Saturday, July 14, 2012

JPMorgan Chase (JPM) Has Too Many Preppies

Insane trading by the London Whale and the CIO's flunkies is finally hitting JPMorgan Chase in the pocketbook.  Shareholders ought to get upset about this 9% drop in net income but they're probably sound asleep.  There are many reasons business will continue as usual.

Too many idiots holding this stock expect it to be bailed out no matter how many stupid decisions its head managers make.  They could be right, or they could be diluted to atoms if Uncle Sam grabs a boatload of new warrants in exchange for cash.

Too many hedge funds will trade this stock based on news blips.  Real corporate governance no longer exists in America because institutional investors have farmed out much of their portfolios to hedge funds that don't perform fundamental research or due diligence of any kind.  I miss CalPERS' activism from over a decade ago.  That went out the window when their moronic leaders in Sacramento doubled down on hedge funds and other illiquid nonsense.

Too many financial journalists will forget all about this loss in a few weeks.  They need to ignore it to keep getting invited to the right cocktail parties and galas.

Too many JPM people are probably spoiled preppies who get rewarded for failure.  That's the biggest reason why we can expect to see this news again.  Even if the problems in my above paragraphs were magically solved, preppie traders and managing directors simply enjoy blowing other peoples' money.  The CIO had to walk the plank but I seriously doubt anyone who leaves will see their severance pay clawed back.  That's not how things work in the new plutocratic America.  Pedigree engenders "trust" and competence engenders ridicule.

Oh yeah, JPM is one of those firms that wouldn't hire me.  Serves them right to lose money.

Full disclosure:  No position in JPM at this time.