Weekend Topic Suggestions
Please post topic ideas here!
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Weekend topic suggestion: Get rich or die tryin’?
Do you have any big ideas which you could develop and sell to the masses?
What’s Your Big Idea?
Whether your interest lies in solving the world’s biggest problems, creating the next commercial success or addressing something closer to home, this course will give you a toolbox to vet your ideas and test them in the real world.
…
Whac, operative word in that post: “lies”. Oh, my, I am starting to sound like HA!
My idea is for a razor with 6 blades instead of 5. It’s extra better. Also I have an idea for a Kardashian with an even bigger booty.
Kim Kardashian Butt Out of Control; Star Unsure How to Handle Badonkage
by Hilton Hater at February 19, 2014 3:40 pm. Updated at February 21, 2014 8:33 am.
Forget the demand for the ever-popular Kim Kardashian sex tape.
Something else related to her won’t stop growing: Her rear end!
According to the latest issue of celebrity gossip tabloid In Touch Weekly, Kim is going through a “diet disaster” because her “butt won’t stop growing!”
Look at that thing! It’s bigger than the ego of Kanye West!
Sorry. These people just make it too easy sometimes.
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According to Kanye, that is her biggest ASSet
I have nothing left with which I am willing to gamble, and for that reason….. I’m out.
How come the stock market is selling off on no news developments?
Or is it more that the news which is driving the selloff is downplayed by the MSM?
Markets
Stock Markets Hit by Tech Selloff
Weak Economic Data From China Is Adding to Fears
By E.S. Browning
April 10, 2014 7:17 p.m. ET
Investors unloaded shares of once-highflying biotechnology and Internet companies Thursday over concerns that they are overvalued, pushing the Nasdaq NDAQ +0.03% to its worst daily decline since 2011.
Adding to those fears was more weak economic news out of China, which reported a 6.6% drop in exports and an 11.3% decline in imports in March.
Economists said the declines were exaggerated by reporting problems, but investors had expected exports to rise. The China figures were just the latest sign to U.S. investors that growth is slowing in a country that has been a major driver of the global economy.
The technology-heavy Nasdaq Composite tumbled 129.79 points, or 3.1%, to 4054.11. Sectors that escaped major declines earlier in the week were caught up in the selling, as some short-term investors hunkered down until they could see how widespread the problems would be.
Stocks in general still aren’t nearly as expensive as they were in 2000, so many investors shrugged off suggestions that they face a replay of the painful 2000-2002 bear market that was sparked by the popping tech-stock bubble.
That is one reason selling has focused mainly on the volatile Nasdaq while the Dow Jones Industrial Average, made up of more-established blue-chip stocks, has been less-affected.
The Dow Jones Industrial Average fell 266.96 points, or 1.62%, to 16170.22, its worst point and percentage decline since February. The broad S&P 500 index dropped 2.09%, or 39.10 points, to 1833.08, also its worst decline since February. The Dow, however, is only 2.5% off the record it hit at the end of December, and the S&P 500 is 3% from its record, hit earlier this month. The Nasdaq is 7% off its 52-week high, hit last month.
Among the big losers, Facebook fell 5%, Gilead Sciences lost 7.3% and TripAdvisor dropped 7%. Alexion Pharmaceuticals was the biggest decliner in the S&P 500, falling 7.5%, while Monster Beverage was another big decliner, losing 7%. Facebook is now 18% off this year’s high, while TripAdvisor is off 24%.
Some established, dividend-paying names resisted the trend, however, with AT&T rising 0.6% and Consolidated Edison up 0.3%. Many investors have flocked to the safety of U.S. Treasury debt. The yield on the benchmark 10-year U.S. note tumbled Thursday to 2.63%, down from 3% in December. Yields fall as prices rise.
After the 30% surge in the S&P 500 in 2013, money managers have warned for months that a pullback of 10% or more was overdue because it hadn’t happened since autumn 2011. Stocks began to pull back several times this year, provoking fears of a broader decline, only to recover and move higher each time.
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Originally published April 10, 2014 at 6:04 AM | Page modified April 11, 2014 at 3:27 AM
Investors flee tech stocks again, pummeling Nasdaq
The high-flyers are laying the stock market low — once again.
By MATTHEW CRAFT
AP Business Writer
NEW YORK —
The high-flyers are laying the stock market low — once again.
Investors turned against biotech, Internet and other once-soaring stocks on Thursday, driving the Nasdaq composite index to its worst day since 2011.
The sell-off in tech names dragged down the broader market and left all the major U.S. indexes in the red for the year.
Steep declines in tech, followed by rebounds, have become a familiar pattern in the stock market in recent weeks. After falling Monday, the Nasdaq and other major index rallied over the next two days. On Thursday, stocks dropped again, led once more by biotech and technology companies.
The slide represents a shift in investor psychology. After chasing their huge gains in 2013, investors are worried that stocks like Facebook and Gilead Sciences, which doubled last year, have become too expensive.
And it’s not just lofty prices that have made those sectors volatile in recent weeks. Regulators are scrutinizing the cost of cutting-edge biotech drugs. Worried investors are shifting from riskier investments to safer areas like utilities, health care and consumer staples.
On Thursday, the Nasdaq composite index fell 3 percent, its worst drop since November 2011.
Few companies escaped the downdraft. Of the Nasdaq’s 100 largest stocks, only one, C.H. Robinson Worldwide, a freight company, ended higher.
Several factors likely combined to send stocks lower, said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research.
Frederick said that recent IPOs, many of them tech and biotech companies, have become overheated. At the same time, the market hasn’t had a 10 percent decline since the spring of 2012, only smaller dips in the 4 percent and 5 percent range.
“We’ve been due,” Frederick said. “We haven’t really had a good catalyst for one, but the quarter’s over, we have an earnings season, we have some stocks that are a little overheated, there’s just a lot of small negatives that are sort of piling together and creating this confluence of anxiety.”
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I joked to my wife the other night that whenever we go on vacation, two things are sure to happen: We will enjoy great weather, and the stock market will crash. It’s quite uncanny how often this combination of factors has occurred over our history as a couple!
Louis Rukeyser had this effect. It was uncanny. And when the clowns at Maryland PBS finally fired him after decades, that was when the stock market tanked in 2002, finally reaching its post tech bubble nadir.
I feel truly blessed to realize that unlike the U.S. economy, my wife and I almost always enjoy good weather when we take a vacation.
April 10, 2014, 4:41 p.m. EDT
U.S. stock market hit by Nasdaq, biotech rout
Small caps buckle as Russell 2000 loses 2.8%; VIX jumps 15%; S&P 500 undercuts 50-day
By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) — The Nasdaq Composite suffered its worst day since late 2011 on Thursday as investors fled biotech, Internet and other high-growth stocks, the sectors that had led the last leg up of the maturing bull market.
The Nasdaq Composite (COMP -3.10%) dropped 129.79 points, or 3.1%, its worst one-day percentage decline since November 2011. The Nasdaq Biotech index (NBI -5.64%) as well as iShares Nasdaq Biotechnology (ETF IBB -5.61%) dropped 5.6%.
The S&P 500 (SPX -2.09%) ended the day 39.10 points, or 2.1%, lower at 1,833.08, falling below its 50-day moving average and dangerously close to crossing its 100-day moving average. Selling was so indiscriminate that only about 2% of 500 members of the index closed higher.
The Dow Jones Industrial Average (DJIA -1.62%) fell 266.96 points, or 1.6%, to 16,170.22, its worst one-day percentage drop in more than two months.
The Russell 2000 index of small-cap stocks (RUT -2.79%) fell 32.30 points, or 2.8%, to 1,127.66. Panic-selling was evident from the jump in the volatility. The CBOE Vix index (VIX +14.98%) of implied volatility on the S&P 500 jumped 15% to nearly 16.
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By Anthony Mirhaydari
MoneyWatchApril 10, 2014, 5:36 PM
What’s fueling the stock market sell-off?
The recent market volatility continued on Thursday in what, in some sectors, was the worst wipeout in nearly three years.
The losses more than erased the previous session’s gains, as the promise of more cheap money stimulus from the Federal Reserve just couldn’t stem the selling pressure. The weakness, yet again, was concentrated in the popular big technology and biotech stocks that were leaders in 2013 — but have since succumbed to persistent underperformance.
The Nasdaq Composite was the hardest hit of the major indices, dropping 3.1 percent for its worst one-day loss since November 2011. Biotech stocks lost 5.6 percent in the largest daily drop since August 2011. And future contracts in Japan’s Nikkei index, the epicenter of the recent market pullback, hit the 14,000 level and are now down more than 14 percent from its recent high to a six-month lows.
At a time of record investor bullishness, aggressive fund positioning, record low cash levels and a “hear no evil, see no evil” attitude, all of this is coming as a major surprise for many investors. Especially after 2013’s record gains amid an easy, low-volatility rise.
So what went wrong? Simply put: Despite everything, the global economy is slowing.
Previously, everything seemed just fine. The Fed was apparently beholden to the market’s whims, gingerly pulling back whenever its desire to normalize its policy stance disrupted the good feelings on Wall Street.
We saw that all last year as former Fed chairman Ben Bernanke spent most of the year trying to restore confidence after hinting in May that the ongoing “QE3″ bond purchase program could start winding down. Months passed, and the much dreaded tapering of the program didn’t start until the very end of the year.
That dynamic seemed to be in play again on Wednesday.
The market interpreted the release of the Fed’s March meeting minutes to represent some backpedaling from a harsher-than-expected policy announcement and post-meeting press conference on March 19. It was there that new Fed chairman Janet Yellen let slip that short-term interest rates could start rising as soon as early 2015 — six months or so sooner than Wall Street had priced in.
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Markets More: Investing Stocks
Don’t Be Surprised If This Is The Start Of A Stock Market Crash …
Henry Blodget
Apr. 10, 2014, 2:47 PM
Stocks are tanking again.
The sudden dives in recent weeks have taken the tech-heavy Nasdaq down 7% from its highs and the S&P and Dow about 3% from their highs.
Drops like that are no big deal.
But some signs suggest that this pullback — or another one sometime soon — could get much more severe.
Why?
Three basic reasons:
- Stocks are still very expensive
- Corporate profit margins are at record highs
- The Fed is now tightening
Let’s take those one at a time.
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Wall Street crash ‘even worse’ than 1987 is coming, says Marc Faber
April 11, 2014 - 12:41PM
Jared Lynch
Business reporter
Wall Street back in meltdown mode
The Nasdaq is experiencing its deepest percentage slump since November 2011.
Don’t be surprised if four horsemen start riding down Wall Street.
US technology stocks suffered their sharpest dive in more than two years on Thursday night, setting the scene for an equities apocalypse, Swiss investor Marc Faber says.
Dr Faber is predicting a 1987-type stock market crash this year – only it will be worse.
He told CNBC that the pain in the internet and biotechnology sectors was just getting started, and the market was beginning to realise that US Federal Reserve was a “clueless organisation”.
“I think it’s very likely that we’re seeing, in the next 12 months, an ‘87-type of crash,” Dr Faber told CNBC. “And I suspect it will be even worse.”
Dr Faber’s prediction comes after another high profile investor, Jeremy Grantham, said last month the ”next bust will be unlike any other”.
The US technology-heavy Nasdaq plummeted by 3.1 per cent on Thursday night (US time), its biggest one-day drop since November 2011. A sharp sell-off in biotechnology and momentum names, including Gilead Sciences and TripAdvisor weighed on the market, fuelling fears among inventors of a broader pullback.
“I think there are some groups of stocks that are highly vulnerable because they’re in cuckoo land in terms of valuations,” Dr Faber said.
“They have no earnings. They’re valued at price-to-sales. And this is not a good metric in the long run.”
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Bulletin Dow industrials down as much as 104 points in early going Friday »
April 11, 2014, 8:46 a.m. EDT
J.P. Morgan Q1 hit by trading, mortgage slump
By Saabira Chaudhuri
J.P. Morgan Chase & Co.’s first-quarter earnings tumbled 19% as the bank grappled with weak fixed-income trading results, while mortgage revenue also suffered.
Results fell short of Wall Street analysts estimates, sending shares down 2.4% in recent premarket trading.
J.P. Morgan reported a profit of $5.27 billion, or $1.28 a share, versus a profit of $6.53 billion, or $1.59 a share, a year earlier. Revenue was down 7.7% to $23.86 billion.
Revenue fell 8.5% to $22.3 billion. Revenue on a managed basis–which compares to analyst estimates, excluding the impact of credit-card securitizations and is on a tax-equivalent basis–was down 7.7% to $23.86 billion.
Analysts polled by Thomson Reuters expected a per-share profit of $1.40 on revenue of $24.53 billion.
Investors look to J.P. Morgan Chase & Co.’s results as a bellwether for the rest of the banking industry, and performance demonstrates that despite signs of loan growth, large lenders continue to struggle with a sluggish U.S. economy and the effect of low interest rates on profits from lending, investing and trading.
The double whammy the bank took on trading and mortgages is likely indicative of results to come from rivals. Mortgage-heavy competitor Wells Fargo also reports results on Friday morning.
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I never understood these analyst predictions to the effect of, “The market will hold up just fine until next October, at which point it is going to crash.” If market participants knew a crash was coming this fall, why wouldn’t they dump their stocks sooner?
A bigger 10%-15% correction is coming this autumn: Bank of America Merrill Lynch
April 11, 2014, 9:55 AM ET
“B-, b-, b-, baby, you just ain’t seen na, na nothing yet.”
In the wake of a big bashing for stock markets this week, BofA’s chief investment strategist Michael Hartnett seems to be channeling a bit of Bachman Turner Overdrive. In a fresh note to investors, he says the big stock market correction is not now, but later.
“High cash, low leverage…bull markets don’t end this way. We think bigger 10-15% correction more likely in autumn as Fed QE ends and rate-hike expectations grow,” says Hartnett, in a note
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I am expecting a 40% correction. A ten percent drop won’t correct anything. A big enough drop to scare the weak hands out of stocks and separate the investors from the amateurs, particularly the ones who say that wall street fleeces mom and pop, that is what is needed. Just like the drop in gold from $1900 to $1200.
I am ready with cash to wait pour into the next asset class that is hated the most by the peanut gallery. I need to read yahoo finance posts more and see which asset class is snickered at the most.
Last year it was precious metals. And also in 2001. In the early 2000s, savings bonds were hated by everyone too.
Have you noticed more “For Sale” signs in the yards around your area than what online listing sites (e.g. Zillow, Trulia, Redfin, etc) show?
I bring this up because after walking around Carmel, CA for a couple of days, it seems like there are a lot more yard signs on the ground than what show up online — about one per block on average when walking around the residential parts of town.
Even weirder is the prevalence of Realtor® storefronts around downtown — again about one per block. I felt similarly a few years back upon noting the penetration of Starbucks shops around downtown Seattle. A number of these places (e.g. Sotheby’s) clearly were catering to the all-cash foreign investor who wants to own a Carmel ocean-view investment property.
P.S. We did spot a lone Chinese couple last night wandering around Carmel. My family members became irate when I suggested they might be real estate investors, as they strongly believed them to be tourists.
“I suggested they might be real estate investors, as they strongly believed them to be tourists.”
Hey, the two aren’t mutually exclusive. Come for a visit, and “snap up” a house or two while you’re at it.
That thought crossed my mind, but I kept it to myself…
Sometimes discretion is the better part of valor.
BTW, I always find that the gasoline prices around big sur are the highest in the nation, what are they running now?
We got some in downtown Monterey for under $4/gal yesterday, but that was something like finding a $20 bill on the sidewalk.
Property pricing has gone insane in the Prunedale area of salinas. Housing is back at the $300/sq.ft. And three new listing appeared just after the last sale. A house listed for $995K, I told my wife nobody would buy it for that, sold for $1025K. Housing is back in the prerecession pricing.
Are you still in the Carmel area?
Does it really matter considering this fact?
Salinas, CA Housing Demand Collapses 23% YoY; Falls 5 Years In A Row
http://www.zillow.com/local-info/CA-Salinas-home-value/r_54288/#metric=mt%3D30%26dt%3D1%26tp%3D5%26rt%3D8%26r%3D54288%252C35767%252C113865%252C27215%26el%3D0
I can ask $50k for my 14 year old Chevy pickup but where is the buyer?
Weekend topic;
Is the inventory in your area increasing ??
Although off of a very low number, inventory in 95050-95051 has doubled in the past two weeks…
On a very local level, inventory has decreased in our ‘hood, as the home that our renter neighbors were hastily forced to vacate so the owner/investor could fix it up to sell was taken off the market four days after listing at more than $100K over recent comps.
I begin to suspect this will not sell, but will soon be rented out again at a higher rental rate to new occupants who have fewer kids and related issues.
Inventory is increasing, but so are the “under contract” signs. I see this especially in the higher end neighborhoods.
In our immediate neighbourhood (95050) we’ve had four houses go up for sale in the last few weeks. This in an area that rarely has any houses for sale.
My suggestion: how much building is going on in your neighborhood, or do you see on your drives around town?
My answer: a cr@pload here in PHX. The semi trucks and contractor’s trucks have been back clogging up the roadways for a good while now.
My area is built up, but there are white vans and small-time contractor trucks everywhere fixing up existing places.
No Junkie…. there are condos going up all around DC. Just like NYC.
Building like crazy here….Commercial & High Density residential…
54 homes planned and/or under construction in my neighborhood. The $90k building permits don’t seem to be bothering anybody today. Had to wait on heavy equipment and saw cutting in the street when I went to work Friday morning. Seems a little excessive, but glad to see the activity after 8 years of nothing.
$90k building permits aren’t an issue when they don’t exist.
Silly fraudster.
Another suggestion: what evidence is there that the big investment companies/hedge funds are dumping their SFHs?
Ben has some choice evidence on that subject in today’s main thread.
OTTAWA—Canada’s middle class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.”
That’s the blunt assessment of an internal Conservative government report, an unvarnished account of the plight of middle-income families that’s in contrast to the rosier economic picture in this month’s budget.
http://www.thestar.com/news/canada/2014/02/23/conservative_report_calls_middleclass_dreams_a_myth.html
Is the middle class dream, just that a dream and was it ever true?
WAB, they have a great farmers market at Monterey Pennsu. College just off hwy 1 today (starts around 9-2). If you want some cheap great looking orchid plants to take home you’ll find them here. Most produce is local.
Do you really eat those DDT contaminated California grown fruits?
DDT? HA, HA, Ha…..you are so stuck in 1985.
Thanks for the suggestion. Will check out.
Other things to check out:
Gizdich ranch toward Wattsonville ( wonderful fresh berry pies at a great price, fresh apple juice).
Carmel: breakfast at Katy’s (pricy but worth a visit)
Tommie’s wok (cheap)
Em lee’s has a cinnamon fry bread kids love
Monterey: RG burger for hamburgers (also one in Carmel)
Monterey fish house is a local favorite for seafood
Dave’s deli for soup and sandwiches to eat by the beach
Pacific Grove: for the women, Nitch-in-Time for jewelry starting
at $5 but looks much more expensive and they do by and sell gold.
Half finished on TI work on 20,000 sq.ft commercial property. Small distribution property leasing is up in this area.
HA has convinced me that property on goes down! Ergo why would anyone pay him $55/sq. ft. To build when they can rent for cheaper. Buy a motor home and move as the job market moves. Cherry pick your moves with the weather.
Whats a years worth of losses to depreciation on that shack of yours? $5k? $7k? And how many thousands have you thrown down that rathole in materials to “make it better”? $5k?
The government and the central bank have gone to extensive lengths to protect the financial sector, implicitly accepting the concept that the financial sector is the cornerstone of the economy.
However, in reality, the logical construct of currency is the cornerstone of the economy.
So, you can protect the value of the currency, yet allow necessary creative destruction of companies that have failed. Instead, due to cronyism (see the LTCM rescue - note the pedigrees of the partners - all connected insiders - a few billion dollar loss was purportedly going to destroy the financial system), they keep bailing these companies out, which simply adds more stresses on the system, and extracts ever more wealth from the population at large, who ultimately pay for the bailouts.
Capitalism has shown itself to be an effective way to generate wealth, when it exists under certain regulatory controls which encourage competition and prevent oligarchy. But it requires creative destruction too. And having a system of “Socialism for the rich, capitalism for the poor is a system which plunders the rest of society for the benefit of the rent-seekers.
Can a society increase the purchasing power of its people by decree?
A 5,000 Sqft will eat you alive.
Good point Puggs.
I know people who purchased 4500-5000 SF houses with sub prime loans in 2006-7. When the walked away, they never wanted to see a big house again. They spent the whole weekend cleaning. No fun.
I know 1500 square feet is more than enough for me. I am a minimalist and hate clutter. But I also don’t want a place that echoes. 1200 square feet is my type. I would mention also on 160 acres. But the Feds at the Cliven Bundy ranch show you don’t have any rights. Your family might have had them for generations until the thugernment decides you no longer have this rights.
Applebee’s wait times…..???
I drove past five restaurants around lunchtime on Friday and they all had long waiting lines: Chipotle, Habit Burger, Jacks, Five Guys, and one local teriyaki place.
Northern California Foothills. Seems to be thriving here.
“Thriving” J._Fraud?
California Ranks #4 On Highest Unemployment Rate By State
http://www.bls.gov/lau/
I was a habit fan for awhile but got tired of it. Try eating fast food with water instead of the soda or shake. It just does not taste as good when you don’t do the complete experience. But I quit the soft drink habit several years ago. I can drink a cup occasionally without reestablishing that habit. Occasionally means once every three or four weeks.
We all have to eat 3 times a day. Food service is one retail industry where it is hard to compete on-line.
Folks who used to be able to afford dining at nice restaurants are now stuck waiting in line at the likes of downscale franchise establishments like Chipotle, Habit Burger, Jacks, and Five Guys?
Sorry to hear that…
I was a buyer of SDRL today because of the market fall. When people are panicking and acting dumb, I’m in. I love human stupidity, at times.
Sorry about responding to myself. That’ so crass
I sold 275 shares of PBR today even though it could still go higher, it was time to take profits. Rousseff makes such a big difference in Brazilian politics.
But I replaced that money with SDRL which I’m very bullish on
Seadrill is a no-brainer if you want to make long term cash.
Hate to sound like a troll but I just sold my Victorville CA house up 4000 from our initial offering after 3 offers in one week. It seems like a hot market if you price accurately. This Summer season could be robust nationwide.
PBR has been an exciting and also risky investment which took me
90 days roughly to execute and risking up to 12,000 of cold cash to see if it would yield a payday.
I made 2700 on this play in the last three weeks.
But holding on before the run was sobering to say the least.
Socialist oil companies with government collusion are risky bets.
but the story is eloquent.
We had a similar experience in late 2004, shortly before Housing Bust 1.0. Good on you for getting out before Housing Bust 2.0.
My wife is ranting on JPMorganChase paying exactly 0% interest on my sons’ savings accounts with them. How come Jamie Dimon is such a stingy S.O.B.?
We’re ditching his bank for our sons’ savings in favor of a local credit union that pays nonzero interest on its accounts.
Did Obama give Jamie Dimon presidential cufflinks?
JPMorgan Chase boss shows off inscribed set at senate banking committee
By Daily Mail Reporter
Published: 14:06 EST, 16 June 2012 | Updated: 15:28 EST, 16 June 2012
The boss of one of America’s biggest banks has been snapped wearing a set of presidential cufflinks, prompting speculation that they were a gift from President Barack Obama.
JPMorgan Chase CEO Jamie Dimon was sporting the cufflinks, emblazoned with the seal of the President of the United States, at a senate banking committee hearing on Wednesday.
One of Wall Street’s wealthiest fat cats, Mr Dimon is believed to have a good relationship with Mr Obama, having visited the White House 16 times and the President on at least three of those occasions.
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Rampant greed and stinginess lead to losses.
JPMorgan’s results don’t bode well for Citigroup
By Mark DeCambre @mdecambre 11 hours ago
A Mexican fraud scandal will haunt Citi’s first-quarter results. Reuters/Edgard Garrido
If you thought JPMorgan’s earnings were rough, brace yourself for Citigroup’s first-quarter results, which are due Monday.
+
Released today, JPMorgan’s results (as well as Wells Fargo‘s) can offer a few clues to where Citigroup’s performance may be weakest. Both JPMorgan and Wells reported that mortgage origination activity tumbled by nearly 70%, thanks to higher interest rates, which cut refinancing demand. Citi’s mortgage originations have fallen in recent quarters, and that likely continued in the first quarter.
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JPMorgan shares close down on Q1 earnings miss
Doug Carroll and Kevin McCoy, USA TODAY 4:45 p.m. EDT April 11, 2014
JPMorgan Chase shares closed down nearly 4% in Friday trading after the nation’s largest bank missed Wall Street estimates by reporting first quarter earnings of $5.3 billion, a 19% drop from a year ago.
The New York-based bank’s shares ended the trading day at $55.30, a nearly 3.7% drop.
JPMorgan reported the bank earned $1.28 a share compared with $1.59 a year ago. Wall Street’s consensus estimate was $1.40 a share, according to a FactSet survey of analysts.
Revenue fell 8% from last year’s first quarter to $23.9 billion.
A falloff in trading revenue was the main contributor to the weaker results. Fixed income revenue of $3.8 billion was down 21% from a year earlier.
But there were declines in other segments of the bank’s business, too. In consumer and community banking, net revenue fell $1.2 billion, or 10%, to $10.5 billion. Mortgage loan originations of $17 billion fell 68% from 2013’s first quarter and 27% from last year’s fourth quarter.
“Clearly this was not the usual upside surprise for JPM,” said Jeff Morris, head of U.S. equities at asset manager Standard Life Investments. “They missed expectations by 10 cents per share due to weakness in revenue.”
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JPMorgan profit weaker than expected as trading revenue falls
By David Henry and Tanya Agrawal
Fri Apr 11, 2014 4:10pm EDT
Breakingviews: Dimon subdued
Related News
JPMorgan on profit drop: Be relieved we aren’t taking big risks
(Reuters) - JPMorgan Chase & Co posted far weaker-than-expected quarterly profit as uncertainty about the U.S. economy weighed on investor trading volumes and consumer borrowing.
Results from the first of the major Wall Street banks to post earnings underscore how difficult the first quarter was for the financial sector. JPMorgan’s bond trading revenue plunged 21 percent, and mortgage lending revenue fell 84 percent from the same quarter last year.
Most of the bank’s big businesses, including commercial lending and credit cards, delivered lower profits. But the bank is not responding by dialing up its risk-taking in commercial lending, and it views falling revenue in its bond trading business as part of a business cycle instead of a symptom of a broad-based and lasting decline in fixed-income trading.
“It’s not like selling cereal - it’s not like your volumes go up 2 percent every day,” Chief Executive Jamie Dimon said to reporters on a conference call. The business will grow over the next decade or two, he added.
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Heard on the Street
J.P. Morgan’s Earnings Show Few Signs of Market Thaw
Concerns About Slumping Markets Ring True
By John Carney
April 11, 2014 2:13 p.m. ET
“Sick of a calm.” That’s how a tavern keeper describes her uncomfortable condition in Shakespeare’s “Henry IV, Part II.” It is also an apt description of banks during the first three months of 2014 as shown by J.P. Morgan Chase’s (JPM -3.66%) results Friday.
As the year began, investors had reason to be hopeful. It appeared as if economic growth and rising rates would spur expanded lending, increased trading revenue and improving net interest margins. Although the great wave of mortgage refinancing had crested, it was possible that housing purchase activity might take up a bit of the slack.
Market conditions, however, quickly began to grind against those hopes. Several indicators showed lending and trading activity stalled as interest rates hit an unanticipated lull. And the decline in profits and revenue shown in J.P. Morgan’s first-quarter performance, often considered a bellwether for the banking sector, confirmed suspicions that big banks were largely adrift in early 2014.
Yet as disappointing as J.P. Morgan’s results were—revenue was down 8% compared with a year earlier, while earnings per share were 19% lower—they didn’t point to any serious stumbles on the bank’s part. The sharp declines from a year ago in mortgage lending and in fixed income, currency and commodities trading revenue, and the less sharp decline in stock markets revenue, seemed to reflect broad market conditions.
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JPMorgan’s profit plunges 19 pct
16 hours ago, Reuters Videos
A slump in fixed income trading and slowdown in mortgage loans slammed JPMorgan Chase’s income. But CEO Jamie Dimon voiced optimism. Fred Katayama reports.
Don Dion
JPM Board Showers Dimon With Goodies, Following $20 Billion In Fines And Bad Results
Apr. 11, 2014 12:50 PM ET
Summary
- After paying billions in fines to the Obama Administration, the JPM board granted CEO Jamie Dimon millions in compensation.
- JPM reported a decrease in profits, and settled its legal issues for a stunning $20 billion in losses for shareholders.
- Given the conflict between executive compensation and institutional performance, JPM shareholders should take profits now.
After paying billions in fines to the aggressive Obama Administration watchdogs, the J.P.Morgan (JPM) board granted CEO Jamie Dimon millions in compensation.
Specific forms of compensation include:
· An additional $18.5 million in stock on top of his $1.5 million base salary.
· $125,973 for the personal use of the company’s jet aircraft.
· $31,041 for the personal use of cars.
· $134,728 for residential and security expenses.
Dimon’s stock bonus could disappear if he leaves the company; in addition, the CEO could lose his entire bonus if he leaves it in less than two years, half if he leaves in less than three. The likelihood of Dimon leaving is slim, however; he hopes to stay for at least five more years and continue to collect these huge compensation packages.
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All the President’s Bankers: Nomi Prins on the Secret History of Washington-Wall Street Collusion
Tuesday, 08 April 2014 11:03 By Amy Goodman and Aaron Mate
Also See: Nomi Prins | The Real Vice-President of the United States Is Wall Street
With U.S. inequality at its highest point since 1928 and Wall Street bonuses hitting pre-2008 levels, we look at the 100-year history of secret collusion between Washington and the financial industry. In her new book, All the Presidents’ Bankers: The Hidden Alliances That Drive American Power, financial journalist Nomi Prins explores how a small number of bankers have played critical roles in shaping a century’s worth of financial, foreign and domestic policy in the United States. Prins examines how these relationships have influenced events from the creation of the Federal Reserve, the response to the Great Depression, and the founding of the International Monetary Fund and the World Bank. Now a senior fellow at Demos, Prins is a former managing director at Bear Stearns and Goldman Sachs, and previously an analyst at Lehman Brothers and Chase Manhattan Bank.
TRANSCRIPT:
This is a rush transcript. Copy may not be in its final form.
AARON MATÉ: Well, if you go by the balance sheet, the last four years have been a time of economic growth in the United States. Corporate profits and stock prices have mostly recovered and, in many cases, surpassed their levels from before the financial crisis. On Wall Street, bonuses are now the highest they’ve been since before the 2008 crash. Just last year, payouts increased 15 percent to $26.7 billion. That’s enough money to more than double the pay of every minimum-wage worker in the country. That’s because, for most Americans, the recovery has been elusive. Inequality is now at its highest point since 1928, and the wages for lower-income Americans are stagnant.
AMY GOODMAN: Well, we now turn to a new history that explains how this disparity has come to be. In her new book, All the Presidents’ Bankers: The Hidden Alliances that Drive American Power, financial journalist Nomi Prins traces the hundred-year history of collusion between Washington and Wall Street. Prins reveals how a small number of bankers have played critical roles in shaping a century’s worth of financial, foreign and domestic policy in the United States. These relationships have influenced events from the creation of the Federal Reserve, the response to the Great Depression, and the founding of the IMF and the World Bank.
For a good part of the 20th century, bankers and presidents presided over a financial system that was relatively stable. But as Wall Street grew increasingly outside of Washington’s control, financial speculation has exploded, leading to the financial crisis of 2008. And even though the economy may now be on the mend, Nomi Prins ends her book with a stark warning, writing, “Either we break the alliances, or they will break us.”
Nomi Prins is a former managing director at Bear Stearns and Goldman Sachs and previously an analyst at Lehman Brothers and Chase Manhattan Bank, now a senior fellow at Demos and author of this new book, All the Presidents’ Bankers.
Nomi, it’s great to have you with us. Talk about the inspiration for the book.
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