Most bank analysts say JP Morgan Chase is the strongest U.S. financial institution left standing.
Investment guru Jim Rogers disagrees completely.
“I’m short JP Morgan,” he tells Bloomberg TV.
“They have a gigantic derivatives position. Their off-balance-sheet derivative positions are among the top three in the world,” if not the largest, he said.
Rogers said earlier this year he was short Fannie Mae and Freddie Mac and a host of other big financials via an exchange-trade fund. We all know how that turned out.
The bank’s credit-card loans also are a disaster waiting to happen, Rogers says.
“There are plenty of reasons to short JP Morgan, but that doesn’t mean it can’t rally for a while, and it probably will.”
As for the U.S. bank industry in general, “I don’t think it’s in good shape,” Rogers says. “They should have a good rally after their huge declines. But are they sound again? Absolutely not.”
He sees the recent run-up in stock prices as a bear market rally.
“I don’t see how there can be much more,” Rogers says. “The world is in serious trouble. There are more bankruptcies and failures to come.”
That doesn’t mean the rally is over, he says. It could last a few days, weeks, or even months.
“But this problem isn’t over yet, and the American government is making it worse by spending obscene amounts of money on the wrong thing,” Rogers warns.
Others see the bear market rally of which Rogers so clearly warns.
“There is nothing new here, every serious bear market has rallies like this,” James Melcher, president of hedge fund Balestra Capital, told The New York Times.
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