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Cyclical or secular? JPMorgan warns again on trading business

  • With Q1 results for the global banks just in the books, JPMorgan (JPM) becomes the first to warn on trading revenues in Q2, expecting markets revenue to slip 20% after declining 17% in Q1.
  • SEC Form 10-Q
  • As in the past, the biggest driver of the slide is weakness in fixed income, currencies and commodities (FICC) as investors continue to shy from exotic fixed-income vehicles contrived by bankers, and instead favor less profitable (for the bond desks) government and high-grade corporate bonds. There's also new regulations which have forced banks away from lucrative businesses like energy trading.
  • "I don't look at the $5 billion in markets revenue and cry in my soup," said CEO Jamie Dimon on Q1's earnings call (the bank did $5.37B in trading business in Q1), stressing his belief that the current tough time for trading is cyclical not secular.
  • JPMorgan fell 1.5% in after hours trading following the news last night. Morgan Stanley (MS-0.5%, Goldman Sachs (GS-0.1%, Bank of America (BAC-0.7%, Citigroup (C-0.4%: "Certainly J.P. Morgan's forecast does not bode well for the other big banks," says RBC's Gerard Cassidy.
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Comments (28)
  • al roman
    , contributor
    Comments (6888) | Send Message
     
    We are witnessing this.
    3 May, 08:25 AM Reply Like
  • deercreekvols
    , contributor
    Comments (5758) | Send Message
     
    When Jamie Dimon falls off his chair in his JPM office and there is nobody there to hear him, does he make a noise?
    3 May, 09:52 AM Reply Like
  • joyer1
    , contributor
    Comments (15) | Send Message
     
    Really a dumb comment.
    3 May, 10:10 AM Reply Like
  • deercreekvols
    , contributor
    Comments (5758) | Send Message
     
    Stay tuned, joyer1, any time Jamie Dimon makes a statement, I consider it dumb.

     

    Where are his comments on the $30B + in fines JPM has paid out under his watch?

     

    I do not view Mr. Dimon has the smartest guy in room and never will. If that criticism makes my comments "dumb," I can live with that.

     

    Cheers.
    3 May, 10:13 AM Reply Like
  • Dallas Salazar
    , contributor
    Comments (589) | Send Message
     
    HILARIOUS. This is great. I agree w/ you. I'm not sure how Dimon got his bullet proof reputation and seemingly Teflon CEO privileges.
    3 May, 10:30 AM Reply Like
  • Dallas Salazar
    , contributor
    Comments (589) | Send Message
     
    ^^^this. :)
    3 May, 10:30 AM Reply Like
  • al roman
    , contributor
    Comments (6888) | Send Message
     
    I'm ! Crying in my soup !
    3 May, 10:58 AM Reply Like
  • daro
    , contributor
    Comments (1605) | Send Message
     
    I think he had his bank positioned for the collapse and grew the bank substantially. BAC on the other hand almost was and should have been taken over by the regulators due a large illiquid mortgage portfolio and a very badly timed purchase of countrywide adding tens of billions of toxic (non) assets at the absolute worst time.
    3 May, 08:09 PM Reply Like
  • spinrbait
    , contributor
    Comments (390) | Send Message
     
    i wish people who just come on here to bash would write an article, and all of y'all could just bash away there.
    does anyone know how this could affect the earnings for next quarter? i'm just not sure how much this trading is to the overall business of jpm.
    i picked some jpm up in the aftermarket at 54.80. i feel pretty good about that price.
    did anyone who actually invests in stocks feel the same? why or why not?
    3 May, 12:04 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5758) | Send Message
     
    I actually invest in stocks.

     

    I manage two portfolios and hold over 30 different stocks. Please do not confuse my criticism of Jamie Dimon and JPM with someone who doesn't follow the market.

     

    I have chosen to not invest in JPM. Their business model is not for me.

     

    I have been at this 25 years and seen the "great ones" come and go. I see nothing special about Mr. Dimon.

     

    Just my two cents.
    3 May, 12:43 PM Reply Like
  • al roman
    , contributor
    Comments (6888) | Send Message
     
    Their are down beats & pressures.See what Monday may 5 brings.
    (JPM) AH May 2 54.77 -.81 -1.46%
    3 May, 12:18 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (889) | Send Message
     
    I realize the fact that there are some readers on this site that hate bank stocks like JP Morgan. Posting the same "Jamie Dimon is an idiot" comments in every story doesn't make their point any more valid. I prefer to deal in logic and facts. Not some obscure personal viewpoint from people who choose to "curse the sky" instead of taking advantage of a trading opportunity.

     

    Therefore...

     

    JPM begins to look very interesting at the $55 and under price point. Why? This earnings statement notwithstanding, this bank generates cash like an ATM and has billions in reserve. JPM is not going anywhere. Their legal problems have mostly been settled and with interest rates almost certain to go up, the big banks will start seeing their earnings power increase dramatically.

     

    I want to remind people that we've been here before... Incidents like the "London Whale" episode have not only been great entry points into the stock, they have been TREMENDOUS buying opportunities. I don't expect JPM to explode to the upside. But it'll probably grind higher as the economy gets better and will pay you a pretty decent dividend while you wait. That's not a bad combination.
    3 May, 12:37 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5758) | Send Message
     
    Fact:

     

    JPM has paid over $30B in fines while Jamie Dimon has been CEO.

     

    Plenty of money made investing in companies other than JPM.

     

    Off to curse the sky.

     

    Cheers.
    3 May, 12:49 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4519) | Send Message
     
    Everyone calls every dip in a bank stock, a "tremendous buying opportunity" at the (likely) top in the earnings cycle.

     

    It's like hearing "buy the dip in BAC -- it's an "isolated" accounting issue.

     

    Seriously it gets old. And yes I've been managing money a long time.

     

    Interest rates going up? Are you following TLT right now?

     

    Good luck. Short BAC and will almost certainly add to the short on Monday.

     

    Also long TLT, btw.
    3 May, 01:20 PM Reply Like
  • King Rat
    , contributor
    Comments (724) | Send Message
     
    Sorry, WPG, being a voice of reason is not a virtue when it comes to the so-called "99%", who are really still the "THAT 5%" of the privileged world who throw away more in a day than much of the world makes in a year, but who get great schadenfreude at seeing any bad news relating to bank securities.

     

    JPM may be a great deal for some buyers, though if you get in, it would be advisable to see it as a trading position rather than a long term investment, at least for now.
    3 May, 04:21 PM Reply Like
  • King Rat
    , contributor
    Comments (724) | Send Message
     
    I am with you on long TLT, but the problem with long TLT short BAC is the whole TBTF dilemma. You have to include cronyism into your calculation.
    Late 2008 rate spikes aside, the further a TBTF bank stock falls, the more likely it will be for the FOMC to issue more stimulus, pushing rates down.
    3 May, 05:26 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (889) | Send Message
     
    I'll tell you what... you take the short position on JPM and I'll take the long. You take the long TLT and I'll take the short. We'll see who's ahead in 12 months on both of those positions, okay?

     

    I have a $8 cost basis in BAC and a $34 cost basis in JPM and have been trading options in both for the last few years. In May 2012 you could have gotten JPM at $31 after the Whale incident. A few weeks ago it was at $61. Tell me where you can get a long buy and hold return like that on a company that doesn't have a 3-digit PE and pays a 3% dividend? Some people can't see the forest for the trees, I guess? Then interest rates go down 20 basis points in a week and guys like MacroTrader100 start screaming the sky is falling. Makes me smile and laugh at their nearsighted money management skills and hubris.
    3 May, 10:41 PM Reply Like
  • spinrbait
    , contributor
    Comments (390) | Send Message
     
    thanks wise poker guy. we know people don't like jamie dimon. (i have the upmost respect for him myself). and i buy in and out of jpm frequently. but for goodness sakes. everybody who just wants to hate on banks can go on cnn, fox, msnbc, bloomberg, cnbc, and even wsj.com. can't there be a single place to talke stocks.
    4 May, 12:01 PM Reply Like
  • spinrbait
    , contributor
    Comments (390) | Send Message
     
    the stock went from around 34.00 to 54 in one year. actually to 61 before backing off. good grief.
    4 May, 12:03 PM Reply Like
  • spinrbait
    , contributor
    Comments (390) | Send Message
     
    i don't think rates are going up anytime soon either. but they have to sooner or later. unless we are headed into another recession. with the quantatative easing going away, i think its just a matter of time. that said, the market as a whole, and interest rates are not making alot of sense to me right now.

     

    i just wonder what jpm's announcement is going to do as far as affecting earnings as a whole. i know their whole earnings is not going to fall off 20%. but how much of their earnings comes form fixed investment trading and equity trading too i guess.
    4 May, 12:07 PM Reply Like
  • al roman
    , contributor
    Comments (6888) | Send Message
     
    We are joint investor's and members of a vast security & trust system.
    3 May, 12:51 PM Reply Like
  • leopardtrader
    , contributor
    Comments (1192) | Send Message
     
    Just get it that the banking index as XLF could rise 50% from here in the next months ahead and JPM should be able to continue to outperform this index. From risk reward standpoint there is minute chance for JPM to trade belwo $52/3 from here. That is taking this current news into consideration
    3 May, 02:04 PM Reply Like
  • Ajayyy
    , contributor
    Comments (327) | Send Message
     
    Sorry to be that guy-- but I wonder if someone was acting on this knowledge before it was public.

     

    The whole week I was seeing such selling pressure in JPM call options. It had me worried and wondering what was up. Luckily, I picked up some put options in the short-term and now I hope this sucker takes a big stumble.
    3 May, 02:55 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4519) | Send Message
     
    A,

     

    Of course they were. A daily occurrence.
    3 May, 03:06 PM Reply Like
  • Brian Sanders
    , contributor
    Comments (830) | Send Message
     
    "stressing his belief that the current tough time for trading is cyclical not secular." Don't they have professional prop traders that are suppose to make money when times are tough?
    3 May, 04:43 PM Reply Like
  • Michael Clark
    , contributor
    Comments (8862) | Send Message
     
    Jamie should be in prison. He has admitted with billions of fines that JPM is a criminal enterprise. Now he is having to admit that without illegal activities he cannot make the kind of return that he did in the past.

     

    TBTE. Too Big To Exist.
    4 May, 12:57 AM Reply Like
  • spinrbait
    , contributor
    Comments (390) | Send Message
     
    lol. you occupy guys are a trip.
    4 May, 12:10 PM Reply Like
  • joyer1
    , contributor
    Comments (15) | Send Message
     
    Spoken like a true socialist.
    5 May, 09:29 AM Reply Like
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