|Dow||-186.59 to 17,427.09|
|S&P 500||-11.76 to 2,011.27|
|Nasdaq||-22.18 to 4,639.32|
|10-YR Yield||-.053 to 1.837%|
|Gold||-$5.40 to $1,229|
|Crude Oil||+$2.52 to $48.41|
If there’s one thing the mega-banks are good at, it’s this: Keeping lawyers fat and happy!
I say that because the earnings report out this morning from JPMorgan Chase & Co. (JPM, Weiss Ratings: A) shows hundreds of millions of dollars in legal costs continuing to pile up — with no end in sight!
Specifically, profit at JPM sank almost 7 percent to $4.93 billion, or $1.19 a share, from $5.28 billion, or $1.30 a share, a year earlier. That missed the average analyst estimate of $1.31 a share. Revenue dropped 3 percent to $23.5 billion.
JPMorgan just settled an antitrust suit tied to foreign exchange market rigging. It also settled a multi-billion dollar, multi-bank lawsuit in November with both domestic and foreign regulators.
|JPMorgan’s quarterly profit was slammed with a whopping $1.1 billion in legal fees.|
The result: JPMorgan racked up another $1.1 billion in legal expenses in the most recent three-month period. That came on the heels of another billion bucks in the third quarter of 2014, and $847 million in the fourth quarter of 2013.
Why are banks like JPMorgan such a major profit center for the legal industry worldwide? Because they’ve basically spent the last several years (allegedly) rigging every market on the planet!
All told, JPMorgan alone signed a whopping $23 BILLION worth of deals with regulators and prosecutors in 2013 alone. The other mega-banks have coughed up tens of billions of dollars more. That means we’re not out of this morass — by a long shot!
Rising expenses of other types also hindered results at the other mega-bank that reported today, Wells Fargo & Co. (WFC, Weiss Ratings: A). The firm did manage to meet earnings expectations, with per-share profit of $1.02 versus $1 a year ago. Revenue rose 3.7 percent to $21.44 billion.
But noninterest expense jumped $399 million, or 5 percent, from a year ago. Commission and incentive compensation, employee benefits, software, outside professional services — it all rose in the quarter!
|“It makes the sector practically uninvestable!”|
And far from being “non-recurring charges” the way bank CEOs would like us to believe, these costs are piling up quarter after quarter with no end in sight. It makes the sector practically uninvestable!
So let me know: Are you investing in bank stocks? Or are you avoiding financials like the plague? What do you think of all these legal costs? Will these companies ever just color within the lines, rather than try to find new ways to scam us all? Let me know at the Money and Markets website!
|Our Readers Speak|
Boy, are the comments pouring in about oil, the euro, stocks and other markets! I’m seeing lots of great observations, and definitely want to share them with you and your fellow investors.
Reader Steve. R. noted (like me) that investments that rise in value with the dollar are looking extended — and he’s concerned the move may be on its last legs. His comments:
“You and another of the Weiss family writers, Larry Edelson, are certainly in the same camp when it comes to the euro, yen and oil.
“I liked the chart on oil that was in Tuesday’s afternoon edition. I’ve got to think those anti-ETFs, EUO and YCS, must be showing the same kind of RSI that the oil chart is showing. I’m beginning to feel a little crowded on these positions too, in my portfolio.”
When it comes to stocks, Reader Ralph P. pointed out the nasty reversal yesterday in equities — and said it could portend more trouble ahead! The view:
“When the Dow Industrials reverse more than 330 points, as they did yesterday, I must conclude this is a major Bear Market starting and it’s not anything to fool around with. It will simply eat you up whole. So watch out. In my experience nothing, no investment is safe.”
As for oil, Reader Kevin O. said he blames politics rather than economics for the price plunge. The consequence? He smells opportunity:
“It probably started with economic pressure on Russia as they need over $100 oil to break even. As time went on though, our ‘friends’ in OPEC realized Russia would not be the only ones squeezed out. Venezuela, Canadian oil sands and others are already hurting. But when our fracking operators begin to shut down, we’ll see the oil prices rip skyward. Another great generational opportunity for the savvy investor.”
Finally, Reader Myron R. commented on how so many investors are leaning one way in a variety of markets, and how that can lead to big reversals — exactly what I noted yesterday! His view:
“Everyone is saying the yield on the 10-year Treasury is going to 1.5 percent, oil to $40/bbl and that King Dollar will continue to rule. Usually when everyone is saying the same thing, the opposite happens.”
Thanks for weighing in everyone! We definitely need to keep a very close eye on these markets, as the heightened volatility of late is a warning sign that trend changes could be looming. That may merit some quick and large adjustments in your portfolios! If you have any ideas on what moves might make sense, share ’em at the website.
|Other Developments of the Day|
Copper was the latest commodity to collapse, plunging more than 5 percent in early trading. The “economic” metal (sometimes called “Dr. Copper” for its ability to forecast global growth) is now trading for its lowest level since July 2009. Ouch!
Speaking of the economy, core retail sales (excluding categories like gasoline and food services) dropped 0.4 percent in December. That was much worse than the 0.4 percent gain that economists were looking for. November’s reading was also revised lower.
The party line from most mainstream economists is that central bankers have done a good job over the years controlling inflation. Never mind that many of us haven’t seen it in our real lives.
But now, the threat of global DE-flation has investors worried. They’re afraid the Federal Reserve and its counterparts overseas won’t be able save their bacon, according to this Wall Street Journal article. Worth a read.
Al-Qaeda’s Yemeni branch said it was behind the Parisian terrorist attacks in a new video. At the same time, the magazine that was targeted — Charlie Hebdo — sold 3 million copies of its latest edition. That’s 50 times more than is typical.
Any thoughts on these topics? Here’s the link again to where you can weigh in!
Until next time,