The New Alcoa: It’s DJIA Drama-Queen, JPMorgan
JPMorgan Chase (JPM) auditioned for the job of “earnings season pacesetter” today by becoming the first among Dow Jones Industrial Index components to announce results since long-time leadoff hitter Alcoa (AA) was dropped from the Industrials last month, along with Hewlett-Packard (HPQ) and Bank of America (BAC).
Alcoa has long reported results first in earnings season, but it was also something of an industrial bellwether, with its aluminum working its way into countless manufactured products. As the economy has evolved in recent years, though, with fast-talking and fast-stepping, much of it in the financial sector, replacing the making of stuff, perhaps handing the baton to JPMorgan is past due.
JPMorgan’s third-quarter report, a $380 million loss vs. a year-ago profit of $5.7 billion, was dominated by some $9 billion in legal costs, the result of defending itself against a half dozen fraud charges. Living close to the line, one might argue, has become the national avocation. Coverage of the missteps at JPMorgan has been exhaustive, with scoundrels, scapegoats and one very-teflon CEO.
And yet, year-to-date, the Jamie Dimon show has narrowly beaten the Dow and the broader S&P 500. As they say, as long as they spell my name correctly.
Others have taken a more data-centric approach to suggesting a new earnings season standard bearer. Bloomberg Businessweek, listing company sales and their correlation to U.S. GDP, found Johnson & Johnson (JNJ), McDonald’s (MCD) and Wal-Mart (WMT) most closely mirroring economic activity. We like Wal-Mart of the three because it has also led the way in fast-stepping, with a bribery scandal in Mexico and various litigated complaints from its workers over the years as the big retailer sought to find out just how much can be gotten from its employees.
The correlation between JPMorgan revenue and GDP is far looser – it ranks 25th out of the Dow 30 – so the big bank has to win its standard-bearer role on style points. Let's consider: the bank’s pre-2007 mortgage-backed securities sales helped both build the bubble and burst it; it received a fluffy government bailout like its banking brethren in the wake of the financial crisis it helped create; and Jamie Dimon, after waiting a respectful interval, then went on the offensive against post-crisis efforts to beef up banking regulation.
Poor guy, he was barely clearing his throat on that topic when he was interrupted by one of his own employees, known as the London Whale, who dropped a multi-billion trading loss on the boss’s desk. Talk about bad timing.
JPMorgan’s board beat back talk of stripping Dimon of the chairman’s title and, though slashing his 2012 pay, managed to slip the chastened executive $18.7 million in all. The hell with GDP-correlation: let’s celebrate drama.
Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at firstname.lastname@example.org. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.