JP Morgan's Earnings

JPM's $13B earnings in 2009 marks a great come-back year. JPM usually is the first one of the big banks shows their results. Looking back, JPM's results appeared to be a reliable indicator how other giant banks are doing. So it won't be surprised to see others doing well in 2009. Another side observation is that banks are allocating tremedous amount of bonus for their employees. That also verify the projection.

Put this earnings aside, however, JPM's Dimon is still cautious about the recovery. Bad loans are increasing and earning estimates aren't certain. Why did he make such comments?

Note that the performance in 2009 was attributed to the stimulus plan. Not only the banking industry and in the States, others industry and nations had similar stories. The fundamental question to ask in 2010 is, how much the recovery is relying on the stimulus plans? Certain factors would need to be considered if stimulus plans were withdrewn: less money supply and higher interest rates. That could mean stronger US dollar and higher mortgage rates. Then the housing markets would be even harder for home owners thus cause more foreclosures. So these are well considered to pay cautious attention.

But no doubt, the plans are expiring. Various media pressed the Fed to raise interest rate to support weakening dollars. The outcry has been lasting since last December. But the Fed remains the stance of low interest rate. This brings in a murky view of future.

Other big economical entities who handed out big bonus are considering exit strategies. Entities like Japan and Gemany that didn't hand out relatively tremedous stimulus are in relatively better shape. China and Asian countries can't wait to remove their plans in various form even though the governments still openly support their plans. Having huge monetary supply in their system causes more pains now than 12 months ago. Inflations have more visibility now, especially in housing market, that have driven up everything. It is ironic to see housing has been the main power of wealth buildup in the past 20 years but it also cause wealth collapse in the States. When this bubble in developing countries burst, another tide of crisis would come.

In conclusion, Dimon has plenty of reasons to be cautious, selfish or not. Regular investors, regardless how are brain-washed to be optimistic in 2010, should also be cautious.