The JP Morgan forensic preview is now available. Remember, this is
not subscription material, but a "public preview" of the material to
come. I thought non-subscribers would be interested in knowing what my
opinion of the country's most respected bank was. There is some
interesting stuff here, and the subscription analysis will have even
more (in terms of data, analysis and valuation). As we have all been
aware, the markets have been totally ignoring valuation for about two
quarters now. It remains to be seen how long that continues.
Click graph to enlarge
Cute graphic above, eh? There is plenty of this in the public preview.
When considering the staggering level of derivatives employed by JPM,
it is frightening to even consider the fact that the
quality of JPM's derivative exposure is even worse than Bear Stearns
and Lehman‘s derivative portfolio just prior to their fall.
Total net derivative exposure rated below BBB and below for JP Morgan
currently stands at 35.4% while the same stood at 17.0% for Bear
Stearns (February 2008) and 9.2% for Lehman (May 2008). We all know
what happened to Bear Stearns and Lehman Brothers, don't we??? I warned
all about Bear Stearns (Is this the Breaking of the Bear?: On Sunday, 27 January 2008) and Lehman ("Is Lehman really a lemming in disguise?":
On February 20th, 2008) months before their collapse by taking a close,
unbiased look at their balance sheet. Both of these companies were
rated investment grade at the time, just like "you know who". Now, I
am not saying JPM is about to collapse, since it is one of the anointed
ones chosen by the government and guaranteed not to fail - unlike Bear
Stearns and Lehman Brothers, and it is (after all) investment grade
rated. Who would you put your faith in, the big ratings agencies or
your favorite blogger? Then again, if it acts like a duck, walks like a
duck, and quacks like a duck, is it a chicken??? I'll leave the rest up
for my readers to decide.
This public preview is the
culmination of several investigative posts that I have made that have
led me to look more closely into the big money center banks. It all
started with a hunch that JPM wasn't marking their WaMu portfolio
acquisition accurately to market prices (see Is JP Morgan Taking Realistic Marks on its WaMu Portfolio Purchase? Doubtful!
), which would very well have rendered them insolvent - particularly if
that was the practice for the balance of their portfolio as well (see Re: JP Morgan, when I say insolvent, I really mean insolvent).
I then posted the following series, which eventually led to me finally
breaking down and performing a full forensic analysis of JP Morgan,
instead of piece-mealing it with anecdotal analysis.
- The Fed Believes Secrecy is in Our Best Interests. Here are Some of the Secrets
- Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?
- As the markets climb on top of one big, incestuous pool of concentrated risk...
- Any objective review shows that the big banks are simply too big for the safety of this country
- Why hasn't anybody questioned those rosy stress test results now that the facts have played out?
You can download the public preview here. If you find it to be of
interest or insightful, feel free to distribute it (intact) as you