Friday, January 23, 2009

JP Morgan Pulls Fast One

I’ll respond to the most recent comments, both kind and unkind (you’ll be surprised to see how someone will go back into the archives to leave an inane—the commenter is anonymous, go figure—comment) , as soon as possible. And I’ll get around to Onishi’s misleading report on the burakumin issue as well. In the meantime, adapted from my email response to a JP Morgan effort to make its competitors look even worse than they are and itself to look better—and what better reminder that “better” is a comparative—if only by comparison.

JP “We’re Outperforming the Competition” Morgan has produced a chart that illustrates the fall in market caps for JP Morgan and its banking competitors. The chart exaggerates the value destruction because the change in market value is proportional to diameter, not area. The greater the destruction, the greater the distortion. A bar chart would have been more appropriate.

JP Morgan obviously did this to exaggerate its edge over its competitors. But the image would be arresting, even without the trompe l'oeil, when, for example, RBS and Barclays barely outperforms Madoff, and Citigroup is not far behind. Or ahead. Whatever.

What I'd now like to see is some sort of comparison between the price tags for the now-quaint private-sector bailouts and their current values. I know that's hard to do since they can come with conditional rights (ex. Morgan Guarantee to MFUG).


Janne Morén said...

The chart is too small to see the numbers and get confirmation, but it seems they might be pulling a second trick: if my eyes are not deceiving me Santander is actually outperforming JP Morgan in this chart. Easy to miss if true, since the Santander circles are smaller.

Yes, that is a very misleading graph.

Jun Okumura said...

Janne: I missed that one. I should have checked numbers more carefully. And you're right, I must have been unconsciously comparing the 20 January 2009 values in green.

Click on the chart and you'll be able to see it full-screen.