A circus dwarf sat on the lap of J.P. Morgan, Jr. and posed for pictures while the storied banker waited to testify before a senate committee on the 1929 crash.
A lot has changed since 1933, but some things have remained constant. Jamie Dimon, CEO of J.P. Morgan JPM is testifying in front of the same senate committee that interrogated J.P. Morgan, Jr.; politicians will grandstand much like they did in 1933, and some will show off their ignorance of the complexities of banking.
In anticipation of this hearing, we have accumulated a partial position in J.P. Morgan to take advantage of market weakness as well as weakness caused by the unexpected trading loss disclosed last month.
I have carefully reviewed the text of Jamie Dimon’s prepared testimony. There is not much that Dimon can say or senators can say that can change our fundamental case for taking a partial position in J.P. Morgan.
Balance sheet
In this turbulent world, a bank with a fortress balance sheet has an advantage over its competition in attracting business. I agree with the following statement in Dimon’s prepared testimony:
“Our fortress balance sheet remains intact: As of quarter end, we held $190 billion in equity and well over $30 billion in loan-loss reserves. We maintain extremely strong capital ratios which remain far in excess of regulatory capital standards. As of March 31, 2012, our Basel I Tier 1 common ratio was 10.4%; our estimated Basel III Tier 1 common ratio is at 8.2% — both among the highest levels in the banking sector. We expect both of these numbers to be higher by the end of the year.”
No earnings risk
My focus is producing high risk-adjusted returns…Read more at MarketWatch
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Consider taking profits on a 10% tranche around $35.40.
