JPMorgan Chase, which emerged from the financial crisis as the nation’s biggest bank, disclosed on Thursday that it had lost more than $2 billion in trading, a surprising stumble that promises to escalate the debate over whether regulations need to rein in trading by banks.
Jamie Dimon, the chief executive of JPMorgan, blamed “errors, sloppiness and bad judgment” for the loss, which stemmed from a hedging strategy that backfired.
The trading in that hedge roiled markets a month ago, when rumors started circulating of a JPMorgan trader in London whose bets were so big that he was nicknamed “the London Whale” and “Voldemort,” after the Harry Potter villain.
For a bank that earned nearly $19 billion last year, the trading loss, which could go higher, will not cripple it in any way. Still it demonstrates how a market blunder can shake even a financial giant that celebrates its “fortress balance sheet.”
It is a rare blow to the reputation of Mr. Dimon, 56, a native New Yorker known for his hands-on management style and a confident swagger. After successfully steering his bank through the market turmoil of 2008 and the recession, he is perhaps the most influential bank executive in the country — and a vocal critic of the efforts to write rules under the Dodd-Frank regulatory overhaul. Read More
Exchange traded funds, the hottest trend in the mutual fund industry, are making inroads into 529 college savings plans and 401(k) retirement plans, but they are still a small part of both markets.
ETFs are mutual funds that trade on the stock exchanges. ETF assets have soared to $1.2 trillion in March from $151 billion in 2002, according to the Investment Company Institute, the funds’ trade group.
Initially, ETFs were the domain of traders, because you could buy and sell them at any time during trading hours. Traditional open-ended mutual funds are priced once a day, after the exchanges close.
Now ETFs are making their way into tax-deferred savings plans, albeit slowly. State Street Global Advisors rolled out an all-ETF 529 plan in April. The SSgA Upromise 529 plan, a new arrangement with the state of Nevada, offers three all-ETF options:
•College-date portfolios, which are managed to be less risky as your child approaches college age.
•Risk-based portfolios, designed to fit aggressive, moderate and conservative investors.
•Static portfolios, which allow you to create your own ETF portfolio.
Investors can change their portfolios only once a year, so people can’t day trade with their child’s college savings plan.
The main advantage is cost, says Steve Coyle, director of U.S. subadvisory services for SSgA. The average annual cost for the portfolios is 0.49%, vs. 0.87% for open-end funds, Coyle says.
Like many ETF-based offerings, the plan is attractive to investment advisers, who can create portfolios for clients, charge fees for the service and still be cost-effective. Read More
If this surprisingly good week makes you want to jump back into stocks with both feet, be patient, writes MoneyShow’s Tom Aspray. A cautious approach will pay off in the leading sectors and plays he has uncovered.
Of course, it was earnings from Apple (AAPL) that saved the day. After trading as low as $555 on Tuesday afternoon, it surged as high as $618 early Wednesday in response to the reported 35 million iPhones sold.
Apple (AAPL) looks ready to close April above its monthly Starc+ band for the third month in a row. For those who are not familiar with Starc band analysis, these bands identify extreme price levels in any market. When prices are at or above the Starc+ bands, it is a high-risk time to buy. Read More
Think the national debt won’t impact your business? Think again. As James Kwak, co-author (with Simon Johnson) of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You, revealed to me in a recent interview, “It’s quite plausible [the national debt] will start having serious economic effects within the next 5-10 years.” The government’s mix of high spending and deep tax cuts risks one of two negative consequences. The first, says Kwak, is that “over time, if the national debt stays high, investors will lose confidence in the federal government and interest rates will go up, which affects everybody because it makes it harder to do things like borrow money to build factories. Or the other possibility is the Federal Reserve might start creating a lot of money in order to fund the national debt and that could cause inflation.” Either outcome is bad for the economy – and your business. Read More