Hey JP, JP … You’re Alright By Me
Great Ones, I’m high inflation I am. High inflation I am, I am. I bankrupted the widow next door. She’s been bankrupt seven times before. And no one wants inflation. (Inflation!) They’d rather have a William or a Sam. (Yes, sir!)
I’m destroying the economy, I’m inflation. High inflation I am!
Second verse, same as the first: The Bureau of Labor Statistics just reported that the June Producer Price Index (PPI) — i.e., wholesale prices — soared 11.3% from a year ago.
Inflation again? Come on, Mr. Great Stuff, give us something different!
Agreed. I didn’t come to talk about inflation today. I’ve had enough. You’ve had enough.
Nope, I came to talk about bank earnings! Wooot!
Is that better? I can’t tell anymore.
Better? Ha. It’s just a different kind of bad, like everything else right now. Man, I need some happy news.
Anyway, as I said on Monday, this week’s bank earnings reports “will give us more insight into just how stable (or unstable) the U.S. housing market and financial system really are.”
Unfortunately, JPMorgan Chase’s (NYSE: JPM) report didn’t exactly spark joy … if you know what I mean.
Here are the surface numbers:
• Earnings per share: $2.76 versus $2.88 expected.
• Revenue: $31.63 billion versus $31.95 billion expected.
So that’s a double miss, right?
Well, things aren’t always quite what they seem when it comes to banks. They are silly companies.
I mean, revenue did rise 1% from last year. So that’s a little bit of a silver lining for JPM investors. Still, profits plummeted 28% from last year. And that’s where things get tricky.
Last year, the banking giant benefited from the release of $3 billion in reserves — i.e., money JPMorgan was holding back, just in case. That $3 billion helped the bank blow out earnings expectations.
This year, however, the reverse is happening. JPMorgan is stocking up again by putting more cash back in reserve … again, just in case.
In fact, JPMorgan now has about $1.1 billion in reserves, held just in case credit losses mount this year. The company noted that it expects a “modest deterioration” in the U.S.’ economic prospects. That’s a stark contrast in wording compared to CEO Jamie Dimon’s June warning that the U.S. was about to be rocked by an economic “hurricane.”
German rock band Scorpions was unavailable for comment.
The thing is that the process of adding to these emergency default reserves is why JPMorgan missed earnings expectations this morning.
Analysts have tried to downplay the economic warnings from JPMorgan’s move, speculating that the company could use the reserves for either covering bad loans or stock buybacks.
So … maybe something good? Maybe something bad? That’s just it. We don’t know.
But I will say this … it’s definitely not a good sign if more banks follow JPMorgan’s lead and start adding to reserves. And that’s not just bad news for home mortgages either. Credit cards, personal loans and especially car loans are all potentially on the default chopping block as inflation and the economy worsen.
You said we weren’t going to talk about inflation!
Dude, if you haven’t looked around lately … it’s all inflation … all the way down. I’ll say it again: Keep a close eye on bank earnings today and tomorrow. You’re going to get some real eye-openers on just how convoluted things are right now.
And on that note, I’ll leave you with these two competing takes on the U.S. economy:
The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy. — JPMorgan CEO Jamie Dimon.
The idea that the economy is strong? Anyone who is actually doing business sees things are not strong. — Lucky Lopez, 20-year car dealer.
I’m pretty sure these two run in different economic circles … is all I’m saying.
Stay safe out there, Great Ones.
Mike Carr has designed dozens of indicators and mastered over 100 trading strategies, but his latest achievement may be his finest.
He calls it “the Greed Gauge.” And it achieves something that investors have tried and failed to do for decades. Using clever financial engineering, it measures investor greed … and harnesses that to give you perfect entry and exit timing!
For traveling EV owners, range anxiety is one anxiety too many … especially considering the anxiety-inducing inflation conversation we just had.
Hey, you said you wouldn’t mention that again!
General Motors (NYSE: GM) is teaming up with Pilot Co. (owner of Pilot and Flying J gas stations) and charging company EVgo (Nasdaq: EVGO). The EVgoal? Building out a nationwide EV charging network. Imagine: Gas pumps and EV chargers, refueling side by side in harmony. I never thought I’d see the day!
These aren’t just your average city/suburb charging stations either: GM and EVgo are targeting more remote locations along U.S. highways — places where long-distance travelers typically pass through. Places where EV charging stations just … don’t exist yet.
The chosen locations will be sized to accommodate any EV, even those with trailers, and offer fast charging. (Still not as fast as gassing up or refueling with hydrogen, but hey, baby steps.)
EVgo, you’ll remember, follows the EV-charging model of owning the actual chargers and selling electricity as a premium. So EVgo will operate out of these stations much like the stations themselves sell their gas — and in contrast to companies like Chargepoint (NYSE: CHPT) that sell charging as a service.
Elsewhere, GM is working with its U.S. and Canada dealers to build up to 40,000 chargers specifically in “underserved rural and urban areas.” But that’s not the only big shake-up happening to solve range anxiety…
According to Charles Mizrahi, this groundbreaking technology is going to make gas guzzlers obsolete. But it has nothing to do with EV manufacturers, lithium-ion batteries or recharging stations.
This is the investment opportunity of a lifetime, but I won’t spoil the surprise.
If you thought demand for charging stations was high, phew, you do not want to be an automaker right now. While GM, Ford, Tesla and the lot are all still trying catch up on pent-up pandemic demand … the chips are finally start to flow again.
As Taiwan Semiconductor Manufacturing’s (NYSE: TSM) earnings report shows, chipmaking revenue is alive and well. Healthy. Robust. So we’ve got that going for us … which is nice.
TSM’s sales were up 43.5% year over year as the company raced to reach demand from consumer goods companies and, you guessed it, automakers.
But not everything is coming up roses over at TSM:
With global market headwinds being awfully, well, windy, TSM is scaling back on how much it’s reinvesting in its business. It’s to be expected — even with rising revenues, no one wants to be spending on growth right now.
Especially not if you’re a crypto hedge fund…
It’s bad news for crypto bros: Another crypto company bit the dust. Oh no… I’m just so shocked, you see. Simply shook … flabbergasted.
Did you accidentally swallow a thesaurus today or something?
No, but it’s getting harder and harder to fake surprise when another crypto-lending platform goes bust. This time, it’s Celsius Network declaring Chapter 11 bankruptcy — the third crypto firm to do so in the past fortnight.
The company started freezing customers’ accounts on June 12, and investors knew something big was up. Well, going bankrupt explains that. But Celsius co-founder and CEO Alex Mashinsky has some words of wisdom on this most unholy of crypto days:
I am confident that when we look back at the history of Celsius, we will see this as a defining moment.
Yes, Mashinsky, well done. The end-of-times is surely a defining moment. Much like the Titanic’s defining moment was the moment of its sinking.
Now, the one thing this has me thinking is … why are people still shelling out for weird, soon-to-be-worthless cryptos? Why … when you can follow Ian King instead? It’s insanity, I tell you.
Cryptos are a potentially revolutionary asset class. And you want to sully the name of such a sweet thing with … speculative crypto lending? The nerve!
If you’re wading into the crypto waters looking to fish out a bargain, it’s no secret … you’re gonna need a helping hand. (Like Celsius here could’ve had.)
America’s No. 1 crypto expert, Ian King, just revealed why RIGHT NOW is the absolute best time to be a crypto investor.
It sounds crazy in this market, but once you see why this correction is actually good for cryptocurrencies, you’ll understand that it just paved the way for the biggest crypto bull market we’ve ever seen … and that it could launch the next wave of crypto millionaires.
Dig If You Will, The Picture:
It’s that time again. You’re about to close out of this email. (Hold on a sec!) The evening is drawing near. Maybe you’re about to get dinner started (it better be pizza night, that’s all I’m saying). But something’s missing…
You’ve plumb run out of dinner table conversation! Inflation, gas prices … your family’s been there, heard all that before. And good luck kicking off the “crypto lending” conversation.
So what’s a Great One to do when you need some quick soundbites of juicy stock market info? You go on TikTok. No … seriously.
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Editor, Great Stuff