The Big Loss
Last week marked the beginning of the third-quarter earnings season. And as usual, the big banks came out first.
While the results looked strong on the surface, in several of these earnings reports, banks posted loan loss reserves that were bigger than expected.
Loan loss reserves are funds set aside to cover potential losses from loans that may not be repaid. One of the biggest losses was JPMorgan & Co. (JPM) $JPMorgan Chase(JPM)$ , which increased its loan loss reserves to $3.4 billion, the most in five years.
Of that, $170 million was due to the bankruptcy of a subprime auto lender, Tricolor Holdings. It's worth noting that this was a private credit deal, and CEO Jamie Dimon warned, “When you see one cockroach, there's probably more.”
All of this spooked the market.
Focus On What's Working
For now, you don't need to worry about the banking crisis if you don't own bank stocks. Treasury yields are falling, which means that the Federal Reserve is going to be cutting interest rates at the next Federal Open Market Committee (FOMC) meeting next Wednesday, October 29, and probably again in December.
The Fed cannot fight market rates.
For now, it's important to focus on what's working.
$Microsoft(MSFT)$ $Amazon.com(AMZN)$ $NVIDIA(NVDA)$ $Meta Platforms, Inc.(META)$
Modify on 2025-10-21 18:32
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- Venus Reade·2025-10-22TOPWould you say good move or bad move to someone who sold and swapped into a combo of WFC and C due to the high p/b and the underperformance relative to peers like C and WFC in recent months?1Report
- BirdieO·2025-10-21TOPGreat insights! Thanks for sharing! [Heart]1Report
- Merle Ted·2025-10-22jpm makes money off of fovnt bailouts and not paying interest on its deposits..not really interesting at allLikeReport