Federal income tax collections

[SlugSlinger]

JPMorgan, Wells Fargo prepare for losses on office loans​

July 14 (Reuters) - JPMorgan Chase (JPM.N) and Wells Fargo (WFC.N) said on Friday they set aside more money for expected losses from commercial real estate loans, in the latest sign that stress is building up in the sector.

Lenders' exposure to commercial real estate has come under growing scrutiny this year, as the sector globally - particularly office buildings - has been pressured by high interest rates and workers continuing to stay at home.

Wells Fargo reported higher losses in CRE due to its office loan portfolio. It increased its allowance for credit losses by $949 million.

But the bank also said its CRE revenue increased quarter-over-quarter to $1.33 billion, primarily due to higher interest rates and loan balances.

"While we haven't seen significant losses in our office portfolio to-date, we are reserving for the weakness that we expect to play out in the market over time," Wells Fargo CEO Charlie Scharf said.

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JPMorgan's CRE revenue grew to $806 million in the second quarter from $642 million in the first quarter. The bank, which acquired First Republic Bank in May, reported $1.1 billion in credit loss provisions driven by its office portfolio.

While the bank's office portfolio was "quite small," JPMorgan CFO Jeremy Barnum told investors that "based on everything we saw this quarter, it felt reasonable to build a little bit there to get to what felt like a comfortable coverage ratio."

The U.S. Federal Reserve's annual stress tests last month painted a better-than-expected picture of big banks' CRE exposure, with projected losses in the event of a market crash declining slightly on last year.

The majority of office and downtown CRE loans, however, are held by smaller regional and community banks, which are not subject to the same strict capital buffers, the central bank said.

Regulators have been keeping a close eye on CRE risk, particularly at banks with the highest ratio of such loans to their total capital, while lenders have been working with customers to try to prevent defaults.

"(T)here's plenty of little structural enhancements you can make to feel better about it, and then there are also in a lot of cases, getting some partial paydowns," Michael Santomassimo, Wells Fargo's CFO, told investors Friday.

CRE borrowers have struggled with higher refinancing costs as property values declined and interest payments have risen. Some $20 billion of office commercial mortgage-backed securities, which bundle together individual loans, mature in 2023, according to real estate data provider Trepp.

The McKinsey Global Institute forecast office property values could decline by $800 billion across nine major U.S. cities over the next seven years, according to a report. Based on a "moderate" scenario, McKinsey predicted demand for office space in 2030 would be 13% lower than in 2019.

McKinsey and others have noted San Francisco's office market has taken the biggest hit, with several major loan defaults in the city so far this year. Even in the Golden State, however, Santomassimo said Wells Fargo has seen successful workouts in its loan portfolio.

Almost a third of Wells Fargo's $33.1 billion in outstanding office CRE loans, or $9.9 billion, were to borrowers in California, according to the bank's latest results. This was followed by New York and Texas, which have also experienced CRE challenges this year.

"So I think it really depends on building, borrower and all the things we sort of talked about in the script, and it's less focused on just California," Santomassimo said.

 

[SlugSlinger]

Disney up for sale? Maybe this should go into the bud lite thread.

The media giant's television arm is more important than Bob Iger's recent comments suggest.​

James Brumley
The Disney (DIS 0.46%) that investors know and love today could look considerably different in the future. That's the hint CEO Bob Iger dropped on Thursday anyway, speaking to CNBC's David Faber at Allen & Co.'s annual media and technology investor conference. Specifically, the company may put some or all of its linear television networks like ABC, The Disney Channel, National Geographic, and FX, up for sale, with Iger suggesting "they may not be core to Disney." As for ESPN, the company's looking for a strategic partner.

Fair enough. No one knows the inner workings of a corporation quite as well as its chief executive. It's his call to make regarding what pieces of the company stay or go.

The prospect raises a key question though: Just how "non-core" is the television operation to Disney? Let's just say Iger might want to rethink the prospect of a sale, or at least clarify his comments.

Breaking down Walt Disney's business​

First, take Iger's comments with a grain of salt. Sometimes, CEOs say things that only partially reflect an idea that's being half-entertained by their organization. They're not always referring to actual plans, and the ideas may never be put into action.

On the other hand, Iger talked extensively about his concern with Disney's television efforts, adding:

The creativity and content they create is core to Disney, but the distribution model, the business model that forms the underpinning of that business, and that has delivered great profits over the years, is definitely broken. And we have to call it like it is. That's part of the transformative work that we're doing.

Those aren't the words of a man who hasn't given the matter much thought.

But linear television is actually tied for first place among Disney's businesses in terms of revenue generation, and is nearly its biggest in terms of operating income. Linear TV out-earns streaming, films, and branded products, and it can give the theme parksunit the occasional run for its money on profitability. In fact, the company's domestic TV arm alone accounts for roughly a third of the company's usual operating income, led by ABC and ESPN.

The graphic below puts things in perspective, laying out each business's top and bottom lines through the first six months of fiscal 2023 (which has been a fairly typical year so far).

Data source: Walt Disney Corporation's fiscal 2023 Q1 and Q2 earnings reports. Chart by author.

Linear TV (domestic and international channels) made up 43% of the company's operating income for the period, so if TV isn't core to the company, then what is?

It's complicated​

It's not easy to say what's really going on in Iger's head, mostly because Disney as a company is more complicated than it seems to be on the surface.

Take Marvel as an example. The comic book brand's history is legendary, and Disney's 2009 acquisition of it was savvy in that it brought lots of highly marketable superheroes into the fold. This intellectual property hasn't always been used quite as wisely as it could have been, however.

As Iger pointed out in his interview with Faber, writing stories for these characters works well on the big screen, but things change when they're appearing in an episodic series created for Disney+ or for linear television. To this end, Disney's chief executive wants to dial back the company's total output of Marvel content, as well as its Star Wars content, which has faced similar dilutive challenges; some Marvel content also airs on cable.

And yet, Marvel and Star Wars are arguably the biggest draws to the company's still-unprofitable streaming platform. Reducing the volume of new content available could sap the appeal of its Disney+ streaming service in an environment where consumers are already overwhelmed with a surplus of choices and soaring costs.

 

[SlugSlinger]

‘Broke Generation:’ 64% of Gen Xers have stopped saving for retirement​

While their parents belonged to the “Greatest Generation,” Gen X may soon be carving out a reputation as the “Broke Generation.”

A recent survey conducted by Clever Real Estate polled 1,000 Gen Xers born between 1965 and 1980 to find out how they fare when it comes to personal finances and the road to retirement. A staggering 56% of Gen Xers said they have less than $100,000 saved for retirement, and 22% said they have yet to save a single cent.

While the desire to retire may be there, the money just isn’t. A whopping 64% of respondents said they stopped saving for retirement not because they don’t want to but because they simply can’t afford to.

The reasons for the lagging savings varied, with many citing poor economic conditions and backbreaking student debt as retirement roadblocks. With the eldest members well into their 50s, the reality is that Gen Xers are facing a retirement crisis, and unless they take action now, they won’t be able to retire comfortably, if at all.

Early Financial Setbacks Have Gen X Behind​

One of the main reasons why Gen Xers have yet to save enough for retirement is that they have faced several financial challenges throughout their lives. A majority entered the workforce during the recession of the early 1990s, which made it difficult to secure stable jobs and earn decent wages.

They also faced significant student loan debt, with the average amount owed being a whopping $43,438 per borrower. Generation X holds 38.8% of the $1.63 trillion in federal student loan debt, more than any other generation.

Gen Xers have also been hit hard by the housing crisis, many of them purchasing homes at the market’s peak in the mid-2000s. When the market crashed, many of these homeowners found themselves with properties worth less than what they had paid for them, leaving them with negative equity. They could not sell their homes or refinance their mortgages, making it difficult for them to save for retirement.

Additionally, many Gen Xers have not taken advantage of retirement savings plans like 401(k)s and IRAs. According to the Clever Survey, 64% of Gen Xers are saving 10% or less of their monthly income for retirement. Experts recommend that workers save a minimum of 10-15% of their pre-tax income each year for retirement, including any employer match.

Historic Inflation Adds Mounting Pressure​

Of all the significant events in their lifetime, Gen Xers say the current inflation crisis has had the most impact on their financial situation, surpassing the COVID-19 pandemic and the 2008 recession.

More than two-thirds of Gen Xers (69%) report that inflation has negatively impacted their retirement plans, and 40% say they have no confidence that they can afford retirement at all.

A Large Majority of Gen X Is in Debt​

No matter what your yearly income may be, it’s tough to devote any money to retirement savings when you carry a significant amount of debt. When discussing what prevents them from helping their future selves, 80% of the Gen Xers surveyed said they were carrying some form of debt, with 52% indicating they have at least $10K in non-mortgage, typically credit card debt.

Gen Xers are pinched between two generations. They have to care for their parents from the aging Baby Boomer generation while still shelling out money to help their adult children from the Millennial generation.

Tack on personal expenses, and it’s easy to see why these middle-aged Americans are far from the career finish line.

It’s Never Too Late To Start Saving​

As Gen Xers retire, the lack of savings becomes even more critical. Without adequate savings, they will be unable to maintain their standard of living or pay for essential expenses like healthcare and housing. This means more and more individuals will need to rely on government programs like Social Security and Medicare.

Ironically, it seems that Millennials (aka children of Gen Xers) are transforming the way retirement savings are approached, with many having already saved more than their parents did at the same age.

To play catch up, Gen Xers need to take action to increase their retirement savings. Here are a few steps they can take:

1. Start saving as much as possible: Even if you’ve yet to save much for retirement, it’s never too late to begin. Try and save as much as possible, even if it means making some sacrifices in your current lifestyle.

2. Maximize retirement savings: If your employer provides a 401(k) or a similar plan, enroll and contribute as much as possible, taking advantage of any employer-matching programs. Additionally, consider opening an IRA to boost your savings.

3. Prioritize debt repayment: Focus on paying off high-interest debt like credit cards and personal loans. By doing so, you’ll have more funds available for retirement savings.

4. Cut unnecessary expenses: Trim non-essential purchases such as dining out or buying expensive clothing. Seek ways to save on monthly bills, such as reducing energy usage or negotiating lower service rates.

5. Explore stock and mutual fund investments: Stocks and mutual funds can offer higher returns than traditional savings accounts or CDs, but they also carry more risk. Research thoroughly and consult a financial advisor before making investment decisions.

This article was produced by Clever Real Estate and syndicated by Wealth of Geeks.

 

[Roy14]

One would think that the older politicians would have the values of yesterday.

The values of yesterday you’re referring to.

 

[mr ed]

Just wait til the digital dollar gets here.
No more private transactions
Every dollar going in and out of your pocket will be traced.
The government will just suck out of your bank account what they feel is their share of taxes.
Make $250k a year
Prepare to share it with the homeless guy down the road.