JPMorgan Chase & Co. (JPM)

"Son, we live in a world that has bonds and those bonds need to be bought by men with balance sheets. Who's gonna do it? You? You, Lieutenant Fuld?

I have a greater responsibility than you can possibly fathom. You weep for Bear Sterns and curse the short sellers; you have that luxury. You have the luxury of not knowing what I know: that Lehman's death, while tragic, probably saved firms and that my existence, while grotesque and incomprehensible to you, saves markets.

You don't want the truth because deep down in places you don't talk about at parties you want me buying bonds, you need me buying bonds. We use words like TSLF, PDLF, Super SIV. We use them as the backbone of a life trying to defend something. You use them as a punchline.

I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom I provide and then questions the manner in which I provide it. I would rather you just said "thank you," and went on your way. Otherwise, I suggest that you pick a sub-prime option arm bond and pay par.

Either way, I don't give a damn what you think you are entitled to."

Though towards the high end of its 52 week range, Chase is becoming a bigger and bigger fish in a shrinking pool. Card Services keep expanding (to the detriment of many) and the other segments of the business aren't just sittin' around chillin'.

Take a moment to consider the multiple layers of leverage in this story.
First, you have JPMorgan's stock which was inflated by the bank's huge leverage.
Then you're using that as collateral for margin loans, so more leverage.
And then with that money, you're buying hedge fund and private equity stakes, which are levered still.
Three layers of leverage.

Leverage TARP and double down baby, this is free money and take what you can as fast as you can, before someone figures this out!

The hallmark of the downturn the past couple of years is that it keeps getting worse, much worse than most people seem to think is likely. Even many insiders at financial firms have decided their companies had gotten so cheap as to be compelling buys only to be wiped out as the next wave hit.

JP Morgan has been seen as a rock of stability, with a solid balance sheet, picking up bargains as other firms go down in flames. But, how solid can you consider a company to be when it has $87 trillion in derivatives on its books? That's a hundred times more than the government could come up with if it were to try to bail out JPM.

It can only be a lose-lose proposition. Either 1), JPM made the wrong bets, and it soon goes down in a crash the size of an asteroid strike. Or 2), it made the right bets. We already have an example of how that turns out. Goldman Sachs made the "right" bets, buying $20 billion of credit default swaps from AIG in 2007-2008. Very smart of them. Then, last September, AIG went bust, and Goldman's $20B went with it. Suddenly Goldman had to run to Warren Buffet for $5B in order to not breach their loan covenants. (I think this is one move Buffet will come to regret.) Anyway, imagine that JPM, by some miracle, actually made the right bets with its derivative portfolio. It's just not possible that its counterparties could pay up any significant amount of the "winning" bets. Whoever was making the losing bets is already worse than broke.

Check out the derivative situation for yourself. Thanks, Bulleye168, for this link:

http://www.occ.treas.gov/ftp/release/2008-152a.pdf

I am betting with real money that JPM is one of the next dominoes to fall. I just hope MY counterparties are able to pay up when the time comes.

CONGRADULATION to JPMorgan! You have $91 Trillion in Derivatives! You are #1!

FYI - The Worlds Wealth was estimated at $150 Trillion in 2001 (http://en.wikipedia.org/wiki/Derivative_(finance)).

Chief amongst the "bankers" making derivatives side bets at this global craps table was JPM's CEO Jamie Dimon, who used $1.75T of depositors' assets to finance his gambling totalling just under $90T (or 1 1/2 years worth of global GDP).

http://www.occ.treas.gov/ftp/release/2008-152a.pdf

JPM's new management team continues to rightsize the business and realize the billions in unrealized expense synergies promised to sell the last several mergers. It is unlikely that Jamie Dimon will be "permitted" to dilute investors, yet again, to pull-off the mother of all acquisitions, Morgan Stanley, until the stock has reaches $60-$65, thus reuniting the original House of Morgan. And if MS is not available a large non-US deal will do. Look for strong eps growth to continue through 2007and $4.15-$4.50 eps, a dividend hike in Q2 or Q3 2007.

As JPMorgan continues to reduce expenses, net earnings should increase. Banks continue to consolidate, and more acquisitions and mergers in the industry will allow JPMorgan to continue to grow earnings. Additionally, JPMorgan has a CEO, Jamie Dimon, with a track record reducing costs and extracting value. All of these should result in an increase in share price over the next few years.

Bank stocks will outperform over the next few years and JPMorgan is coming back from a particularly rough period. This company will be on track with superior earnings over the next few years

Biggest bank or not, it's going down along with the rest as the bears roam free. No bank is immune but some will find their price stablising when investors recognise its true value. Why was it chosen to buy Bear Stearns? Maybe because the really good banks refused to take on bad debt sweetened by immediate liquidity?

If i'd had some capital, i'll buy all those puts for all these big banks that are sending my CAPS score soaring!

It's a government lie. Banks are insolvent.

JPM has historically underinvested in global expansion vis-a-vis Citi and now that most of the integration work from the varied acquisitions is largely complete (and that dolt Bill Harrison is gone) and they have a real go-getter CEO they will finally get into new markets as they should have been doing the last 5+ years.

this rally needs to end

As the US faces increased threats of inflation due to commodity shortages and the rise of other currencies against the US dollar, financial institutions stand to serve and benefit from the coming shift toward more savings and investment. JPM is at the top of the heap here-- a great stock for the long-term growth and income investment strategy. Buy on weakness, hold and reinvest dividends.

The problem with most banks is that they are run by bankers, not well-rounded businesspeople. Jamie Dimon is the latter, and he has the track record to prove it. Don't bet against him. Given the complexity and size of JPM, it would be silly to think Jamie would have had a big impact immediately. It doesn't work that way. It takes time to get up to speed. Otherwise, a new CEO can do more harm than good. Having now had time to formulate his plans and to build momentum, I think more and more of his improvements will start becoming visible. There will be lots of upside surprise in this one over the next couple of years.

I called them and told them that I couldnt afford the 200 + dollar a month increased payment on my 3.99% fixed balance and they refused to keep accepting my old payment of about $145, so instead they told me I could pay about $135 a month and have a 2% interest rate???? I have Two other chase cards and a perfect 10 year payment history, I am not real sure what to make of this but I guess the whole credit card industry must be in chaos or chase is broke and in chaos??

Jim Rogers publicly admitted to having a short position in JP Morgan.

http://jimrogers-investments.blogspot.com/2009/03/i-am-short-jp-morgan.html

He may be talking his book but his logic is solid and his track record near impeccable. For those with the patience and a 12 month outlook this should probbaly pay off. A better retry point may be next month if this turns out to be a fullblown relief rally

Societal anger with banks and political capital thrown against their profiting from the bailout process will result in poor stock performance going forward. Emphasis will be on aiding the public and using the banks as creditors but avoiding "moral hazard". It is no tough sell with the public to tax and regulate aggressively in this environment.

JPMorgan is deeply involved in home mortgage and retail banking, both have a lower prospect in the near future. Its brokerage business is not as competitive as other brokerages like Goldman, Morgan Stanley or Merillynch.