Friday, January 15, 2010

'Witching day'

Greetings good citizen,

Today was one of those ‘option settlement days’ where investors are obliged to ‘resolve’ the positions they hold, either by taking delivery of the item or selling the contract to someone who wants to take delivery…hopefully at a profit.

Um, if we turn our attention to the broader market, it looks like there were a lot of investors holding options worth less than they bid for because markets around the world sold off today.

It doesn’t require too much imagination to figure out why, ‘speculators’ probably had to pony up some cash in order to ‘liquidate’ their positions in various commodities, even oil fell almost $5 a barrel today.

Sort of odd to see the true price of an item ‘discovered’ when it is time to actually take possession. Playing the commodities market in a world full of ‘broke’ deadbeats is a very dangerous game indeed, IF you can’t take possession of the goods and sit on them until you can get your price that is…

After ‘tasking’ you all week with, um, ‘alternative’ news sources I selected tonight’s offering from the NY Times (although at the time of selection, this story remained and ‘orphan’, no NY Times writer had attached their byline to it…)

JPMorgan Loan Losses Overshadow Higher Q4 Profit

NEW YORK (Reuters) - JPMorgan Chase & Co reported deep losses on mortgage and credit card loans in the fourth quarter, dashing hopes that consumer credit is on the mend and sending the bank's shares down 2.1 percent.

Quarterly profit soared to $3.3 billion (2 billion pounds), topping Wall Street expectations, but analysts had been hoping for signs that the bank's credit costs were levelling off or even starting to fall.

In a conference call with investors, Chief Executive Jamie Dimon said, "We don't know when the recovery is." [Boom, boom shaka-laka—what? Oh, did the cheerleaders forget what they were cheering about? That’s a damn shame, too bad it happens far too often.]

JPMorgan is the first of the major banks to report fourth-quarter numbers, and its results may bode ill for competitors.

Investors were keen to hear JPMorgan's forecast for 2010, and its projections were hardly sunny. Asked about the outlook for the economy, Dimon said, "There are some good signs out there, but we don't know."

The New York-based bank's overall quarterly profit amounted to 74 cents a share, beating analysts' average estimate of 61 cents, according to Thomson Reuters I/B/E/S. Year-earlier earnings were $702 million, or 6 cents a share. [That’s one heck of an upside no matter how you slice it, too bad it’s coming out of their customer’s hydes…]

Revenue, excluding assets that have been packaged into bonds and largely sold to investors, totalled $25.2 billion, falling short of analysts' average forecast of $26.8 billion.

JPMorgan shares were down 2.1 percent to $43.75 in morning trading. Shares of other major banks were also lower, weighing on the broader market.

"The logic is, as goes JPMorgan, so goes the rest of the banks," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati. [Understand good citizen that without trillions of your and my dollars, there isn’t a single bank out there that could have kept its doors open…worse, they’d all be toast still if they were forced to use honest accounting methods!]


The bank's large mortgage and credit card businesses have seen rising credit costs in the last year, offset only by record investment banking revenue.

JPMorgan said it set aside $4.2 billion to cover mortgage losses in the fourth quarter, up $653 million from the same quarter a year earlier. Loan loss reserves in its commercial banking unit increased to $494 million from $190 million.

Prime mortgage net charge-offs -- loans the bank does not expect to be repaid -- soared to $568 million, or an annualized 3.81 percent of the book, from $195 million, or 1.2 percent, a year earlier. [You don’t suppose the continuing off-shoring due to globalization is responsible for any of this, do you?]

The bank wrote off loans at a 9.33 percent annualized rate during the quarter, up from 5.56 percent a year earlier but down from 10.3 percent in the 2009 third quarter.

Investment banking generated a fourth-quarter profit of $1.9 billion, compared with a loss of $2.4 billion a year earlier but down 1 percent from the third quarter. Fixed-income trading volume fell from the third quarter.

"JPMorgan is the bellwether, it is the best, most well-capitalized, best-managed bank," said Jamie Cox, managing partner at Harris Financial Group in Colonial Heights, Virginia. "You would hope they'd be the first bank to be able to begin the process of paring down loan loss reserves." [One would guess that swallowing Bear Sterns took a larger toll on profits than they originally imagined…]

JPMorgan's credit losses could indicate further trouble for Citigroup Inc, which reports quarterly results on Tuesday, and Bank of America Corp, which reports on Wednesday. Both banks have large consumer exposure.

Bank of America shares fell 3 percent to $16.31, while Citi shares fell 1.4 percent to $3.46.

(Reporting by Elinor Comlay; additional reporting by Leah Schnurr, Clare Baldwin, Jonathan Spicer and Dan Wilchins; editing by John Wallace)

There’s a bit of irony for you good citizen, JP Morgan is bleeding red ink which doesn’t bode well for the rest of the banking community…except that banking powerhouse…Goldman Sachs.

In yet another ‘mind-bending’ report it seems JP Morgan also made 11.7 billion dollars in profit…but…it has somehow managed to set aside 29.7 billion dollars for ‘bonuses’.

I must be awfully stupid because I can’t for the life of me figure out how that works.

Speaking of , er, ‘stupid’, if you feel like taking a walk on the wild side you can have a gander at this ‘astrologically driven’ forecast for the upcoming year.

At ‘face value’ the whole thing appears a little absurd, but, if you start scratching around into some of the details…it’s not that far off.

Nobody knows what the future holds but this appears to have a bit more than ‘entertainment value’ going for it.

Thanks for letting me inside your head,


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