The last two days present two reasons why regular people do not trust the stock market and traders such as myself just want to throw up your hands and get out completely. What makes this more aggravating is that what I am about to point out does not involve the one thing that irritates me most of all and that is insider trading where people in the early know trade on the news. That is totally illegal but goes on all the time.
Yesterday Goldman Sachs issued a report on JC Penney saying there are two scenarios where the company goes bankrupt. Today Goldman Sachs follows up with a downgrade of the stock to $7 per share. Now this is all well and good if Goldman actually thinks these two reports to be true.
However the one thing Goldman did not mention is that they have a vested interest now in JC Penney failing and falling hard. Goldman has loaned JCP a couple of billion dollars of much needed cash to keep the concern going through the critical fourth quarter period. Yes one would say why would a bank that loaned serious money to a business want it to turn around and fail? Well Goldman has secured that loan with JC Penney real estate. Real estate in nice retail locations. Retail locations that right now is most valuable due to the tightness of that market.
If JC Penney fails and falls hard that real estate will be taken over by Goldman at lower prices which Goldman can then resell for tidy profits. So Goldman's downgrades are self serving. The worst part here is all this is legal, but it is not ethical. If someone has money in JCP then you are taking some losses in the holding. Add in that big chunks of JC Penney retirement and pension assets are in JCP stock as well. Why does Goldman get away with this without SEC oversight and why does Goldman not get some news coverage for what they might be doing to JC Penney employee retirement assets? Goldman is Democrat heavy in it's leanings and political contributions.
Second situation involves JP Morgan. JP Morgan is a fine bank. In fact JPM as said by Warren Buffet is run by the best banker in the country Jamie Dimon. Jamie Dimon steered JPM through the financial crisis and post crisis without any real need for bailout funds and continuing profits. He took care of shareholders and bank deposit holders as well. Mr. Dimon has an well formed ego, but we expect that is certainly well deserved due to his fine management.
During the 2008 election cycle Democrat Jamie Dimon supported and gave money to the Obama campaign. He supported Obama during most of his first term. However Mr. Dimon before the 2012 election had the audacity to say some negative things about Obama's policies and how they were effecting his shareholders and customers. Obama who does not like that kind of talk has turned the US Justice Dept. dogs on Mr. Dimon and his bank with lawsuit after lawsuit which in turn has lowered the bank's stock price and cost the bank billions in legal fees. Shareholders are taking a hit and frankly it has reached the point fair trading in the stock is hard to find. Everyday there seems to be some new lawsuit and people trading in the stock on the news. There is nothing illegal about all this of course, but it certainly is not ethical on the government's part in picking winners and losers when the losers are regular people, employees, shareholders, and customers of JPM.
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