Jamie Dimon wants you to believe that the results for this quarter reflect a move back to stability. JP Morgan wants you to believe that their stock is worth $50 and that the bank is healthy, well capitalized and stable. They want you to believe that what they show you on the balance sheet is all you have to worry about.
The reality is quite the opposite. JP Morgan was the main driver behind the creation of the Fed in 1913 and has continued to, since its inception, to be its greatest influence. Due to this dangerously close relationship, JP Morgan has benefitted with unlimited access to cheap dollars and credit in addition to lax regulation. JP Morgan IS the Fed's priority driver behind its derivative's based dollar debasement and money supply creation initatives. JP Morgan is the main bank the Fed and Government wants to protect at all costs. Yes even more than Goldman Tax.
As I have indicated in previous posts, the creation of new money, means the creation of new interest which requires more "New Money" to avoid default. The only way to avoid this small problem is to create money out of thin air with no perceived interest component. Additionally, the best way to guarantee that the odds favor your debasement programs, is to ensure that that you use these facilities to ensure that you are net short the dollar and guarantee inflationary trends in assets exchanged for those dollars. That way you transfer all the wealth tot he guy printing the dollars. So, derivatives books like JPM's are not a accident. They represent theoretical money that supposedly backs theoretical defaults, thereby balancing the books for the monetary system.
If we have not learned by now, Bernake, Geithner, Summers, Paulson and Rubin should all be in jail already. Goldman Sachs is not the origin of the fraud. The Fed is.
When you put dessert on the table, you expect people to eat it - not look at it - even if its bad for them. Additionally, if its your table and they are guests, they will eat it even if they don't really like it or want to.
When you throw fractional reserve lending, off balance sheet entities and tons of new money manufacturing facilities in front of bankers - you expect them to use them to line their pockets - even if it is bad for everyone in the end. Its the Fed's table, if you want to be invited again you play their game. The theory of greater fools is a bankers favorite...that's why the Fed has been coming up with ingenious and devious ways of shorting dollars for so many years.
But the above wrecking crew would like us to believe that this is a capitalist and free market system. This system is NOT capitalist. The system is crony capitalism with underpinnings of neosocialism thrown in as a backstop.
So, what does this have to do with JPM? Well, lets look at their nice little earnings report and ask a few questions...
- Can it be believed?
- Does it reflect actual earnings?
- Does it reflect their views in the conference call?
- Is everything we need to know included?
"The Firm’s net income of $3.3 billion reflected another strong quarter for the Investment Bank, particularly in Fixed Income Markets, and continued solid performance across Asset Management, Commercial Banking and Retail Banking. Unfortunately, these good results were partially offset by high losses in the consumer credit portfolios" - JP Morgan and Co.
"JPMorgan Chase & Co. , the second- biggest U.S. bank by assets, beat analysts’ estimates as first- quarter earnings rose 55 percent on record fixed-income trading revenue and a reduction in provisions for credit losses. " - By Dawn Kopecki April 14 (Bloomberg)The answer to those questions is NO. JPM has huge credibility issues, and is not believable. Only their access to and influence on the money manufacturing engine protects them. The earnings report was terrible. The bank is supposed to make money banking, they made money by participating in gambling. Additionally, is making money by lowering loan reserves reasonable? In my book, that is not making money, not withstanding being rather arbitrary and convenient. Ironically, the bank should be increasing reserves not reducing them...this action is ridiculous on its face. So we know what this is, is accounting fraud. Adjusting for loss reserves is just another scam served at the dessert table and legalized by its host - the Fed.
If you look at the actual banking results, they were terrible. So, hopefully the gambling and accounting manipulation businesses will continue to be good.
How about the balance sheet? Their balance sheet is a shambles...unless its legal to arbitrarily move liabilities into assets columns at will. (Oh, I forgot it is...remember FASB) Their exposure to credit losses is masked by accounting maneuvers and off-balance sheet entities. You see what they want you to see - not what you need to see. Their leverage ratio is nearly 50 to 1 based on their derivative book alone... not considering the accounting frauds and their off-balance sheet liabilities.
“We believe that the global economy is making an important transition to self sustaining growth as the first quarter comes to an end. As part of this shift, GDP growth is re-accelerating following a modest downshift at the turn of the year. However, it is the significant broadening in G-3 demand, rather than the pickup in top-line growth, that will be the key marker for this transition.If you believe that, then you can reduce your loan reserves to make your earnings report look better right? But let look at what is really happening. JPM as with most banks increased their risks and leverage over the last year - not reduced it. This was accomplished with smoke an mirrors. i.e. The new FASB accounting rules. The worst of the new FASB rules allow banks to reflect unimpaired asset values on your books as long as banks hold them - only realizing true value when they are liquidated. This piece of garbage accounting maneuver makes not sense and allows banks to take more risk without actually showing the risk.
We are becoming more bullish on economic growth, both in terms of how fast economies will grow and in terms of confidence that it will actually happen. Activity data across much of the world have surprised on the upside in recent weeks. Most important is that they are showing greater breadth across regions, sectors, and types of spending.” - JP Morgan and Co.
The other omission, or accounting slight-of-hand, I would like to know about is how much of that trading profit was made on trades on behalf of the Fed? You know the grand Sunday to Monday futures manipulations? I guess the best way to reflect that revenue is to call it fixed income trading revenue. The question is, will they be allowed to buy with abandon for the Fed's accounts next quarter and next year?
"With the worst of the crisis behind the company, Dimon said the board’s “No. 1 priority” this year is finding his replacement. He said many companies have been destroyed by poor succession planning." - Jamie DimonJamie, I have to hand it to you, you are one smart guy. Taking your money and running...sounds like a good plan to me. I think the exit stage left before they try to nail you to the wall is the best policy. Let someone else take the fall.
The funny thing is, that if everything is so great, Jamie has a great job - FOR LIFE! Why leave? he's still young and the bank is still healthy...or does he know something that makes him a little concerned about his future. I rather suspect that we know the answer to that question.
JPMorgan Chase said its nonperforming loans, those that are in default or close to being in default, totaled $2.7 billion, up $946 million from a year earlier but a $763 million improvement from the final three months of 2009.
"We continued to see delinquencies stabilize, and in some cases improve, in our credit portfolios," Dimon said. "Ultimately, the health of these portfolios will track the health of the economy."Does the above mean anything? Or is it just the biggest pile of crap you ever heard. They clearly said that "global economy is making an important transition to self sustaining growth" didn't they...
Clearly, everything we need to know is NOT in this report...but its legal for them to release it. If true, JPM should be liquidating everything in sight if it wants to survive without intervention. (and they really should be - problem is they are the only buyers) However, if JPM wants to cash in on the loan that it extended to the FDIC (so the FDIC can insure it) by triggering the FDIC insurance policies then it only needs to continue the way it's going.
So, cronyism strikes again...and we know who the losers will be.
For reference, below is JPM's stated balance sheet...
| JPMorgan Chase & Co. (JPM) | |
| Balance Sheet ($000) | 3/31/2010 |
| Loans, Gross of Reserve for Losses | 713,799,000 |
| Loan Loss Reserve | 38,186,000 |
| Net Loans Receivable | 675,613,000 |
| Intangible Assets | 51,589,000 |
| Total Assets | 2,135,796,000 |
| Tangible Assets | 2,084,207,000 |
| Deposits | 925,303,000 |
| Total Liabilities | 1,971,075,000 |
| Liabilities and Mezzanine Equity | NA |
| Common Equity | 156,569,000 |
| Total Equity | 164,721,000 |
| Tangible Common Equity | 104,980,000 |
| Tangible Equity | 113,132,000 |
| Common Shares Outstanding (Actual) | 3,975,400,000 |
| As-reported Book Value per Share ($) | 39.38 |
| Basic Book Value per Share ($) | 39.38 |
| Book Value per Share ($) | 39.38 |
| As-reported Tangible Book Value per Share ($) | NA |
| Basic Tangible Book Value per Share ($) | 26.41 |
| Tangible Book Value per Share ($) | 26.40 |
| Income Statement ($000) | 3/31/2010 |
| Net Interest Income | 13,710,000 |
| Net Interest Income, FTE (if available) | NA |
| Noninterest Income | 13,215,000 |
| Revenues | 26,925,000 |
| Total Noninterest Expense | 16,124,000 |
| Pre-Provision Net Revenue | 10,801,000 |
| Net Income | 3,326,000 |
| Diluted EPS after Extraordinary Items ($) | 0.74 |
| Average Balance Sheet ($000) | 3/31/2010 |
| Average Loans | 725,136,000 |
| Average Interest-earning Assets | 1,672,307,247 |
| Average Other Interest Earning Assets | 947,171,247 |
| Average Assets | 2,038,680,000 |
| Average Deposits | 931,835,000 |
| Average Common Equity | 156,891,000 |
| Average Equity | 164,246,000 |
| Average Tangible Equity | NA |
| Average Book Value per Share | NA |
| Asset Quality and Capital Ratios (%) | 3/31/2010 |
| Nonperforming Assets ($000) | NA |
| Net Charge-offs ($000) | 7,910,000 |
| Nonperforming Assets/Assets | NA |
| Nonperforming Assets/Equity | NA |
| Loan Loss Reserves/Gross Loans | 5.35 |
| Loan Loss Reserves/Assets | 1.79 |
| Loan Loss Reserves/NPAs | NA |
| Net Charge-offs/Avg Loans | 4.36 |
| Net Loan Charge-offs/Avg Loan Loss Reserves | 90.67 |
| Tier 1 Common Capital Ratio | 9.10 |
| Tier 1 Capital Ratio | 11.50 |
| Balance Sheet Ratios (%) | 3/31/2010 |
| Equity/Assets | 7.71 |
| Common Equity/Assets | 7.33 |
| Tangible Common Equity/Tangible Assets | 5.04 |
| Tangible Equity/Tangible Assets | 5.43 |
| Intangibles/Equity | 31.32 |
| Deposits/Assets | 43.32 |
| Tangible Equity and Reserves/Tangible Assets | 7.26 |
| Loans, Net of Reserves/Assets | NA |
| Equity + Reserves/Assets | 9.50 |
| Loans, Gross of Reserves/Assets and Reserves | 32.83 |
| Profitability (%) | 3/31/2010 |
| Reported Net Interest Margin | 3.32 |
| Return on Average Assets | 0.65 |
| Return on Average Equity | 8.10 |
| Overhead Ratio | 21.22 |
| Efficiency Ratio | 59.88 |
| Net Interest Income/Revenue | 50.92 |
| Net Interest Income/Avg Assets | 2.69 |
| Net Interest Margin | 3.28 |
| Net Operating Expense/Avg Assets | 0.57 |
| Noninterest Expense/Avg Assets | 3.16 |
| Noninterest Income/Avg Assets | 2.59 |
| Compound 5-Yr Growth (%) | 3/31/2010 |
| Net Loans Five-year CAGR | 11.28 |
| Assets Five-year CAGR | 12.62 |
| Deposits Five-year CAGR | 11.72 |
| Equity Five-year CAGR | 9.35 |
| Equity Per Share Five-year CAGR | 5.74 |
| Net Interest Income Five-year CAGR | 21.27 |
| Net Income Five-year CAGR | 7.99 |
| EPS after Extra Five-year CAGR | 3.27 |
| Revenue Five-year CAGR | 14.55 |
| Regular Dividends Paid Five-year CAGR | NA |
| Additional Growth Rates (%) | 3/31/2010 |
| Net Loans Receivable Growth | 49.02 |
| Asset Growth | 20.43 |
| Deposit Growth | -5.57 |
| Equity Growth | -1.56 |
| Net Interest Income Growth | NA |
| Net Income Growth, after Extraordinary Items | 55.35 |
| Book Value per Share Growth | -5.02 |
| EPS Growth, after Extraordinary Items | 85.0 |
| Growth Rate of Regular Dividends Paid | -86.84 |
| Source: SNL Financial |
