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BlackRock chief equity strategist Bob Doll weighs in on J.P. Morgan's $2 billion investment blunder.
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Thank you -- so the fallout from JPMorgan certainly continues and today one of the top -- on a Wall Street retires says after the big two billion dollar loss act the bank with more on JP JPMorgan mess let's bring in Bob doll chief equity strategist.
At black rocks hardest hit you with its -- North Carolina and -- -- an erroneous.
How big of a deal do you think that this trading loss which is now thing.
It could be more than four billion dollars is too not just JPMorgan but financials and the market overall.
Well it is the latter that is to say JPMorgan considered one of the best at risk management has obviously.
Stumbled here.
They will get back up on their feet and survive and thrive as time goes by.
But the whole issue of delaying regulation because we know quite how to approach it quote -- quote.
I think now gives ammunition to those who say we've got to strengthen the Volcker Rule right as we really originally intended to -- -- We're in the throes of it right now we need to step back and give it give it a breather obviously dig deeper is Jamie Dimon has said every time -- -- the spoken appropriately.
So -- does so does some damage to the repair and the credibility if you will.
So you start to make assumptions or maybe you don't yet but at some point.
You'll start to make assumptions that regulation is gonna be stronger or that the Volcker Rule is going to be even more stringent that it might do more than it already passed you start looking at that yet.
Well look the Volcker Rule gut.
Pages and pages -- and books of comments are I think that while this incident is important.
And will have an impact.
All the other testimony and written comments -- made have to be evaluated.
And so this will be one with one important don't get me wrong one important input into okay what does the Volcker -- mean what do we want it to site.
Given the size of this loss and then just the size of this trade that was laid on.
Do you -- and do we need to worry about not just JPMorgan and other financial institutions not really understanding.
What they're trading and some of the investments that there might well look.
Down at any organization like a bank that has leverage on the balance sheet -- equity as a percentage of assets only this big of course have to Wear his heart of the risk in owning.
A financial company as an investor and of course -- being in running one.
They make all kinds of investments some might say all kinds of bets.
And the overall risk management has to say okay how much systemic risk that we have how much -- we have -- one particular variable.
And do we have that under control in this there's obviously breach that's happened but isn't it.
And a fair question to at least ask whether or not they should be allowed to do some of those things if -- -- the JPMorgan Chase if there -- big bank as opposed to.
BlackRock a big money.
Manager and you know firms do different things and this whole idea we're going back to the conversation about the financial supermarkets that we had after the crash no way to mean to go back to Glass-Steagall -- -- all those questions come up again the.
Is that yes they do so a firm like -- BlackRock we would only do any kind of transaction for the interest of our clients -- we don't invest our balance sheet right.
Your -- correct we're fiduciary and so for a bank.
They're making decisions.
On their balance sheet based on what their overall book looks like.
Customer counts their own account -- how -- all interact with one another I think what's yet to be really understood is.
Where -- this transaction -- it was it.
Just they balance sheet transaction.
I don't think so was -- related to other things more broadly on the balance sheet most likely that will be more typical of JPMorgan will find that out over time.
What about your weighting in fine and financials and that's why hasn't changed much where you are overweight going and I didn't see looking in your top ten holdings in some of the -- you run I didn't see any.
Because this you.
We've been underweight financials for some time that hurt us in the 41 quarter of the shares they did really well what we are slowly.
Adding to financials nibbling on weakness we think that forget this transaction for the moment.
That credit is slowly healing.
The mortgage system.
Whatever that means is slowly healing in that tells us.
-- a big underweight in the financial some probably is less appropriate so when nibbling on weakness but still maintaining an underweight.
Coming -- and we and thankful.
Thank you -- -- the New Orleans -- that lives there and not only this but just before we let you got to broaden the discussion a little bit you know Greece is still obviously a mess and people are now speculating about for real if Greece is gonna be out of the Euro zone of what's your thoughts on the broader market as I know we're testing some of the lows here on the S&P today around thirteen forty what what are your thoughts of the broader markets and.
We -- -- -- consolidation.
Corrective phase I've been using thirteen hundred to thirteen fifteen we've obviously now penetrated that at the upper -- -- we still have an economy that is improving albeit slowly earnings that are improving albeit slowly credit that is healing.
-- the good things along with a risk premium -- -- stocks are pretty cheap compared to other things.
On the other hand where they are because we have a lot of things to worry about growth isn't stronger Europe is back on the front page after falling from a from some time time.
We're gonna hear about -- one off I think for for months and months the company took years to get in this mess it will take years to get out -- overweight now.
Health care on the defensive side.
Adding to energy and technology on the cyclical side.
Bob thank you thank you discussion covered a lot of pain -- pleasure come back more often and how -- -- thank you so much.
