Mother-In-Law Research and JP Morgan

Those of you antique enough to remember Peter Lynch, storied investor who took Fidelity’s once obscure Magellan fund from $18 million to $14 billion in assets (and a seemingly unmanageable 1,000 positions) may also recall that he was famous as a tireless stockpicker.

He wrote a book for retail investors, Beating the Street. One of the things he stressed was that finding companies with exceptional growth potential (“ten baggers”) was very important to achieving superior investment performance. He recommended keeping an eye out for businesses and products that seemed to be superior and then checking if they were public and examining their financials and pricing.

This is what I refer to as mother-in-law research, that people you know, even people who may not exactly be your favorite people, may have very useful insights, in this case into new products and services.

Now when deflation worries are in full cry, Asian markets are having a really bad day, and the financial system is looking a wee bit stresssed, the last thing most people who are wired normally want to think about is catching a trend, They probably want to know when it is safe to emerge from their bunker.

However, I think we could collectively use a distraction (besides the animal pictures I serve up daily) and thought we might try a wee test of mother-in-law research. JP Morgan announces earnings tomorrow. One of my smart correspondents thinks they will announce disappointing earnings (JPM has moved its earnings announcement up to tomorrow from Jan 21) in a replay of when Lehman decided to release earnings early (they were BAAAD).

I have no position in JPM, but I thought it might be an interesting test case of mother-in-law research. One data point it that Chase is being a complete jerk about sticking credit customers with rate hikes. That has become pretty popular now, but as discussed in an earlier post, Chase is being far less user friendly than just about anyone, save maybe American Express. So does this mean they are clamping down like everyone else out of dire necessity?

I am not certain here. I have heard many stories about Chase being difficult with debtors over the years, so that is not conclusive, Indeed, one might surmise that Chase is simply taking advantage of changes in standard industry practice.

My own experience in December certainly gave me the impression that Chase is not as panicked as other banks.

I went to a Chase branch on Dec 1 to open an business account (I have one with another bank, am thinkin’ of doing Tip Jar, trust PayPal not one iota, so if I am going to have to give them bank account data, it is most certainly NOT going to be a primary business checking account). Chase had a “free business account” offer, the branch was close, I figured I check it out. I am actually somewhat leery of Chase (they seem to have gotcha banking down to an art form) but figured this was as plain vanilla an arrangement as one could imagine.

The branch manager was falling all over himself to give me credit, with NO questions about my business income. And the interest rate was far more favorable than I expected (not that I was there to borrow, mind you). And they were NOT doing the Capital One trick of only giving credit lines in amounts similar to bank deposits. I made it clear that this account was gong to be very low transaction volume, low balances, and he was pushing hard, “The more you do with us, the more credit we give, unlike other banks, we are still lending.”

Now perhaps I fit some magic profile (I have had my own business for a very long time, I am an old fart, I live nearby, perhaps I fit in a special preferred category), But given how few questions were asked, that seemed unlikely.

Again, one data point is only one data point, and I would never invest on that. Readers may have consistent or contradictory experiences.

Were I the stock picking type, I might have done more follow up on JPM based on that branch meeting. It may be an indicator, or may just be happenstance. While I strongly believe the banking industry has lousy times ahead for the foreseeable future, particular stocks can still be oversold. And we’ll see what their earnings tell us tomorrow.

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  1. donna

    JPM Chase is an evil company. They put me through five years of hell handling my mom’s estate. If not for the fact that my disabled sister and nephew’s trusts were there, I would wish them gone from the face of the earth.

  2. Steve

    It’s quite easy to get burned by following anecdotal evidence of a firm’s health. Many small investors bought Crocs because they liked the shoes, their neighbors liked the shoes, etc. They did the Lynch shtick. Anyone who actually read the CROX financials would have stayed away. I don’t think reading JPM’s financials is as informative as reading the CROX filings would have been. They’re opaque. Anyway, JPM could wind up the strongest survivor of the crisis, but with a share price that keeps sinking for years.

  3. Anonymous

    @old fart,

    You still have it! Especially with the confidant mannerisms befitting a female of your caliber. Your mind and form are pleasing not say the least.

    Young man

  4. john bougearel

    I remember one thing quite clearly in Bloomberg Markets “House of Dimon” article, though I can not quote it, but Jamie Dimon was quite aggressive and adamant about opening new accounts, and accepting new deposits one at a time.

    But as for mother-in-law research, well I haven’t a mother in law, so perhaps other readers can put their two cents in. :-)

  5. Anonymous

    JPM desires you Yves in the same way Capital One does. They want you to open an account then burn you with changes in terms, rate hikes and mystery fees.

    And if you don’t play ball and try to close your account, they’ll use the old Capital One trick of posting unpaid balances to your account. It will take you six months to close the account if you’re lucky. JPM and Capital one consider themselves above the law.
    They are sociopathic companies with
    psychotic criminal executives and employess (sorry, if you work there you’re pond scum!).

    My experience was similar to yours, until about a year in they began the ‘burning process’.

    Use a Credit Union if you want reliable credit.


    And I was wondering why you don’t have a tip jar.

  6. Andrew Bissell

    I had a very similar experience when I went to open an account for the purposes of getting a safe deposit box. I’m 25 and was only depositing a couple hundred dollars, I work at a hedge fund job that I just started a few months ago, and I just moved back to this city recently. I told them all this and they still couldn’t wait to jam debt down my throat. It was a bit disconcerting.

    However, if you think about it, because the Fed and Treasury are the only thing holding up JPM from total collapse, they may be coercing JPM into offering such easy credit in exchange for asset backstops. When you’ve abandoned whatever flimsy free market principles you had in order to “save” the free market, all normal interpretation of signals (freely lending bank = healthy bank) has to be thrown out the window.

    I feel much safer with most of my money in a small, highly-rated bank that didn’t try to shove credit down my throat when I opened my account. These days, lower account yields and higher fees are the best sign that you’re dealing with one of the last remaining vestiges of sanity in the American banking industry. (I’m sure it will be nationalized at some point … we’re all in this mess together, you see.)

  7. Jim

    Mother-in-law research about Chase. I had a friend of mine relate to me that Chase closed his bank account at the end of the year because on that day he carried a $0 balance. His paycheck direct deposit bounced out the next week because of it. He was told that was their policy, zero balance on 12/31= closed account. I don’t know if that is a good or bad sign but there you go.

  8. Mikkel

    I find it hard to keep Chase from giving me more credit…and I’m young and poor. I signed up for a Continental card in November to get a free ticket/no baggage fees and expected maybe a $1500-$2500 line but got $7500. Only within the past few months have they stopped unilaterally lowering my APR. I also have a 5% on all groceries/gas credit card that is about 3 years old and just came up for renewal; I was sure they were going to get rid of the high rebate but they didn’t. I’ve gotten about $600 out of that thing and haven’t given a dime in interest or fees. That’s the hard thing with relying on anecdotal evidence is they’ve treated me like royalty. Maybe it’s my good looks.

  9. Anonymous

    I have nothing but very positive things to say about Chase, but I do most of my banking at a credit union. Don’t get me started on B of A.

  10. Glen

    Maybe the bloke who signed you up knew who you were Yves. You’ve run the story and in the end Chase gets a semi-favourable mention in a wildly read and respected blog – no amount of money can buy this publicity. But to buy shares based on one experience is dangerous though some people do have good gut feelings and given the accuracy of many forecasters, instinct is just as much a candidate for success at the moment than any other method.

  11. Yves Smith


    Thanks for the vote of confidence, but I am NOT a celebrity, and the guy barely knew what a blog is.

  12. Anonymous

    My experience follows that of Yves; opened a business account, and they looked at my personal account as reference. Gave me a credit card with a very big available credit (more than I should have, given this is a new start up) and an expiration date 7 years away. They also gave me a credit line (unasked), and kept reminding me how generous the terms were.

    They are actively prospecting for new accounts, with offers to give you $25-$100 "bonus" if you bring in friends.

    Back office is not so great, however> all kinds of admin screw ups already. Plus, the retail bankers can't interface well with the online specialists.

    I don't consider JPM to be "well integrated" and if they continue acquiring, could see some significant "digestion" issues.

    R in NY

  13. Richard Smith

    R in NY

    Yes, this “well integrated” idea is a canard. All banks that have expanded by acquisition lately actually have unmaintainable legacy systems that don’t talk to each other in ways that support the stated merger “synergies”. And gradually one realises that there is no intention to integrate them, either; they just slap on a bit of branding – et voila! Probably sensible given the cost and risk, but where does that leave the merger rationale? And the ordinary business of routine management?

    If you are an IT insider you actually get to see some of the mess.

    But consumers can divine the existence of the mess too, via the lousy service they get from departments that can’t talk to each other. Cheque and payment processing is a dead giveaway. Over here we have RBS/Natwest, Barclays/Woolwich/etc, Santander/various. None of them can handle the really basic stuff properly and, as you say, it’s because of the absurdly fragmented back offices.

    YS, on the confidence implied by Chase’s pursuit of bank accounts – mm, you might have a point there. JPM certainly consistently emit some ‘we’re less screwed than everyone else’ type body language. Dimon is in the FT today talking about the gloomy prospects for banking next year. Reads more like realism than prepping the market for bum Q4 numbers. Still, JPM have maxi counterparty risk, despite the rush to net stuff. Perhaps their OTC book will turn out to be the bomb that refuses to explode, though.

    Two lame points for contrast:

    The insistent selling of credit is old hat now – maybe that message just hasn’t got from the bridge to the engine room just yet, or maybe the captain really is happy to plough on down that course. I can see why they would want *depositors* in this new capital- intensive world. Perhaps it is less disruptive to leave the branch managers pitching their old pitch, and pick up the accounts that way? Not something to be fixed urgently, perhaps.

    On credit cards, the continued incredible nonchalance about doling them out bespeaks either an expectation of being able to securitise them and lay off the risk that way, or confidence in the protective powers of the “bullshit promise” mechanism, 2005 Bankruptcy Act, etc. That confidence might be justified for a bit, hard to tell. I sort of hope not, I must admit.

  14. Anonymous

    I work or have worked for nonfinancial companies which are corporate banking customers for all of the banks mentioned here. My comments:

    Citibank – Absolutely excellent staff. Very attentive and knowledgeable. Layoffs have cut through this division – which I thought was the key to the future of the firm – indiscriminately and violently. My belief is that the firm’s corporate arm is disintegrating. (Which is a shame.) The partial sale of the brokerage division is odd because it is such an important part of their corporate banking strategy. Note that when doubts about a bank’s viability emerge, corporate customers will decrease their business ties with that firm. I gave my dept a directive a couple of months ago to cease new business activity with Citi. In banking, the perception of stability and trustworthiness is obviously key.

    JP Morgan – Very competent. Aggressive in seeking business.

    BofA – The sharks, but competent. You have to watch these guys. Very reliable service.

    Wachovia – My impression is that this bank is absurdly overstaffed. But some good people there.

    I could go on. The layoffs going on in the banking sector right now is going to tear a hole in the fabric of upper middle class life (and academia, too).

    About Lynch’s suggestion, it is a good one but needs to be used with great care. I have or had investments in the big 3 banks based on intimate knowledge of their business performance as well as from their financials. Obviously not a great investment.

  15. Richard Smith

    Anon of 5:28 – yup. It is setting in in the UK too – body count rising at last at Merrill, Barclays.

    Was talking to a disconsolate Nomuran yesterday. He had thought he was sitting relatively pretty but it turns out that the Japanese wanted Lehman Intl’s systems and staff as much as the address list – the Lehmanites are on sweet deals (2 year guaranteed bonuses etc – in these markets!!) – and it may be the long-term Nomurans that get the chop. A dispassionate Japanese decision.

    We are going to have some very disoriented middle classes rather soon. I’ll be glad of the company; my head’s been in a spin for years.

  16. mmckinl

    LOL !

    JPM ~ 80 trillion in derivatives !

    Until you know what level 3 assets are really worth you are crazy to invest …

    Citi, BAC, JPM ~ the most toxic banks on the street …

  17. Bob_in_MA

    Re Paypal, I used them for years on my site to sell some small items, probably a total of $50,000. It worked fine for me. I had one transaction where they ruled in a customers favor (and I felt they shouldn’t have), and in their defense, she was a nutcase.

    It really is a pretty good deal $-wise. Plus you never see/have credit card numbers, so there i zero security issue. Don’t underestimate that.

  18. Vizsla

    Re; Mother-In-Law research..

    Every exchange with Chase bank managers in NYC has been pleasant. As in your case, they’e thrown themselves violently at me, trying to get me to sign up for a personal account (I’m the executor of my Mother’s estate and that account resided in Chae).

    Since banks have been clients of mine over the years (I’m a sales consultant with my own practice), I’ve a fairly deep knowledge of platform behavior, and Chase seems to be making a strong effort to make the retail experience as good as possible.

    This contrasts, for example, with TD Bank (formerly Commerce) where I do have accounts. There the experience varies widely from office to office, some wonderful and some downright impaired/

    I stay at TD, though, because the fees much lower, and they’ve made my age group a demographic target, for which I’m thoroughly grateful.

    FWIW, Chase on-line experience is a mess. TD on-line experience (well….Commerce, for the mos part) has been unformly good).

  19. Gentlemutt

    Retail banking is in a quandary. Historically their primary function has been to collect deposits and, to varying degrees, minimize the extent to which they piss off customers.

    Now that the Fed has turned cash into trash, or is vainly trying to do so, all banks, from Chase down to Podunk Federal, are desperate for new loans. (This is the irony of all the current talk about banks-not-lending… now they can’t figure out to whom they can lend reasonably safely. Banks can get money for 18 bps, so they are like the proverbial sailor in a lifeboat, water, water, everywhere…)

    Historically the best loans are made to customers who already have deposits with a bank, so the moment you walk into a branch to open an account nowadays you will be, or should be, romanced by every retail banker.

    This is all consistent with what your recent post observed on Fisher’s belated discovery (and Bernanke’s apparent ignorance) about the sequence of events in a depression.

    Pip, pip, cheerio!

  20. john bougearel

    On Paypal,

    I have to give Paypal some credit. I gave $680 to a woman to build a website. Instantly afterwards, email contact was lost. A week later, I filed a claim in their resolution center. The woman suddenly resurfaced and the money was returned to my account the next day.

    Dependent Paypal users do not wish to mess with Paypal so the resolution center works admirably well.

  21. Anonymous

    Chase wants deposits something special. I called them asking what rate they would offer on internet savings, given that there are online accounts elsewhere that offer 2.5 to 4 percent. Guess what-the publicized offer of about 1 percent isn’t the real number. Of course they say something about whether or not I qualify, but I am giving them first pass on a bag of loot before it goes across the street

  22. Markel

    Hard to judge much from anecdotal branch experiences. I have a wonderful relationship with a Chase banker who has helped my elderly mom immensely over the years, but this rep was a legacy from a bank that Chase acquired years ago. My experience with Chase credit card services, by contrast, is very bad.

    Interesting to talk about JPMC in the context of Citi, the original omnibank. Consider all the New Deal protections hacked down, all the massive exposure of depositor interests to speculation, in the name of giving Sandy Weill his megabank pony. And in the end, the megabank strategy turns out to have been idiotic from the get-go. The IT guys have spoken about the gum and tape reality behind “seamless” back office integration. The marketing folks were also whining the whole time–since there was never a shred of evidence that financial services customers, especially the highly profitable affluent and HNW segments, had any interest whatsoever in putting all their eggs into one organizational basket. Nobody really wanted to trade and bank and borrow and insure under one roof. It was all a farce to pad the compensation of the corporate elite, which is, after all, the sole purpose of all of our lives’ activities here in America.

  23. locust


    Wells Fargo and BoA raised the cost of using their ATM’s by one dollar – now $3 – if no account with them. Percentage wise, that’s a big jump.

    Meanwhile, those ‘freelance’ ATM’s commonly seen in small markets, still charge only $1.

    To me, it’s this really small stuff that says more than companies probably want the public to know.

  24. Anonymous

    My grandmother had a CD at Chase a couple of years ago. She has banked there for like 30 years, through 5-6 mergers of what was originally a small local community bank.

    When the CD came due, they called my grandmother. But as she was 87 and starting to get senile, she just told us “the bank called and said I had to sign a check”. We tried to figure out what she was talking about, unsuccessfully, and so sort of dismissed it. After a couple of days I called the bank and found out that her CD had matured. 13 days ago.

    These jerks would not let me take the money out, even though their interest rate was very low for the renewal. They said it would cost $600 to cash the CD since we were late in notifying them (by 3 days). I had power of attorney for my grandmother, but Chase wouldn’t honor it. (It went all the way to Chase lawyers in New York)

    We ended up having my g’mother declared incompetent and I got her money out – without penalty.

    Also, I got a free Chase checking account, to use for PayPal verification, and put $25 in the account. After about 6 months, they started charging me $6 per month. I didn’t realize this because I just threw the statements on the desk, knowing I didn’t have any money in the account. When I discovered it, I called and they confirmed that if you don’t have a transaction on an account, they charge $6 per month. I said “You mean if I wrote a 1 cent check each month, causing you to do more work, you would not charge this fee?”, and they confirmed that was true.

    Chase is a HORRIBLE bank. Stay away from them. They will screw you at every turn if possible.

  25. Anonymous

    I worked for JP Morgan for nearly 3 years. No talent scumbags can survive very well in that company. Frequently they get rid of anyone with an ounce of talent. My boss was an asshole, so was his and it went on like that till there was no end in sight to assholes and it stank everywhere. JP, forget it. They are still around purely based on luck. Dimon, Black and Winters and other spineless people have made selfish decisions, and the company is around.

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