On Sunday, we looked at a charting error in a JPM research piece that compared bank market caps, then and now. It appeared the JPM analyst erroneously selected area rather than diameter in Excel. (Data can be found here).

TBP Readers did a nice job taking JPM to school as to what the chart should have looked like:

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Rene Corda suggested this as the the proper picture:

New & Improved Chart

(looks like JPM fixed their own chart)

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QQQ Trader send this chart along (with averages!)

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Ironman at Political Calculations gives us these two beauties:

Bar Chart:

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Radar Plotting Chart:

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And Mark McHugh of Across the Street came up with these two beauties:

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Source:
Wall Street Can’t Count
Robert X. Cringely
February 12th, 2009

http://www.cringely.com/2009/02/wall-street-cant-count/

Category: Markets, Research

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

34 Responses to “Bank Market Caps, Then & Now”

  1. leftback says:

    Still plenty of room for those bubbles to get smaller….

  2. TrickStyle says:

    …Gulp…I just looked at the latest S&P earnings estimates. $32.41 for ’09

  3. Marcus Aurelius says:

    Shrinkage.

  4. jpm says:

    If the clowns at JPM cannot handle AREA calculations (elementary school!), why would anyone believe anything they publish?

  5. Soylent Green Is People says:

    The missing information: TARP. Subtract out government infusions and what do these charts look like?

  6. Andy Tabbo says:

    “Shrinkage.”

    Ha. “I was in the pool! I was in the pool!”

  7. Steve Barry says:

    Dow closing low from November is 7552.29…if that is violated, and we came close today a few times, everyone who said the November low was THE low is proven wrong….and the intraday looks like a head and shoulder about to break.

  8. Andy Tabbo says:

    SB:

    I’m not sure DJIA is a relevant index to follow, but your point is well taken. What’s really interesting, in terms of classical charting, is the inverted “pennant/flag” pattern on the SPX that has broken today. You can see it pretty clearly down from 944 to 803. It was snapped today at the 809 level I would expect some sort of retest of the backside of that line at 809 today or tomorrow, and then a complete collapse. 784 is a big line in the sand for me. If we just collapse a little further, decisively break the 784, then I think all bets are off…we may just drop straight to mid 600′s in a blink of an eye.

  9. Mannwich says:

    No worries Steve-O. The usual suspects will just call another THE bottom and claim victory. Eventually they’ll be right but we’re not there yet. Not even close.

  10. Andy Tabbo says:

    And I must point out that “today was something different” in that both the Yen and the SP500 fell. There’s been this freakishly perfect inverse correlation between the Yen and the stock market, UNTIL TODAY. I can smell some black box algorithms starting to smoke up in the James Simons Renaissance fund right now….

    As you might say…” a non linear event” coming…

  11. Steve Barry says:

    @Andy:

    When CNBC targets the Dow closing bottom, it does become relevant, for better or worse…to make sure, 752 on the S&P

  12. leftback says:

    It is a very odd currency day, that’s true.
    The other weird event is the change in the $ and gold relationship.

    The FXE is close to multi-year lows here.
    Everyone seems to be bailing out of every currency into the $ – and hedging with gold.

    Will be watching SPX 784, and 660 of course… should that materialize.
    I would expect ALL of the presently absent participants to enter the market if we see 660.

  13. Man, with chart porn like that, you need to bring a tissue w/ you to read TBP.

    But where’s Wells Fargo? Oh, nevermind. Buffet’s got that under control. Even if they just spent untold thousands of dollars running full-page ads in the WSJ whining about how they can’t take their “high-achievers” on junkets anymore. I’m sure the employees they whined about not recognizing preferred a bit of public whining to private compensation.

  14. Steve Barry says:

    What’s the Intrade contract on the Euro still being around by year-end?

  15. Winston Munn says:

    I just got the latest issue of “The Conservative Thinker” and can assure one and all that the shrinkage in market caps was not the result of global warming, evolution, or deregulation.

  16. Bruce N Tennessee says:

    Barry,

    It would be VERY interesting to do the same type of before/after diagrams on the typical IRA under active management by, say, Merrill Lynch, Wachovia, etc. if that information was available..

  17. R. Timm says:

    Great chart porn there BR. One fatal flaw though, survivor bias! I’d like to see the bubbles for Lehman or Bear Sterns on there.

  18. Andy Tabbo says:

    @leftback.

    The action between the DX and gold has been very bizarre for weeks now. Large specs are skewed both long the dollar and WAY long gold at this point. Very difficult to understand.

    The strong US dollar makes a lot of sense to me in that we’re clearly in a debt deflation spiral. All the world is in massive debt denominated in US Dollars and Yen. In order to pay back those debts, people have to get a hold of US dollars.

    The gold, in my view, is mostly a rush to safety and not an indication of inflation. Note that CRB index is near lows…

    If you’re long gold and making money, congratulations. If you’re long gold “cause the government is printing a lot of money,” then I think your thesis is wrong. That said, who cares. If you’re making money, then it really doesn’t matter if you’re reasoning might be wrong. It’s just worth considering that you might be sitting in a fear based trade with lots of other folks.

    Of course, I admit I could be completely wrong. If I am, then I need someone to explain to me the persistently low long term interest rates, the strong dollar, and the CRB on its ass.

  19. Pete says:

    Shouldn’t BAC be there too ?

  20. DL says:

    Andy Tabbo @ 12:58

    The famous exchange between Elaine and George Castanza…?

  21. EDF says:

    Kudos to all. Brilliant use of charts.

  22. danm says:

    To put things in perspective…

    Canada’s:
    Royal Bank = 40B cad or about32B usd
    TD Bank = 30B cad or 24B usd
    Sctiabank = 30B cad or 24B usd

    And to think that only a few years ago people in finance here in Canada, thought Canada would need to let its banks consolidate to compete against the big ones!

  23. leftback says:

    @AT: I don’t disagree with this at all, I have made money in GDX and have been lightening up in anticipation of a decent sized correction in gold in the near future. This is a fear trade, not yet an inflation trade.

    As for the CRB, WTI etc.., they may be on their ass now, but there is only one direction for them to move in the long run once the $ begins to revert, which will happen on even a modest recovery in confidence.

  24. TrickStyle says:

    @SB –

    LOL. Guilty! I have called 750 THE bottom numerous times. And at the time, I wasn’t even trying to be particularly optimistic with the multiples I was applying to earnings estimates. At the time, I was putting myself in the company of other bears like Jeremy Grantham, Nouriel Roubini and others. If memory serves, even Barry noted around that time that it might be time to start legging in. Of course as time goes by, and more data flows in, a reasonable person adjusts his forecasts.

    Back at 750, if you’ll recall, Paulson had retracted his thinking on the TARP structure and Wall St. freaked out. At the time, that looked like “Global Financial Meltdown” day 1, but it then later subsided when Plan B was agreed upon.

    So now S&P earnings are at 32. And if I apply a 10x multiple, which seems fair, then we should expect to reach 320. Since that’s only about 400 points off the bottom I called, and we’ve grown used to seeing a 400 point swing swing occur daily, don’t I get at least a little credit? ;) At $32 of ’09 earnings, it’s very hard to believe that 750 could ever hold.

  25. Steve Barry says:

    @Trick:

    Glad to see you are quick to realize this…the market has often traded at a P/E of less than 10 at major bottoms…if not this bottom, WHEN? I don’t buy that low treasury yields help any, given that corporate spreads are blown out to their highest since…of course, the Great Depression.

    http://macromarketmusings.blogspot.com/2009/01/battle-of-spreads.html

  26. druce says:

    nice charts.

    but the radar chart chart has the same value vs. area distortion as the original JPM charts.

    (Imagine you used bars emanating from the origin instead of the spider webs. The bar sizes would represent the values you were comparing, not the total filled in area between the bars, as the spider webs imply)

  27. leftback says:

    they must be 8-9% smaller now than they were this morning…
    pretty soon the banks will have no balls at all.

  28. tranchefoot says:

    @AT

    Couldn’t the new correlation btw gold and the usd result from anticipation of a currency crisis in europe?

  29. R. Timm says:

    @ Leftback “pretty soon the banks will have no balls at all.”

    Good One! I appreciate your humor.

  30. leftback says:

    @ Tranche: Exactly, traders exiting Euro and other currencies bought the US$ and hedged it with gold.
    Now look for both of those trades to roll off at some point this week. Euro at multi-year lows, gold at resistance.

  31. Rene Korda says:

    My nickname on the world’s most popular financial blog – and it’s misspelled, how ironic:)

  32. from SB: “I don’t buy that low treasury yields help any, given that corporate spreads are blown out to their highest since…of course, the Great Depression.”

    http://macromarketmusings.blogspot.com/2009/01/battle-of-spreads.html

    Without doubt~ All of times I’ve heard the “High P/E” ‘argument’ predicated on the ~3% Treasury rate–the rejoinder of “OK, who else gets to borrow at that rate? Have you perused the Corporate Bond market recently?” was, largely, met w/ incomprehension..
    ~~

    as to the charts, seeing the, obvious, Delta between the Circle v. Bar Graph representations, it’s no wonder they were interested in trying to play w/ radii..

  33. mark mchugh says:

    Thanks for the mention, Barry!

  34. cjared says:

    Why are there no Canadian banks in these charts?