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So many US banks, so little time | Don’t you know who TSMC’s customers are? |

Hi Reader, here's what you need to know for October 15th in 3:08 minutes.

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Today's big stories

  1. US banking giants Bank of America, Citigroup, Morgan Stanley, and Wells Fargo all reported better-than-expected earnings
  2. You need a new kind of portfolio if you’re going to thrive in the next decade’s investing environment – Read Now
  3. TSMC reported expectation-beating quarterly earnings, as it races to keep up with high demand for chips

Mass Production

Mass Production

What’s Going On Here?

A veritable assembly line of US banking giants all posted similarly better-than-expected quarterly updates on Thursday.

What Does This Mean?

Let’s start with Bank of America (BoA), Citigroup, and Morgan Stanley, all of which have been making the most of the recent influx of mergers and acquisitions: revenues from their investment banking segments – which take a cut of every deal they advise on – were up 23%, 40%, and 67% respectively versus the quarter before. That helped send their profits up by a better-than-expected 58%, 48%, and 25% versus the same time last year.

Wells Fargo, meanwhile, had its personal banking business to thank for its strong showing: the division’s profit almost tripled compared to the same time last year, with shoppers getting back to using cards and racking up fees. That led the company’s profit to jump 60% from a year ago.

Why Should I Care?

The bigger picture: A free billion? Yes please.
Just like with JPMorgan Chase earlier in the week, BoA, Citigroup, and Wells Fargo had tucked away money in case pandemic-stricken borrowers weren’t able to pay off their debts. And just like JPMorgan, they’re at a point where they feel relaxed enough to put that cash back into the business. Not a bad way to end a quarter: BoA and Citigroup added $1.1 billion to their bottom lines, and Wells Fargo $1.7 billion.

Zooming out: Interest or death.
Ultra-low interest rates have been the thorn in banks’ sides this year, hobbling the amount banks can make from their loans businesses. So they might be pleased to see data out earlier this week showing that US consumer prices rose by a higher-than-expected 5.4% last month versus the year before. That’ll put pressure on the US Federal Reserve to raise interest rates sooner rather than later to keep inflation in check, which should give banks’ profits a nice little boost (tweet this).

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Analyst Take

These Strange Times Call For A New Kind Of Portfolio

These Strange Times Call For A New Kind Of Portfolio
Photo of Andrew

Andrew, Analyst

What’s Going On Here?

The last two decades have proved a pretty benign investing environment.

Stocks and bonds, after all, have headed in different directions, making the traditional portfolio of 60% stocks and 40% bonds a safe and profitable bet.

But stocks and bonds started moving in the same direction as of last month, which means what’s bad for the goose is bad for the gander.

And if the experts are to be believed, things could stay that way for 10 years or more.

That means it’s in your interests to update your portfolio, making sure you’re not quite so exposed to the whims of the stock and bond markets.

So that’s today’s Insight: how we’ve found ourselves in this situation at all, and how to build your own new kind of portfolio.

Read or listen to the Insight here

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Inner Circle

Inner Circle

What’s Going On Here?

TSMC – the world’s biggest contract chipmaker – reported better-than-expected earnings on Thursday, as shortage-bruised customers do whatever they can to get special treatment.

What Does This Mean?

It’s that age-old story: customer meets chipmaker, customer can’t get ahold of enough chips from chipmaker, customer offers to pay chipmaker in full up front to skip the line. So that very chipmaker – TSMC – saw its profit climb 14% higher last quarter than the same time last year, and it lifted its sales forecast for the rest of the year too. The company might’ve set its sights even higher, but it just can’t produce enough chips to keep up with the boom. It’ll hopefully be ready for next time, though: TSMC said it was setting aside $100 billion to boost its output over the next three years, and it has plans to build a new plant in Japan too.

Why Should I Care?

For markets: Apple isn’t looking forward to the holidays.
The demand from Apple alone has been too much for TSMC to handle, and it’s reportedly caused the tech giant to cut production of its latest iPhone by up to 10 million units. That, in the run-up to a festive season when Apple usually sees a big jump in demand for its products. That might be why investors sent the company’s share price down earlier this week, along with some of its other suppliers like Japan Display Inc and LG Innotek.

Zooming out: UPS and FedEx are taking on the Santa shift.
Shortages are everywhere right now, and the US is worried they’ll continue to push prices up across the board, slowing the country’s economic recovery. That might be why the government stepped in on Wednesday, securing pledges from logistics giants UPS and FedEx to up their working hours. That should help clear a backlog of orders ahead of the all-important holiday season, so the agreement might’ve come just in the Saint Nick of time.

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– Phil Knight (an American billionaire businessman)
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🤯 Amazing alternatives

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🤔 The Pros And Cons Of Alternative Investments: 5pm UK time, October 18th
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⚡️ What’s Next For EV Batteries?: 11am UK time, October 21st
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