. We saw this with SK CEO Heinik when the US listing took place. When management extrapolates the best quarter forward, the loudest optimism reaches its peak.
Inverting this question helps. What would this forecast sound like if we were close to the peak? He sounds like a record-breaking number and a worried CEO . And that was the Tuesday we had . And this is what Tuesday sounded like. Now the City group puzzle from the cold opening. City pushed all boundaries, announced a share buyback of 30 billion, increased its dividend and fell 4.7% before the close.
This is not madness. This is arithmetic that works on visibility. The stock price is recorded pending the market. City has grown significantly this year, which means that excellence has already been priced in before the results are out. And it happens, as you know, perfection comes at a price. So whatever was delivered was bound to pack a powerful punch.
It was intended to make a profit. When the results confirmed this perfection, there was nothing surprising left in the payment. And the salesman said, " Okay, who's waiting for good news?" Let's go out and register a profit." There is a name for a person who buys stocks the evening after they hit a record high.
Quarterly headline and exit liquidity. The time to have an option on a bank is when the quarter is boring, not when it is historic. If you feel the urge to buy something within 24 hours of seeing a record in the headline, that urge is a signal to slow down. So if you're feeling enthusiastic, saying " record, record, record," that means slow, slow, slow.
This has to be an integral part, as Matthew McConaughey just said , because the narrative and because the narrative that comes after the price has changed are counter signals, not confirmation. Another story this week that's important because there's a digest going around about wealth taxes in America, and I want to get to the bottom of it and get this signal out there for you.
The fact that Washington State has implemented a 9.9% tax on household income over $1 million . Signed in March, enters into force in January 2028 . Read this carefully. This is… an income tax for high earners, not a wealth tax. The actual wealth tax proposed there, an annual levy on stocks, bonds and funds, is on hold for the second year in a row.
This pattern is a whole lesson here. The wealth tax continues to fall in America before it reaches Europe, where most countries that have tried to repeal it have failed due to disputes over valuation, administrative costs and a struggle for capital. India conducted the same experiment. The 1957 wealth tax was repealed in 2015, and the government has repeatedly stated that there is no proposal to bring it back.
So, your portfolio as an Indian investor, this story is a hoax. The signal underneath is different, and developed governments are under real physical pressure and will continue to look for new revenue streams when we have high-paid people sitting there looking good. This physical pressure is one of the tectonic plates that Damian named on Tuesday.
A record quarter and tax headlines are the same story told twice. The system is overheating, and the people inside it are quietly preparing for its turn. So what homework do I have for you today? One calculation. Access JP Morgan's second quarter press release for free on the investor relations website .
Find a significant point in the section and take...one-time profits and calculate what percentage of the $21.2 billion in reported profits came from items that will not recur. Post your percentage, one line of work in the comments, and that one working comment will be promoted. So do it yourself and you'll never read a record profit headline the same way .
Start with a disclaimer. I am not a registered SEB consultant, not an analyst. There is nothing here to recommend that you buy or sell anything, and this should be done with, hopefully, a financial advisor. You pay generously because good advice is worth its weight in gold. Including JP Morgan, Goldman Sachs, Citi Group, Wells Fargo, Bank of America.
Every figure I quoted is from the company, published, and they reported the coverage. You should check them out. Just don't repeat what I say on this channel. Check the documents yourself, because this habit is the main point of this channel. I want you to develop the habit of checking and reading things yourself.
The video is available in Hindi, Tamil, English, any audio tracks you desire. As I said in the previous video, it's not...in my hands. I can't control which languages the AI will choose. I'm just glad it's available for those people who have difficulty understanding the English I speak. Thank you for paying attention to facts, not statements.
See you tomorrow, hopefully, with some more interesting developments in the US, global and Indian markets. Take care of yourself.
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