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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

January 15, 2010 at 10:10 AM

Dimon derails the rally with a splash of honesty

Top of the News: Never mind all the stresses on the economy and the threat of a double-dip recession. The market is like the horses pulling carriages downtown: With it’s short-term blinders it can only look straight ahead, and not even see too far.

Look, right there: It’s JPMorgan Chase, beating expectations on its earnings and doing better than most of its rivals. But then CEO Jamie Dimon slaps the market’s snout, saying results “fell short of both an adequate return on capital and the firm’s earnings potential.”

Serious problems persist loan losses from troubles in the economy outside the trading rooms of the big Wall Street banks. These are not only a result of mortgage modification efforts, but also persistent joblessness and continuing foreclosures and bankruptcies. Suddenly the market is paying attention — for a day at least. Then it can just hope the carry trade continues making hay.

The Back Story: This chart from Infectious Greed is a little hard to follow, but still worth a look. It looks at the ratio of incomes to house prices over the past 20 years.

The track of the bubble is obvious, as is its collapse. The author concludes that some cities — Seattle and Portland included — still have residential real-estate bubbles. What it doesn’t get into are issues such as relative incomes for cities, the amount of pure speculative building vs. demand, etc. So make of it what you will.

Today’s Econ Haiku:

Let’s take a step back

From hearing from customers

That’ll help Starbucks

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