My reveiw and opinion of JP Morgan's Q4 2009 is ready for download JPM 4Q09 review JPM 4Q09 review 2010-01-19 01:48:27 1.16 Mb. I have made it available to all readers, but I sugguest that paying subscribers follow the appropriate links to see how appropo the assumptions regarding revenue and loss trends were in the forensic analysis. I have excerpted some of the review below:

I was not going to bother to comment further, but after hearing pundit after pundit attack Obama for the bank levy and Glass Steagal 'lite', after banks allegedly paid their dues... I just couldn't take it anymore.

 

Yes! Obama has made a lot of policy errors in dealing with the banks. Yes! I believe he has not solved the problems, but has chased the symptoms. The separation of prop trading from deposit banking IS the RIGHT thing to do. In addition, the banks have not come anywhere NEAR repaying their debt to the government. Not even close.

Yes, some of the banks repaid TARP, with interest and warrants. Okay. The investment big banks (that were still in existence) were offered expedited financial holding company (bank) charters. That is why they didn't fail, at least in part.

So, running down the list, the banks paid back TARP. That's a +, but....

Here are some very interesting facts on the latest trend in Alt-a mortgages that have been in the news as of late. The following charts were culled from my mortgage default model which was built primarily from date gathered from the FDIC and the NY Fed.
Here are some very interesting facts on the latest trend in Alt-a mortgages that have been in the news as of late. The following charts were culled from my mortgage default model which was built primarily from date gathered from the FDIC and the NY Fed.
Monday, 11 January 2010 19:00

Banking Hell, Tuesday, January 12, 2010

As I have stated throughout all of last year, the macro, fundamental and political headwinds facing banks make them good shorts and risky investments. They faced a good run in this recent bear market rally, but the spirits have cursed them for the medium term. In addition, these guys act as if they have never heard of PR and strategy, ex. this bonus thing.

Recap in the news:

These fees are coming when banks are not really making the money that it seems like they are making. The big profits stem from the fact that the government gave the "OK" to lie about the credit losses on the rotten assets. These profits are fake if netted out against credit and asset losses. Hence, the bonuses are fake too. If the bonuses get paid out against the backdrop of increasing credit losses and still deflating asset values held with significant leverage on the balance sheet, you would have let the last horse out of the barn.

These proposed fees will just make things worse for the banks. I see bonuses being reduced simply by the mere fact that they are given out as stock at the top of a mini-bank bubble!!!

Monday, 11 January 2010 19:00

Banking Hell, Tuesday, January 12, 2010

As I have stated throughout all of last year, the macro, fundamental and political headwinds facing banks make them good shorts and risky investments. They faced a good run in this recent bear market rally, but the spirits have cursed them for the medium term. In addition, these guys act as if they have never heard of PR and strategy, ex. this bonus thing.

Recap in the news:

These fees are coming when banks are not really making the money that it seems like they are making. The big profits stem from the fact that the government gave the "OK" to lie about the credit losses on the rotten assets. These profits are fake if netted out against credit and asset losses. Hence, the bonuses are fake too. If the bonuses get paid out against the backdrop of increasing credit losses and still deflating asset values held with significant leverage on the balance sheet, you would have let the last horse out of the barn.

These proposed fees will just make things worse for the banks. I see bonuses being reduced simply by the mere fact that they are given out as stock at the top of a mini-bank bubble!!!

From Bloomberg: Bank Profits Tripling Leaves Stocks Cheapest With 15% Discount to S&P 500

Jan. 11 (Bloomberg) -- No U.S. industry has faster profit growth than banks and brokers, and no group is more hated by investors.

Analysts say earnings at financial companies rose 120 percent in the fourth quarter, accounting for all of the income increase in the Standard & Poor’s 500 Index, and will triple by 2011, climbing four times as fast as the market. Should the estimates prove correct, the shares are trading at a 15 percent discount to the index, data compiled by Bloomberg show.

That’s not enough for money managers burned by the 84 percent drop in the stocks from February 2007 through March and more than 160 U.S. bank failures in the past two years. Financial companies are the least-favored equities, according to a Bank of America Corp. survey of investors with $617 billion in assets that showed 38 percent of 123 money managers are holding fewer shares than are in benchmark indexes.

“The stocks are clearly too cheap,” said Mark Giambrone, a fund manager who bought PNC Financial Services Group Inc. and Bank of America stock for USAA Investment Management Co., which oversees about $74 billion in San Antonio. “There may be some bumps in the road ahead, but for the most part those are reflected in the valuations.”

So far the analysts have proven right after the S&P 500 Financials Index gained 15 percent in 2009. Now, Jennifer Thompson, whose ratings for New York-based research firm Portales Partners LLC returned 31 percent in the past two years, eight times the gain for all the companies she follows, said PNC and Fifth Third Bancorp are poised to rally.

Most Bullish

Analysts are more bullish on bank stocks in the S&P 500 than any other industry based on their average share-price forecasts, which call for a 14 percent rally, according to data compiled by Bloomberg. That would extend the group’s 145 percent rally since March that was spurred by better economic data and government rescues of companies from New York-based Citigroup Inc. to American International Group Inc.

The industry has risen the most of 10 in the S&P 500 during the past 10 months. The benchmark index itself gained 2.7 percent last week and closed at 1,144.98 on Jan. 8. Futures on the gauge added 0.4 percent to 1,146.10 as of 12:56 p.m. in New York.

The S&P 500 Financials Index of 78 banks, brokerages and insurers remains down 60 percent since peaking in February 2007. The slump is twice the drop of the S&P 500, which has lost 27 percent from its October 2007 record, after the subprime mortgage market collapse caused $1.71 trillion in losses and writedowns for financial firms worldwide and led to the demise of New York-based Lehman Brothers Holdings Inc. and Bear Stearns Cos., data compiled by Bloomberg show.

 

From Bloomberg: Bank Profits Tripling Leaves Stocks Cheapest With 15% Discount to S&P 500

Jan. 11 (Bloomberg) -- No U.S. industry has faster profit growth than banks and brokers, and no group is more hated by investors.

Analysts say earnings at financial companies rose 120 percent in the fourth quarter, accounting for all of the income increase in the Standard & Poor’s 500 Index, and will triple by 2011, climbing four times as fast as the market. Should the estimates prove correct, the shares are trading at a 15 percent discount to the index, data compiled by Bloomberg show.

That’s not enough for money managers burned by the 84 percent drop in the stocks from February 2007 through March and more than 160 U.S. bank failures in the past two years. Financial companies are the least-favored equities, according to a Bank of America Corp. survey of investors with $617 billion in assets that showed 38 percent of 123 money managers are holding fewer shares than are in benchmark indexes.

“The stocks are clearly too cheap,” said Mark Giambrone, a fund manager who bought PNC Financial Services Group Inc. and Bank of America stock for USAA Investment Management Co., which oversees about $74 billion in San Antonio. “There may be some bumps in the road ahead, but for the most part those are reflected in the valuations.”

So far the analysts have proven right after the S&P 500 Financials Index gained 15 percent in 2009. Now, Jennifer Thompson, whose ratings for New York-based research firm Portales Partners LLC returned 31 percent in the past two years, eight times the gain for all the companies she follows, said PNC and Fifth Third Bancorp are poised to rally.

Most Bullish

Analysts are more bullish on bank stocks in the S&P 500 than any other industry based on their average share-price forecasts, which call for a 14 percent rally, according to data compiled by Bloomberg. That would extend the group’s 145 percent rally since March that was spurred by better economic data and government rescues of companies from New York-based Citigroup Inc. to American International Group Inc.

The industry has risen the most of 10 in the S&P 500 during the past 10 months. The benchmark index itself gained 2.7 percent last week and closed at 1,144.98 on Jan. 8. Futures on the gauge added 0.4 percent to 1,146.10 as of 12:56 p.m. in New York.

The S&P 500 Financials Index of 78 banks, brokerages and insurers remains down 60 percent since peaking in February 2007. The slump is twice the drop of the S&P 500, which has lost 27 percent from its October 2007 record, after the subprime mortgage market collapse caused $1.71 trillion in losses and writedowns for financial firms worldwide and led to the demise of New York-based Lehman Brothers Holdings Inc. and Bear Stearns Cos., data compiled by Bloomberg show.

 

Wednesday, 06 January 2010 19:00

Someone Is Paying a Lot for High Priced Doo Doo

In reviewing the banks that were originally included in the Doo Doo 32 (a list of likely doomed banks created in the spring of 2008), I decided to have a team take the devil's advocate perspective (an exercise that we normally pursue) and attempt to build a bullish case for the sectors that I viewed bearishly yet have outperformed the S&P and escaped profitable shorting during the last three quarters. The results are illuminating.

Below is a list of shortlisted banks that have reported higher returns relative to S&P 500 between the period March 9, 2009 and January 5, 2010 - the bear market rally of 2009. The methodology that we followed for this short listing is as follows:

·         We took out a list of banks that are domiciled in the US and have market capital of more than $500 million and current share price of more than $10.

·         Next we calculated returns for each bank and S&P 500 between period March 9, 2009 and January 5, 2010.

Wednesday, 06 January 2010 19:00

Someone Is Paying a Lot for High Priced Doo Doo

In reviewing the banks that were originally included in the Doo Doo 32 (a list of likely doomed banks created in the spring of 2008), I decided to have a team take the devil's advocate perspective (an exercise that we normally pursue) and attempt to build a bullish case for the sectors that I viewed bearishly yet have outperformed the S&P and escaped profitable shorting during the last three quarters. The results are illuminating.

Below is a list of shortlisted banks that have reported higher returns relative to S&P 500 between the period March 9, 2009 and January 5, 2010 - the bear market rally of 2009. The methodology that we followed for this short listing is as follows:

·         We took out a list of banks that are domiciled in the US and have market capital of more than $500 million and current share price of more than $10.

·         Next we calculated returns for each bank and S&P 500 between period March 9, 2009 and January 5, 2010.