Once you start quantitative easing, such as we have, $17 trillion, how in the world do you pull back from it? How do you stop without having everything collapse behind you? Truth be known, Bernanke didn’t have a choice. If Bernanke did not do QE, this place would look like the day after (the movie) ‘Mad Max.’ - Jim Sinclair, link belowHappy Friday everyone! I only wanted to link the Sinclair interview on King World News but I decided it was important to blog about what JP Morgan is doing.
To begin with, they reported earnings today and all the media fell in love JPM's reported bottom line. The expected number was $1.17, they reported $1.31. HOWEVER, if you strip out the 28 cents they recorded by reducing their loan loss reserve, they actually did $1.03, and missed big time. This is not a valid decreasing of their loan loss reserve a) because we know the housing market is plunging again and JPM will soon have to write down a lot more mortgage debt, b) their non-performing loan disclosure showed that their non-performing loans increased by $600 million to $10.6 billion and c) we know the economy is tanking again so JPM will likely suffer big loan write-downs across all of its lending lines.
But then again, if you know that the President will sign off on using Taxpayer money to bail you out, it's a wonder they don't take their loan loss reserve to zero and really show some paper GAAP b.s. earnings per share!
It turns out Blythe Masters, JPM's head of commodities trading, lied her ass off on CNBC last week when she explained on CNBC that JPM's trading business is client-driven (most of knew she was full of shit). But I thought everyone on Wall Street told the truth when they were on TV (wink wink). Here's the report that explains how JPM has simply moved its proprietary (the in-house hedge fund aka "prop trading") functions into the office of the CIO. This maneuver was done in order to move the risk-based capital trading out of the securities unit and into the bank holding unit. Why? Twofold: 1) it removes the proprietary trading away from the eyeballs of the securities regulators and the Volker Rule AND 2) it shifts this risky trading into a business unit that would be covered by the FDIC. It's what Bank of America did when it moved something like $52 trillion in gross derivative positions from its Merrill Lynch securities unit to its holding company.
Here's the report: LINK That article only mentions currency trading in passing but I would bet BOTH of my testicles that the CIO prop positions include a heavy does of gold and silver COMEX short positions. In fact, I recall about 18 months ago JPM announced that it would be moving its precious metals prop positions up to its bank holding company. You can google it to verify that I am correct.
Finally, in connection with the above quote from Jim Sinclair, every single person reading this, if they don't read anything else today or this weekend, NEEDS to read this brief interview with Sinclair on Eric King's King World News blog: LINK I agree with every single word and punctuation mark in the interview, except that he didn't predict QE to infinity before anyone. Myself and many of my colleagues understood that this is how things would unfold in the U.S. and globally right around the same time Sinclair started ranting about it.
Have a great weekend.