JP Morgan Chase reported today and it sure sounds like everything is coming up roses for the banking behemoth. Income is up 85% over last year at 74 cents a share compared to 40 cents a share a year previous. Revenue is up as well. Of course, as with most financial reporting these days, you have to read between the lines a little. The Times article above reports that Chase is “still hemorrhaging money” from its consumer businesses. So if you do some minor math on that, they are hemorrhaging money from a line of business that is a strong indicator of the economy at large but are bringing in insane profits from investment banking to cover it.
This is a sign of where we really are in the recovery process and why so many smart thinkers out there are saying there’s going to be a double dip sometime this year. People don’t have jobs, they aren’t spending money, foreclosures are still high and the commercial lending problems are only just now coming into the light. JPMC is making money because the market is up, because they have privileged status with the US Treasury and Fed and possibly because they are manipulating the precious metals market. These are not the functions that one of the largest banks in the US should be undertaking to make profits.
Do not think for a minute that the all clear has been sounded. I expect most of the large financial firms to report better than expected earnings this quarter but that other industries will lag behind. That will likely catch up with us in the third quarter and it will become evident that this recovery is mostly smoke and mirrors. The path ahead is fraught with obstacles and given the heavy step of our government and financial industries in recent years, I do not expect them to be able to safely navigate the dangers ahead. Until the American consumer is part of the recovery process, we are just sticking a Band-Aid on a slashed artery. And he’s not going to be part of that recovery for a long, long time.