Wednesday, October 14, 2009

Quickly, Just For The Record On JP Morgan's "Huge" Earnings:

They are COMPLETE bullshit.

Just went thru their press release. Would need to see a 10Q to get more back-up information, but it looks like most of JPM's GAAP net income was generated from:

1) mark to fantasy of their fixed income and derivatives book

2) marking up as much as possible all of the Washington Mutual assets they had marked down to nothing and acquired with U.S. Taxpayer guarantees when they hijacked Wash Mutual's good assets. Looks like JPM is marking those assets back up to fantasy and releasing GAAP (i.e. paper gains) into their earnings account

3) mark to fantasy of their private equity portforlio

Anyone who wants to believe that JPM's huge earnings gains are legitimate also probably believes in Santa Claus.


  1. Dave,
    Come on, you know JPM's number are legit, why do you insist on being so questioning?

    Kidding aside, mayor kudos to you for your Aquiline recommendation. I checked out both Aquiline and ECU, and as I was reviewing their operations and possibilities I swear I said to myself "either of these two could get scooped by PAAS (which I own)". Would have been a good match trade for me, oh well!
    Maybe I will make an ECU buy, the long term chart seems to have plenty of room to the upside and limited downside (hard floor at $0.60).
    Great work!

  2. @Edwardo: ROFLMAO - only after a few hits of high grade LSD...

    @gyc: We're going to keep AQI in our fund and wait for the exchange and strip the warrants and sell the stock. I'm not really a big fan of PAAS management. Even though the stock has done well, I believe it has underperformed relative to the quality of its assets. For one, they actively hedge.

    As for ECU, forget the chart. It's bottom is now defined by the value per ounce in the ground established by the AQI deal. In fact, given that AQI has roadblocks to production - i.e. the cyanind and open pit ban in their province - it could be argued that ECU should get a higher valuation placed on its reserves just because, if they wanted to, they could stop exploring and start mining their deposit with no operational roadblocks (just capital requirements).