We get the Fed's Beige Book this afternoon.
That's good timing too as JPM just announced earnings that were 6.7% lower than last year but, of course, they beat expectations that were adjusted even lower than that and the stock is up 3% pre-market on top of yesterday's 2% move. I wouldn't say that's wrong as the company did make $1.35/share in a quarter that's essentially bad and the stock is priced at just $60 so we can extrapolate a reasonable p/e of 12 assuming they make $5+ for the year – nothing wrong with that – they were just underpriced to begin with but that doesn't mean everything is fine, does it?
JP Morgan was one of the founders of the Fed and is still one a major owner today (the Fed is a private, not Government, institution) and current JPM CEO, Jaimie Dimon, put a positive spin on things despite revenues being down 3% overall at the World's largest bank. That was offset by $1Bn of cost-cutting (7%) and $687M less legal fees as JPM was one of the first banks to settle with the Government for defrauding consumers and causing the melt-down of the US economy (they're reallly sorry, really).
Other than cost savings and lack of legal fees: Investment Banking Revenues were down 24%, Trading Revenues were down 11%, Fixed-Income Trading Revenues were down 13% and Equity Trading was down 5% from last year, so JPM is still not on our buy list. Still, if you must buy a bank, JPM is a lot stronger than most as overall Invesmtment Banking Revenues are down 36% from last year – the worst since Q1 of 2009 so let's not get all excited about banking until we see how JPM's peers are performing.
Of course, most traders don't wait for anything silly like confirmation in a sector so expect all 800 banks to take off today based on the earnings of just one but we're perilously close to the tippy top of the market range (2,100 on the S&P) and we've been taking the opportunity of this rally to lighten up on our longs in our 4 Member Portfolios (…