Earnings, Real Estate and World War III

It has been an exciting week so far. We are seeing a bunch of community bank earnings reports and do the most part we continue to see solid reports with excellent credit conditions and decent loan and deposit growth.

Chris Marinac over at FIG Partners noted this week that net interest income is rising at a majority of banks and that tangible book value has advanced from 6/30 levels for 92% of the banks thus far. Conditions remain excellent for the little banks and our Trade of the Decade portfolio continues to deliver market-beating results.

I was also delighted to see Barry Sternlicht of Starwood on CNBC last week saying that he is pretty bullish on US real estate. He told the network that “"I think you can see acceleration in spending, incomes are rising. I'm seeing that real estate markets, in general, have never been better in the United States."

This is fantastic news for us as we not only own a lot of banks that have real estate as collateral for the bulk of their loan portfolios we own a lot of REITs and real estate related companies in all of our portfolios. We are not necessarily active buyers at current prices, but we are not selling any of our real estate related holdings either so the news that one of the largest owners of property in the world is bullish is happy news indeed.

I know Halloween was this week, but if you really want to be scared read this from Reuters: “Britain said on Wednesday it will send fighter jets to Romania next year and the United States promised troops, tanks, and artillery to Poland in NATO's biggest military build-up on Russia's borders since the Cold War. Germany, Canada and other NATO allies also pledged forces at defense ministers meeting in Brussels on the same day two Russian warships armed with cruise missiles entered the Baltic Sea between Sweden and Denmark, underscoring East-West tensions.”

I have been saying that geo-political risks are the most important one the market faces and poking Putin is probably the most dangerous game we can be playing in terms of risk right now. I have been saying since the Ukraine fiasco began that the West is badly underestimating Putin’s willingness to get into a shooting war with the West. While I would love to see a selloff, I would prefer it was not caused by World War III.