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Weldon Financial CEO Greg Weldon breaks down the bigger picture issues when it comes to J.P. Morgan's investment blunder and the European markets.
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Such -- so what does JPMorgan's two billion dollar trading blunder mean for the broader market let's bringing Gregory Weldon.
Greg the CEO president Doug weld -- financial and it's great to have you with us is it possible to know how much value has been shaved off because of this two billion dollar loss.
-- -- No I think that's hard to qualify -- relative to their book relative to the size of the firm -- -- to the risk exposure they have on any given day.
I think it's small.
I think the bigger picture dynamic -- firstly let's say a common thread with any of these kind of situations whether it's long term capital management JPMorgan any of these big losses.
It's the degree of leverage applaud the had a big position they took a big -- this is part of the game.
The bigger picture issue on the second side of the so as a regulatory issues and how this -- focused that a narrow it down what is it mean to them.
Financial sector -- as a -- I think it's a negative it takes -- -- -- -- potential to make money and prop trading is -- a taboo words so.
Health they've kind of been caught doing this in a backhanded way that will put pressure on other firms that might be doing so well.
Are we -- way too big deal about this though I mean Dick movie was out today saying they're still gonna make eighteen billion dollars and 2012 even with the las.
If you add what Bank of America Goldman Sachs and Morgan Stanley all made together they're not gonna make eighteen billion dollars in twenty trump.
-- this isn't such a big deal.
I'm shocked at how much attention this is god and I think if you had not come out made this a public issue.
It might not have been such didn't get to do that for fair disclosure -- -- I guess relative to what he has to do for the -- absolutely but I I think that this has been blown out of proportion but also speaks volumes to do.
The environment regulatory -- the way this administration is dealing with business and free markets and capitalism.
You know that's more troubling bigger picture issue here so I -- -- underlying Gregg what are some trades here in looking -- -- -- this is significant risk how do you make money -- it if at all possible well -- -- we've been short the stock indexes and bond markets and there is a pretty significant technical breakdown today in the time bond market which I think is significant to note.
We've been short the Spanish stock market I don't see.
A positive resolution to this it's not something you can monetarily Paper over.
Austerity is really the answer but the degree of austerity necessary to tackle this problem now is -- too painful.
Now -- about pain -- since the human condition so it really just -- -- -- -- -- -- -- -- take on the dollar in expected dollar take -- -- at some point and that's the buying an entry point so what level -- we're -- about 128 cross with the Euro right now when you by the dollar it's not so much where it's it's how it gets there I think might might thesis is when not if but when Greece goes out of the union.
This would -- the Euro to some degree -- remove the weakest -- so that may be short term positive.
The Euro rallies the dollar comes off you get some position squaring off of that the bigger picture trade still though is Spain Italy -- I mean it can't be the only -- to leave -- -- -- just hand it wouldn't be that huge of a problem it seems like it almost makes sense for Europe to carry and Paper Greece for the rest of their lives to keep them from leaving.
Yeah because it's -- you -- what do you know Spanish pretty president like this then there really is a bigger concern and that could come back and really hurt the Euro that you know and the back and.
I Germany's economy posting an expected growth this quarter you know vs France posted -- zero which is the bigger indicator -- of what's going on.
Neither because to me what's more important is the more timely data out -- German employment the PMI manufacturing data.
Very weak first rise in the number of unemployed in Germany since 2009 I think it's starting to be affected they're not immune to this and this to me as much more significant than that divergence.
How does the Fed balance what's going on in Europe with our own economic conditions there's a lot of discussion right now on another round of quantitative easing -- see unfolding what these very difficult I mean -- that is in a really tough spot with the political situation here in the US.
With gasoline still -- four dollars even -- it's come off a little bit.
Politically very difficult for them to push -- those big stimulus package.
Even if and I think it is needed.
So it puts them -- -- tough spot which I think is a risk to equities and commodities and pretty much all the asset markets right here -- the ECB and the Fed are kind of boxed in.
For the next six to nine months.
I think that creates a very turbulent marketplace and what you don't know what to make what's the next big signpost that you're looking forward to going forward is that maybe this meeting between their gone -- -- or what's the next big thing -- -- the equity markets I think you know it's it's it's acceptable for the Fed to push.
If people are experiencing a pain in the equity markets -- specifically the US which is.
You -- perform fairly well relative to the markets but is now starting to come under some pressure the -- -- pump money and then when that's happening.
It makes it a much more talks led to the upside spread quickly your -- McIntyre that your parents I mean I'm looking and at least fifteen to sell our.
We're lower -- very bearish alright.
Good stuff today covered a lot of ground really -- Greg Weldon.
