(New York)

Goldman Sachs investors took it on the chin this week. Earnings numbers just released look pretty grim, especially as compared to some other banks, like JP Morgan, which had good showings. The bank got hit by a triple whammy of lower trading revenues, weaker private equity profits, and lower fees from investment banking, all of which conspired to bring earnings down by 20% in the first quarter. David Solomon, CEO, is promising the company is undertaking a “front to back” performance review of Goldman’s businesses.

FINSUM: This looks particularly poor because JP Morgan was able to achieve the highest ever quarterly profit of a US bank during the same period.

(New York)

Netflix has been hammered recently by news that Disney is launching its own streaming service. The stock saw a major selloff on Friday (4%) because of the threat the Disney move theoretically poses to Netflix’s model. However, the fears seem overblown, providing a buying opportunity of Netflix. Analyst Scott Devitt from Stifel explains, “We see little risk to Netflix growth plans and pricing power against this new offering given Netflix’s most popular price point should remain lower than the Disney bundle while Netflix is on track to materially outspend Disney on content”.

FINSUM: Netflix seems likely to remain both cheaper and offer more content for the foreseeable future, so the fears do seem overdone to us.

(New York)

Asset manager Guggenheim just put out a big call. The money manager’s strategists think that the economy is headed for a recession and markets are headed for huge declines. Their call is more interesting than the usual prognostications though. They point out that while this recession looks likely to be shallow because of a lack of underlying issues in the economy, the losses the market will suffer are likely to be severe. Scott Minerd of Guggenheim points out that “Our work shows that when recessions hit, the severity of the downturn has a relatively minor impact on the magnitude of the associated bear market in stocks”. Instead, it is the loftiness of valuations prior to the downturn that has a greater impact on how markets behave during a recession.

FINSUM: This argument makes total sense to us—there is no big fundamental problem with the economy, so a shallow recession, but equity prices are hefty right now, which means big losses.

(New York)

The Wall Street Journal has published an interesting article giving advice to investors on how to assess, and when to dump, losing mutual funds. The article makes the point that investors should not automatically clear out their losing funds, just like they shouldn’t always buy winning ones. Funds have their own reasons for poor performance and those reasons can have a big impact on whether they should stay in a portfolio. Here are four questions to ask in assessing funds, “Does the fund have a good process in place?”, “Is the manager sticking to his or her own guns?”, “Is there a new manager, and do I trust him or her?”, “Is this negative performance coming in a segment of the market in which it is tough to beat index funds?”.

FINSUM: Good funds can have significant down periods, so it is important to have a methodology for deciding if and when to dump them.

(New York)

Precious metals are heating up, much to the joy of the investors that have stuck with the shiny laggards. Gold has been enjoying a good rally, and that should help pull up silver, which has been in a slump. “It is difficult to be pessimistic about silver at these levels”, says one portfolio manager. Silver is down more than 9% this year, even as gold has rallied. However, eventually gold will start pulling investors into silver. “Silver has lacked retail investment demand, so a sustained rally in gold will lead to the speculators coming and buying silver”, says the portfolio manager.

FINSUM: Precious metals have not been getting much attention for years, but gold is off on the right foot this year. Importantly for silver, a recession doesn’t hurt demand because it isn’t an industrial commodity.