It wasn’t just Goldman Sachs that reported better than expected Q3 earnings this morning: on the surface, Bank of America surprised to the upside as well, and in fact its FICC division reported an even better results than Goldman’s. The bank, which had gotten Warren Buffett’s seal of disapproval, after the billionaire investors dumped much of his shares in what was once a Top 5 position, performed better than expected as it benefited from volatile markets while net interest income topped analysts’ estimates. On the other hand, there were also quite a few red flag, with the company’s Net Interest Yield sliding to a cycle low even as charge offs and credit losses jumped to the highest in years.

Here is a snapshot of what BofA reported in Q3:

• Revenue net of interest expense $25.35 billion, beating estimate $25.27 billion
  • Trading revenue excluding DVA $4.94 billion, beating estimate $4.57 billion
    • FICC trading revenue excluding DVA $2.94 billion, beating estimate $2.77 billion
    • Equities trading revenue excluding DVA $2.00 billion, beating estimate $1.81 billion
  • Investment banking revenue $1.40 billion, beating estimate $1.24 billion
  • Wealth & investment management total revenue $5.76 billion, beating estimate $5.63 billion
• EPS $0.81, beating estimates of $0.77

Taking a closer look at the Global Markets group, revenue from equity and fixed income, currencies and commodities trading rose 12% to $4.93 billion in the third quarter:

• FICC revenue increased 8%, to $2.9BN, beating estimates of $2.8BN, “driven primarily by improved client activity and trading performance in currencies and  interest rate products”
• Equities revenue increased 18%, to $2.0BN, beating estimates of $1.8BN “driven by strong client activity and trading performance in cash and derivatives”

Similar to Goldman, BofA’s investment banking also outperformed expectations, a sign that the long-awaiting rebound in dealmaking is taking hold. The company benefited from “year-over-year growth in investment banking and asset management fees, as well as sales and trading revenue,” CEO Brian Moynihan said in the statement.

Investment-banking revenue rose 15% to $1.40Bn, better than analysts expected amid renewed strength in dealmaking. Fees for advising on mergers and acquisitions fell 14%, less than the almost 24% decline analysts had expected. Revenue from equity and debt issuance increased 16% and 37%, respectively.

Not everything was stellar however: the second-largest US bank said that net interest income, a key source of revenue for the company, fell 2.9% to $14 billion, the lowest of the cycle; still this was better than the 3.4% drop analyst had expected (on an FTE basis, NII was $14.11 billion, also better than the estimate of $14.07 billion). The number increased $0.3B from 2Q24, driven by fixed-rate asset repricing, higher NII related to Global Markets (GM) activity, and one additional day of interest accrual, partially offset by higher deposit costs; it also decreased $0.4B YoY, as higher deposit costs more than offset higher asset yields, higher NII related to GM activity, and loan growth. Overall, BofA’s net interest yield came in at 1.92%, down both sequentially and YOY, and just below the estimate 1.93%. And now that the Fed is cutting rates again, that’s as good as it gets for BofA’s NII.

It wasn’t just the Net Interest Yield that left much to be desired: similar to JPM, BofA’s provision for credit losses unexpectedly rose to the highest in years, and was $1.54 billion in Q3, higher than the $1.53 billion estimates with a Q3 net reserve build of $8MM in 3Q24 vs. net reserve release of $25MM in 2Q24; This was the highest since the covid crash!

Charge offs also rose to $1.534 billion, above the $1.5 billion estimate and a 0.58% charge off ratio. This may come as a surprise to anyone looking at the stock which is still up, if not for long, and thinking that the results were somehow much better than expected.

According to the bank, commercial net charge-offs of $490MM increased $16MM; this was driven by commercial and industrial NCOs which increased $111MM, driven by two borrowers; at the same time commercial real estate NCOs declined $101MM.

On the spending side of the income statement, things were generally in line with expectations:

• Non-interest expenses $16.48 billion, estimate $16.49 billion
• Compensation expenses $9.92 billion, estimate $9.9 billion

Here is some other data:

• Return on average equity 9.44%, estimate 9.01%
• Return on average assets 0.83%, estimate 0.78%
• Return on average tangible common equity 12.8%, estimate 12.2%
• Basel III common equity Tier 1 ratio fully phased-in, advanced approach 13.5%, estimate 13.5%
• Standardized CET1 ratio 11.8%, estimate 11.9%

Looking at the balance sheet, we find:

• Loans $1.08 trillion, estimate $1.07 trillion
• Total deposits $1.93 trillion, estimate $1.93 trillion

Shares of Bank of America, which gained 24% this year through Monday, climbed 1.4%, but were well off session highs, and we expect it to close red as investors override the euphoria algo kneejerk reaction.

BofA Q3 investor presentation below (pdf link)

ASML Holding (ASML) shares plunged Tuesday morning after third-quarter bookings missed average analyst estimates and forecasts were slashed. Nasdaq puked on this news as the whole AI ‘insane demand’ narrative unravels.  

The Dutch company that makes the chip-making machines used by major players in the semiconductor industry reported dismal third results. 

Here’s the breakdown (courtesy of Bloomberg):  

• Bookings EU2.63 billion, -53% q/q, estimate EU5.39 billion (Bloomberg Consensus)
• Net sales EU7.47 billion, +20% q/q, estimate EU7.17 billion
• Gross margin 50.8% vs. 51.5% q/q, estimate 50.7%
• Net income EU2.08 billion, +32% q/q, estimate EU1.91 billion
• Cash and other EU4.99 billion, -0.7% q/q, estimate EU4.86 billion

ASML slashed 2025 net sales and gross margin guidance as demand for AI wanes. 

Fourth quarter forecast:

• Sees net sales EU8.8 billion to EU9.2 billion, estimate EU8.95 billion
• Sees gross margin 49% to 50%, estimate 50.5%

2025 forecast: 

• Sees net sales EU28 billion, estimate EU27.71 billion 2025 YEAR FORECAST
• Sees gross margin 51% to 53%, saw about 54% to 56%, estimate 53.9%
• Sees net sales EU30 billion to EU35 billion, saw about EU30 billion to EU40 billion, estimate EU35.94 billion

ASML shares were hammered in NY, down -16%. 

Nasdaq puked as well. 

*Developing… 

Authored by Lance Roberts via RealInvestmentAdvice.com,

In the movies, greed is a trait often exhibited by the rich and powerful as a means to an end. Of particular note is the famous quote from Michael Douglas in the 1987 movie classic “Wall Street:”

“The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.”

While greed is necessary to build wealth, excessive greed often has far more terrible consequences when investing.

Few stories are as staggering or cautionary as this one. An investor turned an $88,000 investment into a mind-boggling $415 million through Tesla stock, only to lose it all. It’s a story that captures extremes of financial success and failure. It is a story of greed and the false confidence that comes with exponential returns. However, a deeper examination of the circumstances that led to this loss clarifies that there were warning signs. Common-sense strategies and risk management tools to prevent financial catastrophes were abandoned.

In this post, we’ll examine what happened, how greed played a key role in the investor’s downfall, and the steps that could have been taken to mitigate the risks. Ultimately, the goal is to highlight valuable lessons to help you avoid the same fate and safeguard your wealth.

The Journey from $88K to $415M

The story begins with Christopher DeVocht making hundreds of millions from Tesla options with an initial investment of $88,000. This feat occurred during the speculation boom driven by massive Government interventions in 2020. As Tesla’s market value skyrocketed, Christopher’s position grew exponentially. The leverage provided through options and margin lending allowed him to continue to take on increasingly larger positions. As shown, in 2020, Tesla’s shares rose by 1700% as zero interest rates and massive monetary interventions led to the most speculative stock market run in recent history.

During that meteoric rise, Christopher’s portfolio value surged to an unbelievable peak of $415 million. However, Christopher chose to stay the course instead of cashing out or diversifying his holdings. Despite the risks of a highly concentrated portfolio, the allure of even greater returns was too hard to resist.

Unsurprisingly, just like staying too long at the Blackjack table in Las Vegas, the market eventually turned against him. In 2022, the market reversed course as the Federal Reserve began an aggressive rate-hiking campaign and stimulus checks ran out. During that year, Tesla’s stock value fell by nearly 70%. Of course, had Christopher just been long Tesla shares, his value would have still been roughly $100 million. However, Christopher’s problem was that he was using leveraged options and margin debt. The problem with margin loans is the borrower must liquidate shares to repay the loan. Additionally, options contracts expire worthless. The portfolio was wiped out with the forced liquidation of Tesla shares to repay margin loans and options expiring worthless.

Naturally, a lawsuit against his financial advisor followed, blaming them for not taking action to preserve his wealth.

I can almost assure you there were suggestions that he should take action to reduce his exposure. However, when greed is involved, that advice likely went unheeded. I can tell you from personal experience clients will not take advice to sell rising holdings during a market frenzy. One excuse is the “fear of missing out.“ The other is often unwillingness to pay taxes on gains.

This story should serve as a potent reminder that unchecked greed and poor risk management are often the architects of financial ruin.

Stocks Often Lose 100%

One of the most crucial elements of this story is greed’s role in amplifying the investor’s downfall. Greed can cloud judgment, leading individuals to chase ever-higher returns without regard for the growing risks. Here is an important statistic for you.

Hendrik Bessembinder examined the history of 29,000 stocks in the United States over the 90 years of good data available. He’s also examined about 64,000 stocks outside the U.S. on a slightly shorter time horizon because of available data. To understand the result, we must understand the difference between mean, median, and mode.

The mean is the average value among the sample. The median is the middle value. Importantly, the mode shows the most repeating value. 

What was the result?

The “mode” was (-100%.)

In other words, the most common outcome of buying a stock is losing all your money.

Here is a visual representation. If you picked 100 stocks, 70% would likely underperform the market.

Managing Risk

In this case, Christopher happened to latch onto one of the few companies that soared well above norms. Given the historical distribution of returns from single stocks, a cursory understanding of risk should have provided some caution. As such, Christopher had ample opportunity to lock in substantial profits or at least diversify a portion of his wealth. But, as is often the case when emotions dictate investment decisions, he opted to “ride the wave.”

For a deeper understanding of risk, read our previous post, “Howard Marks’ View Of Risk.“

Many investors fall into this trap, believing that the market will always move in their favor. What they fail to consider, however, is that markets are always cyclical, and what goes up eventually comes down. By not acknowledging this, he exposed himself to an unnecessary risk that ultimately cost him everything.

The loss of $415 million wasn’t inevitable—it was preventable. There were several options that Christopher could have taken to mitigate risk and safeguard his wealth. Here are three strategies that could have changed the outcome of this story:

1. Portfolio Diversification

When Christopher turned his initial $88,000 investment into $1 million, a simple strategy would have been to diversify. When betting on margin, the loan value is based on the collateral of the underlying account. Therefore, shifting some of his profits to Treasury bonds would have decreased the decline in 2022, requiring fewer liquidations. However, by keeping his entire wealth in Tesla stock, he was highly exposed to the volatility of a single company. In this instance, Christopher effectively bet “all in” on every hand at the blackjack table. Logic would dictate that, eventually, you would lose that bet.

Given that diversification spreads risk across various asset classes, stocks, bonds, real estate, and other investment vehicles, such moves early in the cycle would have significantly reduced the impact of Tesla’s eventual downturn on his overall wealth.

2. Setting a Stop-Loss or Trailing Stop Order

The problem with diversification, however, is that it would have limited Christopher’s significant upside. Therefore, to remain aggressive in the position, Christopher could have taken several strategies to reduce his risk significantly. Since Christopher was already using call options to bet on Tesla, he could have bought “put” options to hedge his downside risk. While the cost of the options would slightly reduce his overall return, the “insurance” would have saved him millions in 2022.

Another effective risk management tool is setting stop-loss or trailing stop orders on investments. A stop-loss order allows an investor to automatically sell a stock once it hits a predetermined price, limiting potential losses. A trailing stop-loss, on the other hand, adjusts with the stock’s price as it rises, locking in gains while protecting against large downturns.

In Christopher’s case, setting a trailing stop-loss would have allowed him to capture most of Tesla’s extraordinary rise while preventing catastrophic losses when the stock eventually declined. This safeguard ensures that you are not solely reliant on timing the market, which, as we all know, is nearly impossible to do consistently.

3. Profit-Taking

It’s often said that “bull markets make geniuses out of everyone.” When stocks soar, it’s easy to get complacent. However, a process for regularly taking profits would have been an easy solution for Christopher.

For example, when Christopher turned $88,000 into $1 million, a prudent exercise would have been to put $500,000 into cash or Treasury bonds. Then, repeat that process at regular intervals, $5, $10, $25, $50, $100 million, and so on. Regular profit-taking and storing those gains in the safety of Treasury bonds would have yielded a massive amount of protected wealth. In the end, while Christopher may have still lost a lot of money on his aggressive betting on Tesla, he would have still had $100 million or so in Treasury bonds.

This is not an uncommon issue that I always see with clients and prospects. Greed comes in three destructive forms: 1) the need to make more, 2) the lack of knowing when “enough is enough,” and 2) the unwillingness to pay taxes.

Christopher lost all his wealth. I am sure he now realizes the error of excess greed and hopes a lawsuit will return some of his gains. (Such will likely be the case as the brokerage firm’s insurance company will likely settle the case in arbitration for $100 million or so rather than going to court.)

The good news, however, is that Christopher didn’t have to pay any taxes.

In hindsight, those taxes would have been a cheap price to pay.

What the Advisor Could Have Done

While Christopher is responsible for his decisions, the financial advisor must protect the client’s wealth. An advisor’s job is to execute trades and provide sound guidance that aligns with a client’s risk tolerance and long-term objectives. In this case, the advisor could have done several things differently:

• Proactively encouraged diversification: A responsible advisor would have emphasized the importance of not putting all the investor’s wealth into one stock, no matter how well it had performed.
• Insisted on setting up risk management tools: The advisor should have suggested stop-losses, rebalancing strategies, or profit-taking checkpoints, giving the investor automatic mechanisms to reduce risk.
• Maintained clear communication: Regular discussions about the portfolio’s risk exposure and the potential dangers of an overly concentrated position could have kept emotions in check and led to more rational decision-making.

As I said, the advisor likely discussed these options with Christopher, who assured the advisor he understood the risk. However, if Christopher failed to heed the advice, the advisor should have taken another precaution: fire the client.

Yes, the advisor should have fired the client in clear written communication, stating that the client was not heeding the advisor’s advice. More than once in my career, I have fired clients or not taken on prospects for the same reasons. Unrealistic expectations, greed, excessively risky positions taken, etc., are all good reasons not to take on a client, regardless of how big the account is. When things inevitably go wrong, the advisor is always the first to get sued.

We take our portfolio management and advisory services very seriously, primarily focusing on preserving wealth through a disciplined and conservative process. Therefore, we work to ensure that clients and prospects align with that philosophy to minimize the risk of something going wrong, as in Christopher’s case.

The Bottom Line

This case is a sobering reminder of how greed, unchecked by rational decision-making and proper risk management, can turn a once-in-a-lifetime financial windfall into a crushing loss. As investors, it’s crucial to understand that market gains are never guaranteed and that the risks of overexposure can be devastating.

If you are in a similar situation, riding the wave of massive market gains, ask yourself: Is now the time to take some chips off the table? Are your investments aligned with your long-term goals and risk tolerance?

At RIA Advisors, we specialize in helping investors navigate these complex decisions with sound financial planning and proven risk management strategies. Don’t wait until it’s too late—schedule an appointment with one of our experienced advisors today. Together, we can help you protect and grow your wealth responsibly.

Unlike his financial system overlord peer Jamie Dimon, BlackRock CEO Larry Fink continues to show an optimistic view on cryptocurrencies.

During yesterday’s earnings call, Fink declared, “I’m not sure if either president would make a difference” on Bitcoin’s growth,” adding “I don’t believe [Bitcoin’s rise] is a function of regulation.”

He went on to compare Bitcoin’s growth to much larger markets like mortgages, noting liquidity and transparency drives adoption more than rules.

Well, first, I’m not sure if either President or other candidate would make a difference. I do believe the utilization of digital assets are going to become more and more of a reality worldwide.

Conversations we’re having with institutions worldwide, conversations about how should they think about digital assets, what type of asset allocation there should be. I mean, we believe Bitcoin is an asset class in itself. It is an alternative to other commodities like gold. And so, I think the application of this form of investment will be expanded to the role of Ethereum as a blockchain can grow dramatically. So if we can create more acceptability, more transparency, more analytics related to these assets, then it will be expanded.

But I truly don’t believe it’s a function of regulation, of more regulation, less regulation. I think it’s a function of liquidity, transparency, and then through that process, no different than when you – years ago when we started the mortgage market, years ago when the high yield market occurred, started off very slow, but it built as we built better analytics and data, and then through better analytics and data, more acceptance and a broadening of the market. And I truly believe we will see a broadening of the market of these digital assets.

And then we’ll see how does each and every country look at their own digital currency. That’s a very different asset than a Bitcoin in itself. But I do believe what we’re going to witness as we build out better analytics, and then the question is, as you mentioned regulation, how do we see in this country the role of digitizing the dollar? And what role does that play? That’s a very different question related to, let’s say, Bitcoin and other items like that. But all of that is going to be under discussion.

And what we re witnessing in other countries, we’re seeing big success in India, in Brazil in the digitization of their own currency for various different reasons. But we believe the technology of these blockchains are going to become very additive. And then you will overlay Al, and having better data analytics, the applicability and the broadening of these markets will occur.

But, there are always the naysayers, and true to his theme over the last ten years, Minneapolis Fed President Neel Kashkari exclaimed yesterday that “bitcoin has been around a dozen years and its still useless”.

This should not come as a surprise since Kashkari has been comparing Bitcoin to Beanie Babies for years…

Fed President Neel Kashkari: #Bitcoin has still shown no actual usefulness in the real world… If you want to collect Beanie Babies, God bless you. I’m just cautioning people who think this an investment vehicle of usefulness.

pic.twitter.com/RlkBpExEuN

— Bitcoin News (@BitcoinNewsCom) May 15, 2024

“When will the Fed put Bitcoin on its balance sheet?

You already said on record that you have an unlimited supply of dollars, doesn’t it make sense to trade some of them for a currency with a hard cap?”

Incredible clip

Kashkari’s answer will be studied by future historians pic.twitter.com/8kgFRUZTJi

— Alex Gladstein 🌋 ⚡ (@gladstein) April 5, 2024

Of course, The Fed does not want anyone seeing this ‘alternative’ currency taking off since it exposes the potemkin reality that they spend every day defending. In fact, Bitcoin is breaking out this morning…

…following the lagged surge in global liquidity right on cue…

So, despite the $1.3 trillion market cap and 1.2 billion wallets using the cryptocurrency… and Fink’s optimism over adoption… and Trump’s plans for a strategic reserve… and Kamala’s proposals to empower black men in the crypto world… a Fed head remains dissonant, presumably believing the entire crypto ecosystem is nothing but ‘transitory’.

Bitcoin is the 10th largest asset on the planet…

Well, you know what else is transitory…

…nothing lasts forever, Neel!

Israeli Prime Minister Benjamin Netanyahu is denying a Monday Washington Post report which sent oil prices sliding and which painted a picture of President Biden using diplomatic finesse to ensure Israel won’t strike Iran’s nuclear or oil sites.

“We listen to the opinions of the United States, but we will make our final decisions based on our national interests,” Netanyahu’s office said Tuesday, as cited in Bloomberg. The new report notes that Israeli is merely “weighing US misgivings” and has committed to nothing concrete regarding strike plans.

This is widely being taken as a clear denial of the main substance of the prior WaPo report, which stated Monday afternoon that “Israeli Prime Minister Benjamin Netanyahu has told the Biden administration he is willing to strike military rather than oil or nuclear facilities in Iran” – citing two unnamed officials.

In the wake of the Washington Post headline West Texas Intermediate fell to near $70 a barrel, sliding as much as 5%, with Brent futures slumping below $74.

The Washington Post had chalked up a recent Biden-Netanyahu call as a win for Biden diplomacy:

Netanyahu was in a “more moderated place” in that discussion than he had previously been, said the U.S. official, describing the call between the two leaders.

The apparent softening of the prime minister’s stance factored into Biden’s decision to send a powerful missile defense system to Israel, both officials said.

But Bloomberg is now referencing the same report as precisely that which Netanyahu is denying. Bloomberg writes:

A report in the Washington Post said the Israeli premier had agreed to limit his retaliation for an Oct. 1 Iranian ballistic missile salvo to military targets. The newspaper cited two officials familiar with the matter who it didn’t identify.

Such a decision might not sit well with more hard-line Israelis. “We have an opportunity to cut off the head of the snake,” far-right National Security Minister Itamar Ben-Gvir told Army Radio, in reference to Iran. He declined to give details on closed-door cabinet deliberations.

As we highlighted in our prior coverage, there remain plenty of hawks in Bibi’s security cabinet who are urging Israel to go big in its response. It is also the case that Netanyahu has been talking about taking out Iran’s nuclear program for many years at this point.

“Never had a greener light”…

Reports say Israel assured the U.S. that any retaliatory act against Iran would not target nuclear or oil facilities. But @ilanberman, @afpc Senior VP, says Israel has “never had a greener light from the international community” to “set back” the Iranian nuclear program. pic.twitter.com/HDKBYrGveY

— Squawk Box (@SquawkCNBC) October 15, 2024

On Tuesday, Israeli Defense Minister Yoav Gallant reiterated that Israel’s response to Iran will be “soon, accurate, and lethal” – as cited in Al Arabiya.

Meanwhile, the Pentagon has said that an initial THAAD missile system has reached Israeli and will soon be fully operational, complete with US service members manning it. The Monday WaPo report had strongly suggested that Biden’s offer of the THAAD missile defense system is ultimately what resulted in Netanyahu’s vow to not hit oil or nuclear sites in the Islamic Republic (a quid pro quo of sorts) – a claim which is now being shown as dubious.

Goldman extended the banks’ solid results this morning when it reported a 45% jump in profit to $3bn in the third quarter, boosted by its equity trading business, while beating solidly on revenues even as the investment bank took another hit from its retreat from retail banking. Goldman’s net income of $2.99bn compared with $2.1bn in the third quarter of last year and outstripped analysts’ estimates of about $2.5bn. Here are the details for Q3:

• Net Revenue $12.70 billion, beating estimates of $11.77 billion
  • FICC Sales & Trading Revenue $2.96 billion, beating estimates of $2.96 billion
  • Global Banking & Markets net revenues $8.55 billion, +6.8% y/y, beating estimates of$7.65 billion
  • Investment banking revenue $1.86 billion, +20% y/y, beating estimates of $1.68 billion
  • Equities sales & trading revenue $3.50 billion, +18% y/y, beating estimates of $2.95 billion
  • Advisory revenue $875 million, +5.3% y/y, beating estimates of $757.5 million
  • Equity underwriting rev. $385 million, +25% y/y, beating estimates of $359.6 million
  • Debt underwriting rev. $605 million, +46% y/y, beating estimates of $567.9 million
• Net interest income $2.62 billion, +70% y/y, beating estimates of $1.84 billion
• EPS $8.40 vs. +54% y/y from $5.47

In the best quarter for Goldman’s stock trading business since the start of 2021 – and on track for its best year ever – equity trading revenues reached $3.5bn, up 18% and defying expectations of a flat quarter. The firm credited significantly higher intermediation revenue in derivative and cash products.

On the other hand, the company’s biggest profit center, fixed income trading (FICC) revenues fell 12% to $2.96bn, in line with estimates; Goldman said lower FICC revenues “reflecting significantly lower net revenues in FICC intermediation, due to significantly lower net revenues in interest rate products and commodities, partially offset by significantly higher net revenues in currencies and credit products and higher net revenues in mortgages.”

In August, the bank said the co-head of its commodities business, Qin Xiao, was leaving after just a few months in the role at a time when gains in that business have slowed. CEO David Solomon last month flagged a significant slowdown in revenue tied to equity and debt investments in its money-management unit, particularly as the bank pares back investing from its balance sheet. That revenue was $294 million, a sharp slowdown from recent quarters, including the more than $1.2 billion at the end of last year.

Some more results:

• Provision for credit losses $397 million vs. $7 million y/y, below estimates of $411.9 million
• Platform Solutions pretax loss $559 million, below the estimated loss of $302.7 million
• Total deposits $445 billion, +2.8% q/q
• Total operating expenses $8.32 billion, -8.2% y/y, higher than the estimate of $8.11 billion
• Compensation expenses $4.12 billion, -1.6% y/y, higher than the estimate of $3.89 billion

Despite the narrowed focus in its business, now that it has jettisoned its ill-fated consumer banking foray, the bank is still shy of its mid-teens return-on-equity target, having only hit that mark once in the past 10 quarters. In the three months through September, the New York-based firm posted a 10.4% ROE — a measure that tracks how profitably the bank invests shareholder equity.

Goldman’s results would have been even stronger were it not for a charge due to losses Goldman took a year ago tied to its pullback from consumer banking and writedowns on real estate investments. The bank’s results included a $415 million hit tied to severing the firm’s credit-card partnership with General Motors and jettisoning other small retail ventures. Barclays Plc said Monday it’s taking over the GM business after Goldman fumbled its foray into consumer lending.

The Wall Street firm has spent much of the last year trying to drop its much bigger card tie-up with Apple. That book of business, which has about $17 billion in outstanding balances, could suffer a steeper hit if Goldman exits the partnership by selling the loans at a discount.

Goldman also benefited from a revival of dealmaking activity in what Wall Street hopes is the start of a sustained recovery. Investment banking fees rose 20% at $1.865bn, ahead of the $1.68bn estimates. Merger-advisory fees were $875 million. Goldman jumped out in front of JPMorgan on that metric after falling behind its rival in the second quarter. Its equity-underwriting business posted revenue of $385 million and debt-underwriting revenue was $605 million. Also of note: the bank said that the backlog of investment banking fees was up from the end of the second quarter “and the end of 2023.”

Goldman’s asset and wealth management division, which is central to Solomon’s efforts to make the bank less reliant on investment banking and trading, reported a 16% increase in revenues to $3.754 bn. Management fees climbed 9%. The bank reported $16 billion of fundraising in the alternatives business, mostly tied to credit-related strategies. Here is the full breakdown:

• Management and other fees primarily reflected the impact of higher average AUS
• Incentive fees were driven by “harvesting” (i.e. selling)
• Private banking and lending net revenues primarily reflected the impact of higher deposit balances
• Equity investments primarily reflected net gains from investments in corporate private and public equities, compared with net losses in 3Q23
• Debt investments primarily reflected lower net interest income due to a reduction in the debt investments balance sheet

Total assets under supervision for Goldman’s wealth management group rose $169 billion to a record $3.10 trillion, driven by inflows across all asset classes, particularly in liquidity products and fixed income assets. The group also benefited from net market appreciation primarily in fixed income and equity assets.

The consumer-platforms business, dubbed the bad bank within Goldman, recorded a 32% drop in revenue to $391 million, driven by the GM card exit and resulting in a pretax loss of $559 million.

The bank’s net interest income rose a whopping 70% YoY to $2.62 billion, smashing estimates of $1.85 billion; the bank reported that in Q3, its average interest-earning assets were $1.59 trillion.

Investors have sent Goldman shares higher this year as the bank abandoned major parts of its consumer-banking push and positioned itself to benefit from a rebound in investment banking. As Bloomberg notes, across Wall Street, big banks are showing they can fend off headwinds in their retail businesses from the reduction in interest rates, while highlighting the potential for increased dealmaking that would lift fees across the industry. But few are doing it as well as Goldman, whose shares have posted the biggest gain among the top US banks this year, advancing 36%, and they reached an all-time high on Monday. The stock jumped 3.3% at 8:03 a.m. in early New York trading.

Full Goldman investor presentation below (pdf link).

A Moscow court on Monday sentenced a French citizen to three years in a penal colony on allegations of spying, in a case which has centered on his failure to register as a foreign agent. 48-year old Laurent Vinatier is being widely described in media is a “French researcher” who works for the Geneva-based Center for Humanitarian Dialogue, a nonprofit conflict-resolution organization.

He worked for the NGO as an adviser on Russia and Eurasia and was arrested in June after the Russian Ministry of Justice designated him a foreign agent, and as it was found he failed to register with the government.

Prosecutors allege that information he collected, including on Russia’s armed forces, could be used against the Russian military and state.

Russia alleges that he “purposefully collected information in the field of military and military-technical activities.” It comes after similar convictions of Westerners, including the saga of Wall Street Journal reporter Evan Gershkovich who was freed in a prisoner swap along with ex-Marine Paul Whelan in August.

“The court ruled to find Vinatier guilty and sentence him to three years in a general regime penal colony,” judge Natalia Cheprasova ruled.

Vinatier said he was unaware that he was supposed to register as a foreign agent, and his defense team has blasted the controversial 2012 law under which he was arrested, saying in a statement: “We consider the sentence harsh and will definitely appeal.”

The law requires any individual or entity receiving foreign support to legally declare themselves a foreign agent. It is similar to laws in the US, or many other countries which have parallel statutes.

The NGO for which Vinatier worked says that its main activity is “to prevent and resolve armed conflicts around the world through mediation and discreet diplomacy”. The French national traveled frequently on behalf of the NGO.

Russian media has noted that he pled guilty to the charges. Amid the Ukraine war, NGO’s are regularly under suspicion that external intelligence services use them as cover to gain access to the country and sensitive information.

Prosecution asks for 3 years and 3 months in prison for French citizen Laurent Vinatier on charges of collecting military data without registering as a “foreign agent.” Adviser to @hdcentre, he was arrested in Moscow in June and later admitted guilt.

Video: Mediazona pic.twitter.com/MBeCkqyrgj

— Mediazona (@mediazona_en) October 14, 2024

Russia’s RT has described that “Russia’s foreign agent law, first adopted in 2012 and expanded in 2022, requires anyone who receives support from abroad or is under the influence of entities from outside the country to register and be labeled as such.”

“While such persons or entities are not banned from operating in Russia, they face a range of restrictions,” the report adds. “Those found in violation of the law can face fines of up to 5 million rubles ($55,000) and up to six years in prison.”

Authored by Shane Harris via RealClearPolitics,

Vice President Kamala Harris’ comments about owning a “Glock” are proving to be, more than just a short-lived embarrassment, a microcosm of the problem plaguing her candidacy. Like other failed campaigns before, Harris’ camp seems to believe the public can be hoodwinked with prepared lines and ads and images that are at odds with the candidate’s record and identity.

“Tim Walz and I are both gun owners,” Harris said on stage in Philadelphia last month during her debate with Donald Trump. “We’re not taking anybody’s guns away.”

It was one of the more discordant remarks Harris has made throughout her short-lived campaign, and inadvertently highlighted her record of hostility toward gun owners and the Second Amendment. Harris has supported bans of popular firearms which she calls “assault weapons,” praised Australia’s gun grabs, and signed on to a Supreme Court brief which argued that the Second Amendment protects only a “collective” or “militia-related” right to bear arms – and not an individual right.

To many political observers, this transparent attempt to appeal to gun owners after her long history of anti-Second Amendment advocacy smacked of desperation. For some, it evoked memories of an infamous 2004 John Kerry campaign photo op which showed the Democrat nominee dressed in camo emerging from an Ohio cornfield with a double-barreled shotgun, supposedly just wrapping up a goose hunt. Kerry knew firearms – he’d served in combat – but the image felt utterly contrived.

Perhaps the most famous instance of a candidate pretending to be something he wasn’t and thinking a clever photo op would solve a terminal problem with his campaign was Democratic presidential nominee Michael Dukakis in 1988. Dukakis, then governor of Massachusetts, wanted to run on the Bay State’s economic resurgence – the “Massachusetts miracle,” he called it. The George H.W. Bush campaign had other ideas, producing a series of withering negative ads attacking Dukakis for his policy as governor allowing “weekend passes” for convicted murderers, his association with the ACLU, and his perceived weakness on national defense. In response, the Dukakis campaign tried to show their man’s toughness by orchestrating a photo op of him riding in an M1 Abrams tank.

It didn’t look authentic, and the image went viral before viral was a thing. Dukakis contributed a major laugher to the history of presidential campaigns. To this day the photo is regarded as one of the most consequential unforced errors in presidential campaign history.

Is Harris maybe facing her own “Dukakis in the tank” moment? Following her debate with Donald Trump, she insisted on doubling and tripling down on her gun comment, displaying a complete inability to read the room.

The first follow-up came a little over a week after the debate when Harris told Oprah Winfrey, “If somebody breaks into my house, they’re getting shot,” a jarring declaration she punctuated with one of her infamous cackles. Then came the awkward moment on CBS’ “60 Minutes” when the vice president said specifically that she owns a “Glock” and has “had it for quite some time.”

Were it not for those two subsequent comments, Harris’ initial debate remark might’ve faded away after some mild ribbing from conservatives.

So now Harris has created an even bigger headache for herself, namely because she has supported policies which would not only outlaw handgun ownership, but ban Glocks specifically. In 2005, Harris backed a San Francisco measure that would’ve outlawed handguns in the city; her 2008 Supreme Court brief in D.C. v. Heller explicitly argued that the Second Amendment does not protect the right of private citizens to use handguns for home self-defense – exactly what Harris told Oprah she has a gun for. Most Glocks also have what Harris would consider a “high-capacity magazine” (10 rounds), which she has forcefully called for banning.

In the end, Harris turned what should’ve been only a mildly embarrassing moment into a classic self-own. But missteps such as these aren’t aberrations, they are indicative of a deeper problem in a national campaign.

As Mike Dukakis later said himself about the notorious tank photo-op, “That didn’t beat me. If we had run a decent national campaign, that wouldn’t have had any effect.”

Shane Harris is a writer and political consultant from Southwest Ohio. His work regularly appears on AMAC Newsline. You can follow him on X @shaneharris513.

Ukraine’s President Volodymyr Zelensky on Sunday publicly condemned increasing Russian-North Korean collaboration regarding Moscow’s war in Ukraine, which Zelensky for the first time said hasn’t stopped at providing arms, but has even witnessed Korean troops present in the battle zone.

“We see an increasing alliance between Russia and regimes like North Korea. This is no longer just about transferring weapons. It is actually about transferring people from North Korea to the occupying military forces,” Zelensky stated.

He highlighted the allegation as another reason that Ukraine needs more urgent support from it Western partners. Ukraine forces remain outmanned and outgunned along the front lines in the east.

“The front line needs more support,” Zelensky emphasized. “When we talk about giving Ukraine greater long-range capabilities and more decisive supplies for our forces, it’s not just a list of military equipment. It’s about increasing the pressure on the aggressor – pressure that will be stronger than what Russia can handle. And it’s about preventing an even larger war.”

Zelensky has of late sought to craft his messaging in response to the obvious signs of war-weariness among the European and American publics, hence his talking point of preventing a larger war.

“True peace can only be achieved through strength and the entire next week will be dedicated to working with our partners for the sake of such strength, for the sake of true peace,” Zelensky continued.

The claim that North Korean troops are actually deployed alongside Russian forces on the ground is nothing new. Last week, the South Korean government made a public accusation saying North Korean troops are currently fighting on behalf of Russian forces in Ukraine. 

The charge was specifically made by Seoul’s defense minister Kim Yong-hyun on Tuesday. He described that he has reason to believe that six North Korean officers were killed in Donetsk when a Ukrainian missile hit their location on October 3rd. He called reports which first surfaced in Ukrainian media “highly likely”.

The accusation, which lacks hard evidence, came after months of official US allegations saying the north has sent arms and ammo into Russia by the trainload.

What is clear is that Moscow and Pyongyang have made no secret that they are deepening their ties, including on the military front, but both sides have denied North Korean involvement in Ukraine.

There have been several exchanges of defense delegations, and Kim has visited Russia, and Putin even made a very rare visit to Pyongyang in June. The two leaders signed a mutual defense agreement this past summer.

If true this would mark a major escalation of N.Korea’s involvement. “More North Korean troops could be deployed in the war,” Seoul has warned. The West wouldn’t be able to do much, having already put fairly maximum sanctions on both Russia and North Korea. It could be another dangerous sign that the Ukraine war is getting more and more internationalized.

Via Middle East Eye

A slew of court cases around the world are raising questions about the legality and transparency of the international supply chain that helps keep Israeli F-35 fighter jets flying over Gaza and Lebanon. Israel has used the F-35, described by its American manufacturer Lockheed Martin as “the most lethal” fighter jet in the world, extensively in its nearly year-long offensive in Gaza, in which a reported over 41,000 people have been killed.

Best known for its stealth capabilities, the F-35’s use in Gaza, an enclave without an air force where less sophisticated F-16s and F-15s are perfectly capable of dropping bombs, may seem out of place. However, arms control experts and researchers say Israel has had to rely on F-35s to maintain the high volume of strikes conducted over the past year in Gaza and now in Lebanon, where weeks of bombings have killed more than 1,000 and displaced over 1.2 million.

“They need all of their planes to participate,” said Noam Perry, strategic research coordinator for the American Friends Service Committee’s (AFSC) Action Center for Corporate Accountability. Israel has been aided by surges in the flow of F-35 parts from the United States, which experts say have been crucial in keeping the planes airborne.

Litigation in the Netherlands has already stopped the transfer of spare parts stored at one of three global F-35 distribution hubs to Israel since February. As four cases against arms exports to Israel move forward, governments in the UK, the Netherlands, Canada and Denmark face difficult legal questions regarding F-35 parts made in their countries.

Middle East Eye also understands that NGOs that took Australia to court over arms exports to Israel in a case that was discontinued last year remain determined to find ways to hold the government accountable for F-35 parts manufactured there.

A key question posed by these cases is how the governments can continue to license the export of F-35 parts bound for Israel while complying with domestic laws and international treaties, which require them to assess whether such parts could have been, or will be, used in violation of international humanitarian law.

So far, the response in at least three of the countries – the Netherlands, the UK and Canada – is that F-35 parts sent to third countries, but ultimately destined for Israel, can be treated differently than weapons that go directly to Israel. One rationale provided by the UK and Dutch governments is that suspending parts whose final destination is Israel would disrupt the global supply chain, as the parts are difficult, if not impossible, to trace.

Last year, the US Government Accountability Office (US GAO) found that over $85m worth of spare F-35 parts had been lost globally because the US government and private contractors had not determined who was responsible for tracking them. 

However, arms control experts and litigants who spoke with MEE say this is clearly a case of politics, not logistics. “They can track these things within very small areas, in real time, everywhere in the world,” said Martin Butcher, policy advisor on arms and conflict for Oxfam, which is involved in a legal challenge against UK arms exports to Israel being brought to the High Court. “The idea that they can’t track them is absolute nonsense.”

Parts moved ‘at breakneck speed’

While experts say it is difficult to establish which type of aircraft Israel has used in specific attacks over the past year, it is clear that F-35s have played a key role in Israel’s air war on Gaza and now Lebanon.

Much of what is known comes from Israeli media reports or other public sources, including a post on Israeli Defense Minister Yoav Gallant’s X account. This post was utilized by the Danish news outlet Information and NGO Danwatch to confirm that an F-35 had been used in a designated safe zone in Gaza in July that killed at least 90 people. However, there are other signs that the F-35 has been crucial.

Chairing a hearing before the US House Subcommittee on Tactical Air and Land Forces in December, Representative Rob Wittman said the F-35 program had “moved at a breakneck speed” to deliver more spare parts to Israel.

Last year, British companies used open licences covering the F-35 program 14 times to export items directly to Israel, nearly three times more than in each of the two previous years, according to data obtained by the UK-based Campaign Against the Arms Trade (Caat).

It is unclear when the shipments were sent in 2023, but Caat believes the jump likely indicates a heightened demand from Israel for spare parts since October 7.

While bombs are often the focus of arms embargo campaigns, spare parts for the F-35 – and other fighter jets in Israel’s fleet – have been critical to Israel’s air war in a way that is frequently overlooked by the public, said Josh Paul, a former State Department official who resigned in protest last October.

“Modern fighter jets rely on immense amounts of continuous maintenance,” said Paul, who is now a fellow at the US-based NGO Democracy for the Arab World Now (Dawn). He estimated that for every one hour of flying, a fighter jet requires three hours of maintenance.

“If you cut off the supply of spare parts, particularly on something like the F-35s, which relies on a global just-in-time delivery chain, it would very quickly become unflyable.”

Flying F-35s in seemingly unnecessary conditions over Gaza may have been useful for the Israeli Air Force to maintain fleet readiness and gain insights into the fighter jet’s capabilities in combat.

That information will also have been relayed back to the prime contractor, Lockheed Martin, the US Air Force and potentially other partner countries in the F-35 program, several arms experts told MEE. Lieutenant-General Michael Schmidt, who oversees the F-35 programme, said in December that Israeli F-35 users were “achieving exceptional mission capability rates and the aircraft is proving resilient.”

“We’re learning a tremendous amount and will apply lessons learnt to enhance fleet readiness across the globe,” he told the House Armed Services subcommittee. “A lot of militaries are benefiting from what Israel is doing right now,” said Perry of the AFSC. “All of the air forces that have F-35s, that have ordered F-35s or that have considered ordering them, they are all benefitting from this – and, of course, Lockheed Martin itself.”

A program like no other

The information sharing among F-35 partners is just one example of a global defense program that operates like no other. The consortium is managed by the Pentagon’s F-35 Joint Program Office (JPO) and includes seven allied countries that have contributed varying amounts to the program’s research and development in exchange for price reductions on fighter jet purchases.

Israel signed a deal with the United States to procure a third squadron of 25 x F-35 stealth fighter jets from Lockheed Martin.

The $3 billion deal is being financed through U.S. military aid to Israel.

This will bring Israel’s total F-35 fleet to 75. pic.twitter.com/WJZ6ldZz3F

— Clash Report (@clashreport) June 4, 2024

Seven other countries that are not partners in the program have also purchased the F-35, including Israel. Lockheed Martin says the F-35 supply chain involves more than 1,900 companies in the US and in the countries that have acquired the aircraft.

Arms control experts told MEE that the F-35 is run on a “just-in-time” delivery system, allowing the fighter jet to send a message to alert its operators when a new part will soon be needed. “Then the base requests from the depot – whatever depot it is in, be it in the Netherlands or Japan – and says we need this bit,” said Oxfam’s Butcher. “It’s all tagged electronically.”

This is why many, including Butcher, are sceptical when governments say they cannot suspend F-35 components destined for Israel due to the difficulty of tracking them across a complex, multinational supply chain.

Gerard Jonkman, director of the Rights Forum, one of three Dutch NGOs challenging their government over arms exports to Israel, told MEE: “Even Ikea or any company in the world knows exactly where their spare parts are coming from. So what about a plane like this?”

“If one batch at a certain moment would turn out to be of bad quality, then you would need to know from where they are coming and in which planes they have been assembled.” Even if it is true that it is currently impossible to trace F-35 parts, this should be addressed, he said.

“If your logistical system is not able to cope with international law, then you have to find a way to change your logistical system,” Jonkman said.

When asked if components from partner countries could be tracked and traced, Lockheed Martin directed MEE to the US government. F-35 JPO spokesperson Russell Goemaere told MEE in a statement that maintaining accountability for parts and data is “essential to ensure prudent management of F-35 financial and operational resources”.

“However, most F-35 parts are part of a global spares pool procured for the benefit of all F-35 customers. Parts in this global pool are not designated for any designated end user as they are procured and are instead issued and distributed to our customers based on demand and prioritization, when needed,” Goemaere said.

“While the F-35 supply chain is capable of controlling material movement based on part number/configuration, no current system, process or business rule is in place to filter out or stop the movement of specific serial numbered material to any specific country based on its country of origin.”

Political problem

More than just a logistical problem, those challenging governments to stop the export of F-35 parts to third countries believe their governments feel locked into the US-run program.

“The US is the government that has taken and demanded complete control over the F-35 program, including which country can even buy it,” said Frank Slijper, leader of the arms trade project at PAX, the Dutch NGO involved in the legal challenge there. “They clearly have no interest in countries like the Netherlands or the UK messing up what is so central to American foreign policy.”

They also believe their governments may fear that if they suspend parts, they will be seen as unreliable partners in any future defence program. No partner country in the F-35 program, touted in promotional videos as “diplomacy in action”, is understood to have ever suspended parts.

Partner countries may also worry about the legal consequences of companies manufacturing and exporting F-35 parts if they suspend licenses to third countries.

On the other hand, they point out that, unlike the United States, all the countries where litigation is currently underway are parties to the Arms Trade Treaty. Under the treaty, arms transfers are prohibited when it is more likely than not that they will be used to commit certain human rights violations.  

“If they would not act on this specific case of F-35s and Israel, they lose their credibility,” Slijper said. “Subcontracting companies and countries indeed have a responsibility and they cannot leave it to another state – in this case, the US – that is not part of the Arms Trade Treaty.”

Jonas Devantier, the program advisor for Oxfam Denmark, one of several NGOs challenging the Danish government, said that during their legal case, he and others learned that roughly 90 percent of the arms exports Denmark provides to Israel are through the F-35 program.

One component made in Denmark is a pylon that releases bombs from the fighter jet. “So it is very clear that it is needed for the F-35 to be used in the way that they are,” Devantier said.

In March, the Danish government announced it was implementing “a very restrictive approach” to arms exports to Israel, which turned out to be restrictions on new export licences.

Existing licences, including those covering exports related to F-35s, remain in place.

Devantier said: “It has become more and more untenable to maintain that the F-35 fighters cannot or should not be subject to the same scrutiny as the other exports.”

Hearings in most of the court cases are scheduled to be held in the coming weeks.