Jim Sinclair’s Commentary
There are no Morgans in JP Morgan and no Goldmans in Goldman. There is no loyalty to the grand old names, only loyalty to self interest in the New Normal. Now, if you got this report purely from number crunchers and not enemies what would you do with your own money in JP Morgan and Goldman? You got it, run to gold and silver. It is happening and hiding in plain sight.
I recently told you even I am terrified of what is coming financially. This type of public news only stokes my concern for you and I. This kind of information should motivate their employees to vote for “Bernie Free Things.” Remember Bear Sterns, where there was no Bear or Sterns, canned 14,000 employees in one push of the send button.
The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns
By Pam Martens and Russ Martens: April 14, 2016
Jamie Dimon, Testifying Before the Senate Banking Committee on June 13, 2012 Over Massive Derivative Losses at the Depository Bank of JPMorgan Chase
Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system.
A rational observer of Wall Street’s serial hubris might have expected some key segments of this letter to make it into the business press. A mere eight years ago the United States experienced a complete meltdown of its financial system, leading to the worst economic collapse since the Great Depression. President Obama and regulators have been assuring us over these intervening eight years that things are under control as a result of the Dodd-Frank financial reform legislation. But according to the letter the Fed and FDIC issued on April 12 to JPMorgan Chase, the country’s largest bank with over $2 trillion in assets and $51 trillion in notional amounts of derivatives, things are decidedly not under control.
At the top of page 11, the Federal regulators reveal that they have “identified a deficiency” in JPMorgan’s wind-down plan which if not properly addressed could “pose serious adverse effects to the financial stability of the United States.” Why didn’t JPMorgan’s Board of Directors or its legions of lawyers catch this?
It’s important to parse the phrasing of that sentence. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”
That statement should strike fear into even the likes of presidential candidate Hillary Clinton who has been tilting at the shadows in shadow banks while buying into the Paul Krugman nonsense that “Dodd-Frank Financial Reform Is Working” when it comes to the behemoth banks on Wall Street.
How could one bank, even one as big and global as JPMorgan Chase, bring down the whole financial stability of the United States? Because, as the U.S. Treasury’s Office of Financial Research (OFR) has explained in detail and plotted in pictures (see below), five big banks in the U.S. have high contagion risk to each other. Which bank poses the highest contagion risk? JPMorgan Chase.
The OFR study was authored by Meraj Allahrakha, Paul Glasserman, and H. Peyton Young, who found the following:
“…the default of a bank with a higher connectivity index would have a greater impact on the rest of the banking system because its shortfall would spill over onto other financial institutions, creating a cascade that could lead to further defaults. High leverage, measured as the ratio of total assets to Tier 1 capital, tends to be associated with high financial connectivity and many of the largest institutions are high on both dimensions…The larger the bank, the greater the potential spillover if it defaults; the higher its leverage, the more prone it is to default under stress; and the greater its connectivity index, the greater is the share of the default that cascades onto the banking system. The product of these three factors provides an overall measure of the contagion risk that the bank poses for the financial system.”
The Federal Reserve and FDIC are clearly fingering their worry beads over the issue of “liquidity” in the next Wall Street crisis. That obviously has something to do with the fact that the Fed has received scathing rebuke from the public for secretly funneling over $13 trillion in cumulative, below-market-rate loans, often at one-half percent or less, to the big U.S. and foreign banks during the 2007-2010 crisis. The two regulators released background documents yesterday as part of flunking the wind-down plans (living wills) of five major Wall Street banks. (In addition to JPMorgan Chase, plans were rejected at Wells Fargo, Bank of America, State Street and Bank of New York Mellon.) One paragraph in the Resolution Plan Assessment Framework and Firm Determinations (2016) used the word “liquidity” 11 times:
Jim Sinclair’s Commentary
Mr. Williams shares the following with us.
- First-Quarter 2016 Retail Sales Contracted Quarter-to-Quarter,
Before and Most Likely Also After Inflation Adjustment
- Non-Comparable Seasonal-Adjustment Revisions Boosted March Sales to a
Decline of 0.3% (-0.3%), Instead of About 0.8% (-0.8%)
- Retail Sales Series Faces Likely Major Downside Revisions in
April 30th Benchmarking
- March 2016 PPI Goods Inflation rose by 0.19%,
PPI Services Profit Margins Fell by 0.18% (-0.18%), Leaving
Aggregate Final-Demand PPI Inflation Down by 0.09% (-0.09%)
“No. 798: March Retail Sales and Producer Price Index (PPI) ”
Jim Sinclair’s Commentary
Come on David, nothing is rigged, Martin told me. All you need is charts and cycles to be an omnipotent market maven.
New York City, New York
April 14, 2016
The robo-machines were raging yesterday based on precisely nothing except banging 2080 on the S&P cash and a teapot’s worth of short-term trading momentum. But a 1% or $300 billion gain in the stock market apparently needs some fig leaf of rationalization. So the lazy hacks who cover the casino’s daily hijinks for the mainstream media came up with some doozies.
To wit, JPMorgan purportedly had a bang up quarter and surprised to the upside and China’s export machine came roaring back. This was supposedly some kind of all clear signal. According to the bulls, the market can’t rise without “participation” by the financials and China is still the mainspring of global growth.
I won’t bother to say, not exactly. You could have learned by the second paragraph that “up” was actually “down”.
In fact, JPMorgan’s earnings were down 7% from last year, and were nearly $1 billion or 15% below its bookings for the March quarter three years ago (2013). Whatever they implied, JPM’s Q1 profits had nothing to do with a break-out to the upside.
That was reinforced by its revenue postings. They came in 3.5% below prior year, and that was no aberration. It seems as if JPMs revenues have been drooping ever since the Feds gifted it with Washington Mutual and Bear Stearns back in 2008. LTM revenues of $92.7 billion are now 10% below the $103 billion it posted back in 2010.
In any event, why would anyone argue that quarterly accounting income of the giant Wall Street banks has anything to do with the main street economy or even real profits?…
Jim Sinclair’s Commentary
Ask if you are one of more than 49% of the USA getting something from the Government Dole. Who are you voting for? Clearly the candidate that the police are using force on.
If that does not work then 100% of the vote counting machines will be Diebold.