Late on Friday JPMorgan (NYSE:JPM) disclosed in its 10-Q that it sees markets revenue in the 2Q down 20% from the quarter a year ago
In the filing, the company said: "Based on Markets revenue results to date, which reflect a continued challenging environment and lower client activity levels, expect 2Q14 Markets revenue to be down approximately 20%+/- versus 2Q13. The Markets revenue actual results will depend heavily on performance throughout the remainder of the quarter, which can be volatile."
This is odd so early in the quarter for JPM to be guiding down this much, which is mostly it extrapolating the trading results up to this point through the rest of the quarter. Also, because JPM is the largest fixed-income trader, it indicates the other investment banks will face similar predicaments this quarter.
The more important theme in play is that I think the company is trying to set the bar very low early on in the quarter to bring down analyst estimates (or even spur some downgrades), and things could only look more rosy from here. But the ultimate takeaway is simply a daily chart of the 10-year Treasury yield and the S&P 500 (INDEXSP:.INX), both have remained very range-bound this year, and as a result trading is choppy and hard for everyone.
Another thing I noticed is the recent wave of banks disclosing how much exposure they have to Russia (Norway's sovereign wealth fund applies here, too). Back in the winter of 2011, when economic nuclear winter was on the horizon for the eurozone periphery, US banks were falling over themselves to disclose how much exposure [Buzz & Banter post] they had to Greece, Spain, Italy, Portugal, and Ireland, and how much they had lowered it in recent months. That was about six months before the ultimate bottom in those countries' equity indices. Certainly not a blanket catalyst to buy Russia, but a good representation of where we are on the emotional roller-coaster -- on our way down towards the bottom.
Having reread Tom Clancy's last book, Command Authority, in the last two weeks (released December 9, 2013), which was like reading the playback of what's gone on in Ukraine this year, I fully understand that the situation there could turn into a shooting war. In the book, after Russia (led by a group of politicians heavily based on the current government) annexes Crimea, it fabricates an incident to send tanks into Ukraine to protect Russian-speaking citizens. Not dissimilar from this morning's report from state-run Voice of Russia (propaganda) which states that there have been grave human rights violations in Ukraine.
JPM also lost a big chunk of business to Citigroup (NYSE:C) this weekend when the world's largest sovereign wealth fund, Norway, transferred its custodial and securities lending portfolio to Citi on a seven-year contract. According to the FT, the fund owns 1.4% of every listed company in the developing world -- a staggering stat.
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