By 6:40 a.m. the traders were already awake, which is the hour earnings season truly begins, not because of the markets but because of the coffee. By 7:15 the research desks had printed the previews, and by 8:00 the previews had been read by the people who write the previews, who are the only people who reliably read the previews.
The big banks kick off the quarter this week, and the previews are unusually cheerful for a country that has been complaining about the price of gasoline since June. JPMorgan, last quarter, posted earnings up 41 percent from the year before. The quarter before that was the highest quarterly profit in the bank’s history, $21.2 billion, helped by a surge in stock trading and a one-time gain on its Visa stake, as the market’s own recap put it.
There is a feeling some readers get when they see a number like that, a small hot feeling behind the ribs, the feeling of being left out of a party you were technically invited to. That feeling is understandable, and it is also wrong, and here is why.
A bank’s profit is not money taken from you. A bank’s profit is money the bank made by being very good at the thing you asked it to do, which is hold your money and move it around at the correct moment. When the bank is good at that, the money in your account is, in a sense, being held by a winner. You are represented. You are, in the narrowest legal definition available, on the winning team.
The rate environment explains the rest. Rates sit near five percent. When rates are high, the bank that owns the cash gets paid for the cash, and the customer who owns the cash gets a statement. The difference between those two experiences is the entire American economy, expressed as a feeling.
By noon the analysts will have used the word “resilient” approximately four hundred times. Resilient is the word the industry uses for a machine that keeps working while everyone standing next to it complains that it is too loud. The machine is not being rude. The machine is functioning. The complaint is a form of applause the machine has learned to ignore.
By 4 p.m. the numbers will be out, and the numbers will be good, and the good numbers will be described as a sign that the consumer is healthy, because the consumer is the one who keeps paying, and a consumer who keeps paying is, by the industry’s definition, thriving. The banks have a word for this too. They call it “the consumer,” which is the most honest word in finance, because it is the only one that admits there is someone on the other side of the counter.
The quarter’s first report lands Tuesday morning. The coffee will be ready.