JPM - JP Morgan

[rb]

Interesting that banks are hitting all-time low P/TBV while many stocks are hitting all-time highs.

Lots of high-quality companies like PG trading >30x PE. ADBE >50x PE. SHOP >25x Revenue.

Is this recession only happening for financials?

Why the disconnect?

I've been thinking the same thing. There's basically a miss-pricing here. If the S&P is worth 2800 then no way the banks show be this low. If banks are this low, no fucking way should the S&P be worth 2800.

 

Seems like a long-short banks vs s&p might be a good trade at this point.

 

I agree with you guys that banks are cheap relative to the index, but I think that's because banks are the only ones seemingly acknowledging how bad this is with $25+ billion in reserve build in a single quarter.

 

I'd rather just shirt the index though, or go long puts (which I have). I bought European banks years ago expecting the valuation spread with US banks to eventually close. My guess is that it is closing, but not with Euro banks moving higher. Zero-rates are now here to stay in the U.S. too

I agree with you to some extent. (not about euro banks).

 

The long-short (banks-S&P) is basically another way to play the market bear thesis here. Since the puts are still really expensive, the long-short trade is cheaper.

 

There is a case to be made that the banks may be over-reserving at this point to intentionally drive down their current earnings. El-Erian made this point very well earlier this week and I think that there is some validity to it. It should be noted banks have done this before and it's a no-no from a regulatory perspective. But now that leveraged loans don't have to be MTM I'm guessing the regulatory perspective is more theoretical than anything.

 

As a former banker I have this nagging thought in the back of my head that won't let me be. It's like a woodpecker that did a few lines of coke. If the Fed is gonna buy every dogshit security out there, why not MY dogshit securities? I just have this sneaking feeling that there's a lot of securitization associates working 90 hour weeks (much nicer now with COVID cause they get to work in their underwear and sleep in their beds instead of under their desks) to package all the shit loans on God's Green Earth for the courier to take to the Fed. After the Great Shipment is done, loan portfolios may look pretty good.

 

I don't know if I'd take a position at this point, but the rating agencies are gonna make some nice coin rating all this paper too btw.

[meiroy]

https://www.bloomberg.com/news/articles/2020-04-22/jpmorgan-commercial-clients-beat-out-smaller-ones-for-sba-loans?cmpid=socialflow-twitter-business&utm_source=twitter&utm_campaign=socialflow-organic&utm_content=business&utm_medium=social

 

"Banks earned origination fees of 5% on loans of up to $350,000; 3% on loans between $350,000 and $2 million; and 1% on loans between $2 million and $10 million. That means they earned $17,500 for processing a $350,000 loan, compared with $100,000 for a $10 million loan"

 

 

[fareastwarriors]

https://www.bloomberg.com/news/articles/2020-04-22/jpmorgan-commercial-clients-beat-out-smaller-ones-for-sba-loans?cmpid=socialflow-twitter-business&utm_source=twitter&utm_campaign=socialflow-organic&utm_content=business&utm_medium=social

 

"Banks earned origination fees of 5% on loans of up to $350,000; 3% on loans between $350,000 and $2 million; and 1% on loans between $2 million and $10 million. That means they earned $17,500 for processing a $350,000 loan, compared with $100,000 for a $10 million loan"

 

Small Business Rescue Earned Banks $10 Billion In Fees

 

https://www.npr.org/2020/04/22/840678984/small-business-rescue-earned-banks-10-billion-in-fees

[ERICOPOLY]

The bank is among four lenders now facing accusations in a lawsuit that they prioritized the biggest loans in order to earn higher fees.

 

But their fees would be higher if they lent out $500k to twenty clients vs lending the entire $10m to one client.  So I don't get how they could be accused of earning higher fees by prioritizing the biggest loans.

 

 

[CorpRaider]

Seems only rational, efficient, and in the interest of both client and bank, if one is racing to underwrite loans with limited capacity to underwrite, limited funds available, resulting in limited time to file applications, to prioritize the larger loans.

[ERICOPOLY]

Why allow larger loans in the first place only to later complain the banks gave out large loans?

 

Perhaps the politicians assumed this would happen, wanting to help out larger interests, but doing so in a way that ostensibly looks geared to reward smaller loans.

[fareastwarriors]

Jamie Dimon says JPMorgan is a ‘very valuable company at these prices’

 

 

https://www.cnbc.com/2020/05/26/jamie-dimon-says-jpmorgan-is-a-very-valuable-company-at-these-prices.html

[erdospi]

Jamie Dimon says JPMorgan is a ‘very valuable company at these prices’

 

 

https://www.cnbc.com/2020/05/26/jamie-dimon-says-jpmorgan-is-a-very-valuable-company-at-these-prices.html

 

Why isn't he buying in the open market?  He has a large portion of his net wortht in it and had the aortic dissection,but it would be a stronger statement to just buy the stock.

[John Hjorth]

Jamie Dimon says JPMorgan is a ‘very valuable company at these prices’

 

 

https://www.cnbc.com/2020/05/26/jamie-dimon-says-jpmorgan-is-a-very-valuable-company-at-these-prices.html

 

Why isn't he buying in the open market?  He has a large portion of his net wortht in it and had the aortic dissection,but it would be a stronger statement to just buy the stock.

 

erdospi,

 

Your point is to me true.

 

- - - o 0 o - - -

 

Furthermore, a belated welcome to CoBF from me to you! - Please don't be a stranger going forwards. [ : - D ]

[RadMan24]

Jamie Dimon says JPMorgan is a ‘very valuable company at these prices’

 

 

https://www.cnbc.com/2020/05/26/jamie-dimon-says-jpmorgan-is-a-very-valuable-company-at-these-prices.html

 

Why isn't he buying in the open market?  He has a large portion of his net wortht in it and had the aortic dissection,but it would be a stronger statement to just buy the stock.

 

erdospi,

 

Your point is to me true.

 

- - - o 0 o - - -

 

Furthermore, a belated welcome to CoBF from me to you! - Please don't be a stranger going forwards. [ : - D ]

 

Second that. I would argue, Jamie has put in all he can at this point. The fact that he is saying his company is valuable at these prices, and that the base case economic scenario is looking feasible, is enough to instill confidence among shareholders, or speculators, that the banking sector that additional reserves won't be needed. He's also a straight shooter.

[fareastwarriors]

 

Inside the JPMorgan Trading Desk the U.S. Called a Crime Ring

 

The U.S. says the precious metals desk at JPMorgan was a racketeering operation. Now the bank is poised to pay a record penalty for spoofing. Here’s a look behind eight years of alleged conspiracy

 

https://www.bloomberg.com/news/articles/2020-09-28/inside-the-jpm-precious-metals-desk-called-a-crime-ring-by-prosecutors?srnd=premium

 

JPMorgan set to pay nearly $1 billion in spoofing penalty: source

https://www.reuters.com/article/jp-morgan-spoofing-penalty/jpmorgan-set-to-pay-nearly-1-billion-in-spoofing-penalty-source-idUSKCN26F07H

 

 

Feels like every few months another bank is paying giant fine/settlement...