Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Minyan Mailbag: JPM - One Simple Reason


Stop looking at me Swan!


Prof. Katsenelson,

What do you think of short JPMorgan (JPM) / long Lloyds (LYG) on a pairs trade?



I am not here to give advice so please take this as philosophical discussion, because that's what it is:

I am not a big fan of JPM for one simple reason: Every value manager I know that owns JPM owns it for one simple reason - Jamie Dimon. I am sure Jamie deserves the confidence, however, I have a hard time owning a stock because one person, even if that person happens to be a CEO, will turn the company around.

Also, I don't like JPM's (and Bank of America's (BAC)) trading business; a black swan type of event that never happened in the past combined with incredible leverage of a bank could bring this financial giant down overnight. In addition, I don't trust JPM's numbers as it recently digested BankOne and I am sure took plenty of charges. The company is so complex (it is also true for Citi (C) and BAC), that I could probably analyze a dozen companies instead of analyzing this one - just not worth my time.

I don't know how conservative JPM is with its lending practice. If it is, in the absence of black swan type of event, the stock could do fine in the interim.

I believe a bank with a lower dividend yield, significant exposure to higher risk consumer lending and a large mortgage origination business would be a better candidate for this type of pair trade. I cannot think of a bank that fits that description from the top of my head. WaMu used to fit this description, though I am not sure if it is the case anymore.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos