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Friday, May 11, 2012 – JPMorgan Moving On

DOW – 34 = 12,820SPX – 4 = 1353NAS +0.18 = 293310 YR YLD -.04 = 1.84%OIL – 1.51 = 95.57GOLD – 13.00 = 1581.40SILV – .15 = 28.99PLAT – 21.00 = 1471.00 So, let’s break down the problems at JP Morgan Chase. The bank lost net $800 million, on a $2 billion dollar trading loss in synthetic credit derivatives. They won’t go broke today. JPM made $5.4 billion in profit in the first quarter. Still, a couple of billion dollars is significant, and it raises questions about the regulation of banks, the valuation and suitability of derivatives, the size of the world’s largest firms and the systemic risk they may pose to the financial system. For the past few years, JPM has been increasing the size and importance of its proprietary trading desk based in London. Theoretically, a proprietary trading desk trades stocks, bonds, currencies, commodities, derivatives and other financial instruments with the firm’s own money – as opposed to using customers’ money. If the bank makes money, they keep it and Jamie Dimon gets a big bonus. If they lose big, Jamie Dimon could lose his job, but he gets to keep the bonus. If the proprietary trading department screws up royally and the trades implode and pose a possible systemic threat, then the taxpayers cover the losses, and Jamie Dimon gets to keep his bonus. Once upon a time, the proprietary trading department of a bank was not the major part of the banks’ profits. The bankers …

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March, Tuesday 13, 2012

DOW + 217 = 13,177SPX + 24 = 1395NAS + 56 = 303910 YR YLD + .08 = 2.11%OIL +.04 = 106.75GOLD – 25.70 = 1676.10 SILV – .20 = 33.51PLAT – 7.00 = 1692.00 It’s a crazy world. Stocks posted their best day of the year. Go figure. The big boost seems to be JPMorgan announcing a dividend, while at the same time 3 banks failed the Fed’s Stress Test. Wait a minute, you’re asking yourself, “Self, am I going crazy or was the Fed supposed to release the results of the Stress Test on Thursday?” And of course, the answer is yes. The Fed, in releasing its annual stress test results, said 15 of the 19 largest banks would have satisfactory capital buffers, even after considering banks’ proposed dividend increases or share buybacks. The regulator said Citigroup, Ally Financial, SunTrust, and MetLife fared worst under the supervisory stress ratios, with Tier 1 common capital ratios of 4.9 percent, 2.5 percent, 4.8%, and 5.1 percent, respectively. The bank holding companies that came out top were Bank of New York Mellon with a Tier 1 common capital ratio of 13.1 percent under the hypothetical financial shock, State Street Corp with 12.5 percent and American Express with 10.8 percent. Bank of America came in with 6.2 percent, and JPMorgan’s result was 5.4 percent. So, only 4 out of 19 enormous financial institutions failed the stress test, meaning that just over one-quarter of the biggest banks in the country could implode at …

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