Archive - Apr 13, 2011 - Story

Busy day with quite a bit on the economic front: if Gallup is right March retail sales will be weaker than expected. Other key events include the JOLTS survey, business inventories, a Treasury auction and the inverse - POMO; and last Obama is presenting at noon his deficit reduction plan.

And so the loan loss reserve accounting game continues. JPM just reported earnings of a solid $1.28/share for Q1 2011, generated by net revenue of $25.8 billion (a decreased of $2.4 billion from a year ago). This would have been enough to push the stock substantially higher... if only $0.29 of this "beat" was not from a purely accounting benefit from reduced credit card loan loss reserves. Now the only question is how much of this credit card improvement is from credit card holders paying their credit card cards instead of their mortgage (and with a $50 billion annual squatters rent benefit this is not a trivial question). Considering that JPM announced a $650 million expense for estimated costs of foreclosure-related matters our guess is "a lot." Per Jamie Dimon: " "Retail Financial Services demonstrated good underlying performance, while we continued to invest in building branches and adding to our sales force. However, this performance was more than offset by the extraordinarily high losses we still are bearing on mortgage-related issues.(a) Unfortunately, these losses will continue for a while. Rest assured, we are fully engaged in fixing our problems and addressing our mistakes from the past, and we will strive to build the best mortgage business going forward.""

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 13/04/11