Cyclical stock: JPMorgan Chase & Co

John Pierpont Morgan was probably the greatest financier on the planet. It is difficult to imagine the impact this man had made on America and the rest of the world. 

JPMorgan Chase & Co is the largest bank in the United States and the 7th largest in the entire world. It also has the largest market capitalization out of all the banks on this planet. 

The conglomerate today is involved in every single financial activity one can name, from investments, transfers, brokering, down to lending, money management, funds, equities and insurance

It is hard to visualize how large this iconic bank is, especially, knowing that the company as we know it today, had been formed quite recently from 4 massive banks.

These 4 massive banks that are the base of the company today were:

  • Chase National Bank
  • J.P. Morgan & Co.
  • Chemical bank
  • The Manhattan Company

With so much controversy and flaws the company, like many other banks had been constantly dealing with throughout the years, it is clear that people’s confidence in them has been slowly decreasing over time.

 But let’s first go back in time and see where and how it all started. John Pierpont Morgan’s story is absolutely incredible. We can start by mentioning that young Morgan had been a part of a very influential family, his father was a famous player in Wall Street and had a joint financial institution called Peabody, Morgan & Co

That’s where young Morgan got his first job and was introduced to the greatly emerging financial industry at that time. Later on, Morgan went for studies all over the continents, from Boston to Switzerland, Germany and then the United Kingdom. 

When he got back, this young ambitious man had started working in different financial institutions, including working directly for this father and his father’s influential friends, later – Morgan’s mentors. 

Then, Morgan had started his own agency which was acting upon his fathers company, J.C Morgan & Co.

John Morgan would later partner up with another great man, a financier named Anthony Drexel, who would later become his mentor as well. 

Not long after their partnership and formation of Drexel, Morgan & Co., young businessman’s mentor had died so he was left with this large company on his own shoulders. 

However, he still had close relationship to his father’s company, another company of Drexel’s in Philadelphia, and one more venture of his father’s. So John was not left alone in this wide financial ocean.

After Drexel’s death, the formed company was named J.P. Morgan & Company. It may be said that the original company started back in 1895 when John became the sole owner of the corporation. 

John now had become independent and started turning struggling businesses into profitable ventures.

Because of that, his popularity grew, so did more and more influential partnerships. Pierpont Morgan was one of the men who built the United States, starting with investments in General Electric, AT&T and  U.S. Steel with partners like Carnegie or Edison.

During 1907 when the United States were drowning in a great economic trouble, John Pierpont Morgan had introduced a plan to the committee and basically made a rescue on the entire country all by himself and few of his partners. 

Heavy investments in the United States railways, first telephone and Edison’s lightbulb, which was actually beaten by Westinghouse and Tesla’s alternating current (AC) had been some of the bases on which America was built. 

Nearly every single meaningful invention made in the last century had been backed by John P. Morgan.

During the World War 1, John Pierpont Morgan had been one of the main players to issue bonds from such desperate countries as the United Kingdom and France which could hardly keep up with their war expenses and were in need for capital. 

Morgan’s company at that time had also been in need for subsidiary such as a separate investment bank. That investment bank was founded and today we know it as none other than Morgan Stanley

It is one of the largest investment institutions in the entire world and happens to be a public company as well. 

After both great wars which had drained entire countries and put many in a recession, institutions like Chase National Bank or The Manhattan Company had started emerging. These both companies had merged and formed quite a competitor for J.P. Morgan & Co. called the Chase Manhattan Bank

In 1958 this now large corporation had released the first credit card in the country. Talking about innovation, Chase Manhattan had also merged with a company called the Chemical banking Corporation which had launched the first ATM in the United States. 

During the dotcom boom another merger took place but this time it also involved J.P. Morgan & Co. This merger had become one of the most impactful banking deals in the entire world, 4 companies in total made a junction and formed a super giant in the industry. 

That giant was named, of course, JPMorgan Chase & Company. What happened next was even wider and had a global escalation. 

Since the seventies, banks and overall, financial institutions have been greedy, very mischievous and greedy, lending these terrible and risky subprime mortgages to people. 

These people were usually not even qualified for these mortgages, so many of them would not be able to pay such high interest rates. It was going great until 2008 when the entire world came to reality and realized that these poor people’s mortgage payments were getting later and later. 

As a result, the United States economy crashed like never before and transmitted its financial troubles to other countries as well. Global chaos had begun, people had lost their homes, jobs, savings, investments, practically everything they could possibly lose. 

Some of the largest investment banks like Lehman Brothers went bankrupt within the first months. JPMorgan, on the other hand, was not affected that harshly. Not that harshly because it was still able to acquire Bear Sterns and WaMu as well. 

So, as you can imagine, JPMorgan’s assets today are one of the largest in the entire world. Only Industrial and Commercial Bank Of China is larger on the planet. Although the market capitalization of this company is around 300 billion as of October, 2020, its assets reach more than 3 trillion dollars in total. 

This of amount of assets and market capitalization means, no one out of these giant banks like Wells Fargo, Citibank, Bank of America or US Bankcorp is able to compete against JPMorgan Chase. 

Some of these globally known and respected banks are worth more than 3 times less than this head of capitalism. This lets one think how a small firm run by a single individual who just happened to have lots of connections could take over America’s financials and build something that is still practically the largest bank in the world. If it wasn’t for China.

However, just the fact that the company has nearly the largest market cap on this planet, or that it has a substantially larger amount of clients than other banks, does not and should not pardon the company for the things it had done and is still doing till this time. 

Those things are nothing else but greed-induced flaws which do not look cool on the company’s resume. It shall be mentioned that the company was one of those which had helped strike the 2008 global economic crisis

And these large banks used to do those things like risky lending, subprime mortgages because everybody was doing them and there haven’t been pretty much a place to run away from them.

But what outrages the public, the government and the rest of the world is that it turns out that these large banks are laundering money day after day. That is why now, in 2020 they are so harshly fined, for hundreds of millions of dollars. 

The public has also been losing confidence in these companies, ever since 2008. 

It is hard to imagine how people must have felt when their beloved investment banks, ones like Lehman Brothers had declared bankruptcy and their investments were pretty much gone. This is a complete life-destroying phenomenon

Such large companies, more notably, banks of any sort are aware they they are responsible for millions of lives. Yet, they still do these greedy, terrible things that are fully able to hurt their customers in the long or short-term future. 

Corporations of this kind should really acknowledge the mistakes they have made in the past, reflect on them and see how they can prevent even the closest thing to the previous from ever happening again. It often times comes down to the management of a company. 

Organizing better management was one of the effective things J.P. Morgan himself used to turn poorly performing companies into profitability. One of the most crucial things for a company to have is great leadership. Let’s look at Tesla, Facebook, Microsoft or Apple

Even having such great products, it is arguable that it would have been possible for these companies to rise to the point they are floating at now, without their leaders (founders) Mark Zuckerberg, Elon Musk, Steve Jobs, Steve Wozniak or Bill Gates

The same goes with John Pierpont Morgan. It is safe to say that with Morgan’s leadership, the bank was making practically no mistakes. However, once a new dog runs into this flashy financial world, it is easy for him to see a great opportunity inside it. Great, not necessarily ethical.

In conclusion, JPMorgan Chase & Co will remain as one of the top 3 largest banks in the world for a long time. Most people are receiving a great service from this company on a daily basis and will keep getting that. 

However, the financial services giant should really think about how ethical its activities actually are to avoid massive fines and even lawsuits from the government. 

Cyclical stock: JP Morgan Chase & Co

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