1/14/11…bank on it…again!

…isnt’ that Jamie Dimon something…the greatest banker the world has ever seen. The proof is in JP Morgan’s earnings which soared 47% in the quarter! Isn’t that fantastic? Jamie…how DID you do it? Well of the $4.9B in earning for the quarter, $2 billion came from DRAWING DOWN LOAN LOSS RESERVES! Not only that for the first 9 months of 2010 40% of the earnings came from the loan loss reserves. Fantastic! You better believe it after all YOU dear reader and taxpayer made it all happen!

Against this gleeful story is one from yesterday that foreclosures will rise 20% next year…hey…doesn’t that mean additions to the loan loss reserves? If TB’s banking memory is correct, yes it does. This may be the biggest fraud ever perpetrated on the American taxpayer…and all legal. Plus they can take all those newfound earnings and boost the bonuses…again with YOUR money!

TB recently read an article on Goldman’s earnings…remember after becoming a bank they had a quarter in which they didn’t have a single day in which they lost money trading…zip! Well the author dissected their earnings by breaking out the different divisions and found something interesting…in addition to huge volatility in performance over the past three years. None of the divisions performed any better than other broker/dealers. It was all in the residual which can only mean the near zero rate loans from the Fed and holding treasuries – leveraged up too – for a positive spread…a big positive spread which only has one risk: IF interest rates rise and they don’t get out fast enough. But hey, that is a small risk when you are too big to fail, right?

Returning to yesterday’s topic of volatility, and the unexplained magnitude of the jumps in treasury yields (other than compression due to low starting points but that happened also in 1962). Well, it is explainable if you understand that there are no long term investors left – except perhaps China, Japan, and of course numero uno, the Fed!

So is it possible that Goldamn and some of the other big brokers…JPM comes to mind…were dumping even as the Bernanke Fed was trying to boost stock prices while AND promising to keep treasury yields down???

The thought has crossed TB’s mind…but naw….they wouldn’t do that…after all, isn’t that fighting the Fed!

As for stocks yesterday, it was an inside session on the Dow in a tight range and down. Once again new 52 week highs hit 473 BUT this time new lows soared to 151 from around 20…is there a message here on the duration remaining on the rally?

. . . - - - . . .    . . . - - - . . . (S.O.S.)

Rookie New Jersey Governor Christie (R), showed how either naïve or dumb he is as on the day of a big state bond sale he suggested that bankruptcy was possible and thus the size of the issue had to be cut back. First, the state cannot file bankruptcy, it is not an alternative, but what kind of message is this new leader sending?

TB has been chirping all week about the rancor that has permeated politics and while not responsible for the Arizona shooting has made it virtually impossible to get anything done in Congress and now the GOP wants to roll back the budget to 2008 levels and the tea party contingent say they will not budge on the debt ceiling without meaningful cuts. This is another example of irresponsible government that causes the foreign investors we depend on to demand higher yields if they are going to buy our bonds.

The problem is that the media has become so polarized, both right and left that it wants to make its point, even if it distorts the truth…and we, being as intelligent as we are…or simply unable to decipher the truth (“the truth, you can’t handle the truth”), only listen to the one that matches our own agenda…yes, you too have an agenda! In this environment, not only can nothing get done, but the economy is going to suffer…and that means you and I…oh well, stocks are up as are corporate earnings, and with a little gimmickry so are the banks…wonderful!

Have some fun this weekend!


Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries...as he sees it...and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Copyright TBD Capital LLC, January 14, 2011.


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