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.