JP Morgan Chase's first quarter results 2008 - hope and pitfalls

World financial markets are unstable. JP Morgan Chase's announced first quarter results for 2008 spiked up bourses in New York and elsewhere. This despite a precipitous drop in profits, and an admission that 'cash rich' JPM is saddled with flabby earnings and subprime debt. Nonetheless bankers took heart from this less than robust news. JPM took Bear Stearns with the complicity of the Fed, for a mere pittance. And its CEO Jaime Diamon shown toasting South Korea's president Lee Myung-bak in today's financial pages, is set on picking up more banking properties on the cheap. Has he illusions of grandeur that JPM will become the one big bank globally? Possibly. Only time will tell. What casts a bleak pall on JPM's horizon is the slow emergence of the huge pool of subprime debt it has kept from public scrutiny, and some say is between us$150bn to us$300bn. It seems markets should be more vigiliant in cheering JPM. What is a further sign of cause for concern are the bonds which Goldman Sachs and Lehman and perhaps Merrill Lynch and Morgan Stanley are floating on the market at a 7,9 per cent coupon. Sounds attractive doesn't it? Indeed, it does. Whoa pard'ner...it is a hundred per cent risk bond founded on junk, the junk of subprime debt! Instead of reform these slick investment bankers are looking with keen practices to turn a depreciated Yankee dollar of profit. For how long? Caveat emptor!