Kaltbaum on JP Morgan energy woes!

Since we are being asked:

A Financial Times headline says that JP Morgan had to add $500 million to loan loss reserves because of “energy pain!” Now you know why financials have been acting horrid. They are not going to be alone. Remember, in bear markets, everything comes front and center as debt and leverage become negatives. In bull markets, leverage and debt are your friends. On top of that, there are stories that loan loss reserves for JP Morgan may have to go as high as $2 billion. Since their total energy portfolio is $44 billion, we suggest those numbers may be low.

Many believe It is just this that causes “forced selling” to cover these reserves…and there is a good chance that is what you are again seeing. We just believe we are in a bear market.

Remember, as we have told you dozens of times, in bear markets, surprises happen to the downside as the many “one-sided” trades get unwound. When you add the margin and leverage that has been built up throughout the Fed-induced bubble, problems arise.

For months, on tv, on radio and in these columns, we have been telling you about all the bodies in the bull market closet that turn into skeletons when the closet turns bearish. You are now also seeing the other part of the equation that we have been mentioning and that’s the fact that the recent bear market action is telegraphing economic trouble ahead. Economic numbers are heading the wrong way!