JP Morgan (JPM): 5 Reasons to be Bearish Before Earnings

[FollowMyAlpha]

1. Regulatory reform is forcing J.P. Morgan to review certain parts of its business model. The outcome will likely be that it needs to alter the way it operates some of its most profitable divisions.

2. JP Morgan makes rainfall profits off its derivative book but it lacks sufficient transparency relative to its balance sheet. A good majority is offset but it's tough to really quantify what type of risk truly lays there.

3. Loan are still rising. Any real double-dip in the economy is likely to hurt results over the coming years despite its strong balance sheet.

4. Analysts wonder whether JP Morgan can really provide sustained high long-term earnings relative to what was seen before the Financial Crisis.

5. Basel III will require banks such as JP Morgan to hold much more capital. This will prevent banks as whole from deploying more capital and providing higher returns to shareholders.

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Summary:

We have no official buy or sell position on JP Morgan (JPM) but heavily encourage a positive discussion to see all points of view be they bullish, bearish, and or something else.

[Edward Hay]

I would just add that a double dip recession is not likely. We might see some continued trouble in the housing sector but this will start to recover as inventories are cleared out and the US jobs machine kicks into higher gear in 2011.

[Billy T]

Some think JPM is with large naked short position in silver - what do you think?
If they are, then margin calls are growing more costly.
Thus, they could be selling more, to try to hold price down.
They don't seem to be buying to cover a short position now, but may have been part of silver's rapid price rise (The gold silver ratio has been falling - so demand for silver was greater than for gold.)