I don't know enough about JPM other than it is under valued and has an enormous derivative business - more than 30% market share (JPM was merger of Cahse and JP Morgan, both big in derivaties). Notional values are greater than 40 Trillion ( 10**12 USD).
The US economy is is starting to work again, and JPM has #1 market share of a key product, derivative financial instruments. Done right, they sit in the middle, make money from volitility (+ superior market knowledge from running such a big book) with moderate to minimal risk.
Can be a damn good business, as long as the world is a exciting volitile place. Peace, balanced budgets, fixed exchange rates, stock market in a trading range instead of bull or bear - that would be bad for JPM if that were to happen. Almost all finanacial derivaties are bought on some level as insurance or hedges against sudden large changes. In a stable world, prices for insurance drop, and fewer people buy.
In your words for JPM, Volitility = Friend
(I must say I have learned a lot from that)
Would not be surprised is JPM is net long gold at some price...
JPM at $20 between now and 2005 ?
MY guess - less than 10% , more than 2%
More important,
IF JPM does go to $20, there are many other things that would be better to own than JPM puts -
either NEM or Euros (inflation)
or US treasury bonds or Nasdaq puts (defaltion)
*******
Cyclical recovery plays ...well, energy is a traditional recovery play and seems to be doing okay ;-)
Metals- copper, etc. might be next.
Each recovery has a different sequence - right now I can't see beyond energy. |
