JP Morgan Chase suffers $2 billion trading loss
JP Morgan Chase acknowledged after the close of trading on Thursday that it had suffered a $2 billion loss in the past six weeks in a trading portfolio designed to hedge against risks the company takes with its own money. Its stock plunged 7 percent in after hours trading, according to the Associated Press. Other bank stocks also fell. The losses came in a derivative portfolio and were somewhat related to a bond trader known as the London Whale, but Jamie Dimon, CEO, indicated that the problem was spread more broadly. Dimon indicated that the bank would show an $800 million loss in the second quarter due to this transaction. The bank is unloading the securities in a responsible manner. Experts indicate the Volcker rule, scheduled to go into effect in July, would not have prevented this scenario.
Weak economic data from China and India impacts markets
On Friday China reported its industrial production rose 9.3 percent from a year earlier in April, below expectations and down from nearly 12 percent in March. Investment and retail sales also slowed, according to the Associated Press. India’s industrial output fell 3.5 percent in March from a year earlier due to weak manufacturing and investment. The fear is that the weakening situation in Europe is slowing down growth in Asia. China’s economy grew at 8.1 percent in the first quarter, the slowest since 2009. Asian markets and European markets are both down on Friday. The Dow closed up 19 points on Thursday at 12,855, prior to the JP Morgan Chase announcement.
Facebook IPO already oversubscribed
Reuters is reporting that a source close to Facebook’s initial public offering indicates it is already oversubscribed. Institutional subscribers have apparently already demanded more shares than Facebook has made available. The company is seeking to raise $10.6 billion by selling more than 337 million shares at $28 to $35 per share. Facebook has 900 million users but experts indicate that it needs to find ways to increase its revenues.
Sony posts record annual loss of $5.7 billion
Sony, the maker of TVs, laptops and PlayStation games and consoles, posted its largest annual loss of $5.7 billion on Friday, according to Reuters. Analysts feel that the consumer electronics provider does not have a strong strategy to compete in its loss making TV business, nor can it compete in the smartphone business against Apple and Samsung. Shares of Panasonic, another large television provider, also fell on Friday. Sony indicates that it will double its sale of smartphones and Playstations in 2012.
China wants to control local auditing firms
China’s Ministry of Finance has instructed the Big Four auditors that no more than 40 percent of the partners in their Chinese offices can have gained their qualifications as certified public accountants from overseas. That number must be reduced to 20 percent by 2017, according to the Wall Street Journal. The Big Four accounting firms have had trouble staffing their Chinese offices with qualified local individuals. Additionally, investors are concerned about auditing problems in recent years as well as fraud and misrepresentation. This has been a point of tension between the US and China. Just Wednesday, when the SEC asked Deloitte’s Chinese office to turn over documents, it was forced to refuse due to Chinese law.
George Clooney raises $15 million for Obama
Hollywood’s elite rolled out the red carpet for President Obama on Thursday in a soiree that raised $15 million for Obama’s campaign. The fundraiser produced more money for Mr. Obama than any other he has held, according to the Wall Street Journal. Clearly unemployment isn’t bothering Hollywood’s elite.
Catherine S. McBreen is President of Millionaire Corner. McBreen plans and develops content for Millionaire Corner. Catherine balances editorial content to meet the informational needs of both new and seasoned investors. She designs special monthly surveys on topical issues affecting the economic environment.
McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law. She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.
Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences. She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth. Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.
McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)
Catherine is the mother of four and is involved in many school and community events.