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Mark Buys a Boat



July 15, 2012 – Comments (0) | RELATED TICKERS: PAY , ARCB , IRF.DL

Investors continue to focus on bank profits, all the while deploring the graft and corruption that has become the American financial system.

Friday, JPMorgan Chase and Company (NYSE: JPM) announced second quarter earnings.

The earnings release was well received by investors. It really is a shame that those same investors, the ones that decry the hubris that is our financial system, didn't read all of the SEC filings the company made.

Portfolio Commentary
The Wax Ink Portfolio was up 0.8% for the week, with an average share price of $24.34.

By comparison, the Dow was unchanged, the Nasdaq was down 1.0%, the S&P 500 was up 0.2%, and the Russell 2000 was down 0.8%.

Year to date, the Wax Ink Portfolio is up 3.6%, while the Dow is up 4.6%, the Nasdaq is up 11.6%, the S&P 500 is up 7.9% and the Russell 2000 is up 8.1%.

Market Commentary
The markets waited all week for a divine sign, some word or head nod from the supreme investor being. Finally JPMorgan announced and the party began.

Nobody seemed to really care that the company had revised the prior quarter's earnings. Nor did anyone seem to care that the losses from the now infamous London Whale trade were approaching $5.8 billion, a far cry from the $2 billion first reported.

But such is life in the land of liars and cheats.

I guess the thing that was the most amazing to me was that according to one of the company's SEC 8-K filings, it took management until June 30, to determine the extent of the deficiencies associated with its Chief Investment Office (CIO).

I admit that when it comes to banks and bankers in particular, I am beyond cynical. As the matter of fact, I simply don't believe a single word that passes from a banker's lips.

This filing simply attempts to get investors to believe that in today's age of high speed computers and massive IT investments, it took an entire quarter to unravel this trade, and that, in my opinion, is simply a lie.

I believe JPM management was aware of this trade from the beginning and knew full well what the ramifications could be were it to go sour.

I also believe that senior management was willing to take the risk for the trading profits associated with it knowing that in the end, the only thing that would happen if the trade turned out badly, would be a bit of very poor press and perhaps an SEC fine, an SEC fine that would simply reduce the profits the trade generated by a few percentage points.

It does make wonder though, what has happened to the Sarbanes-Oxley Act? Would trades like the one JPM made actually be approved by management if just once the company CEO and perhaps the company's board members were actually sent to prison?

I also wonder how many takers there would be for JPM stock if the law allowed for the entire company to placed into receivership while an independent group of lawyers and accountants "unraveled" a trade such as this one? Very few I suspect.

In the end of course, nothing will happen to JPM management. There will be no fines that amount to squat and certainly no prison time for any of the company's management.

Nor will there be any changes to the banking laws, the trading laws, or the disclosure laws, since in the end, members of Congress don't really want the public to understand the laws they create, they just want to have their pictures taken as they make them.

There was other economic news during the week of course, some good some not. But I have come to realize that investors aren't very interested in this news, since in the end, it does little to move the prices of the stocks they are touting.

Equity Commentary
The Wax Ink Portfolio again benefited thanks mainly to the decline of the dollar against the Euro and the JPM news.

Moving up during the week were business equipment maker Verifone Sytems, Inc. (NYSE: PAY) up 12%, industrial materials company L.B. Foster Company, (Nasdaq: FSTR), up 7%, and aerospace communications company Ducommun, Inc. (NYSE: DCO), up 5%.

Stocks winning the green weenie for the week were tire maker Goodyear Tire and Rubber Company (NYSE: GT), down 8%, semiconductor manufacturer International Rectifier Corporation (NYSE: IRF), down 6%, and trucking company Arkansas Best Corporation (Nasdaq: ABFS), down 7%.

Political Commentary
The week in politics was even more boring than it was last week, and to be honest, I didn't think that was remotely possible.

I was able to learn that Jessica Alba inspired a make-up tutorial for those of you into drama, and believe it or not, the Cookie Monster's call may have been a hoax.

Is there nothing sacred in America anymore?



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