Reminder: Sabrient is available to chat with Members, comments are found below each post.
Courtesy of Daniel Sckolnik, ETF Periscope
“Money is better than poverty, if only for financial reasons.” – Woody Allen
It’s baaack. Yes, the new earnings season is ready to take center stage once more, and investors are hoping for some corporate magic to prop up Wall Street’s fragile confidence. Whether that is a wise place to look for encouragement at the moment may be decided rather quickly, as J.P. Morgan Chase and Co. (JPM) will be reporting later this week, and there remains the possibility that bad credit default swaps suffered by the now infamous “London Whale” out of JPM’s London office will surpass the $2 billion level currently estimated.
Should a significantly higher loss be revealed during JPM’s earnings report and subsequent conference call, all kinds of stuff could hit the fan. Not only would JPM’s stock be impacted, it would also negatively impact the markets in general, and the banking industry in particular.
Just a few weeks back, JPM’s CEO, Jaimie Dimon, managed to swat away the softball questions lobbed to him when he appeared before a Congressional committee that pretended to care about how such a huge loss could be suffered by one of the “too-big-to-fail” club members. The level of indignation by House members was the exact opposite of palpable, as they seemed to accept completely both Dimon’s apologies and perfunctory explanations of the hedging process as performed by big banks. It seemed he was pretty much forgiven by all, as indicated by the rise in price of JPM’s stock immediately following his performance.
However, if those trading losses should be reported as north of $5 billion, it is possible that a whole new round of questions about the levels of risk-taking by big banks begins to re-emerge. This time, with the presidential election heating up, it is possible that the issue of market regulation re-emerges as one of the issues du jour.
Should that occur, Wall Street, already concerned about a less than robust domestic economy and a still unresolved sovereign debt crisis in Europe, might get a serious case of the jitters. In that event, investors who may not be convinced of the benefits of a summertime that features a thinly traded equity market may sell off and go to cash, something that has proved a…
