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Pre Market - July 17th 2008 - JP Morgan profit falls 53%

REPORTS Q2 $0.54 V $0.44E, R $18.40B V $16.55BE
- Q2 ROE 7.0% v 22.0% y/y
- Q2 Tier-1 capital ratio 9.1% v 8.4% y/y
- CEO Jamie Dimon said, "Our expectation is for the economic environment to continue to be weak - and to likely get weaker - and for the capital markets to remain under stress. We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer.
- Retail Card Services provision for credit losses $2.19B v $1.67B q/q sequential and about double year over year.

Headlines can be misleading… CNBC is reporting the JP Morgan news as though it is wonderful. But the facts are that JP Morgan’s profits fell 53% from this time last year. Like we have been saying for many months, the big Wall Street financial institutions have lost one of their largest money makers which was the mortgage market. Without the mortgage market shuffle (buying and selling mortgage assets for profits) the investment institutions have lost a substantial ability to generate profits.

INITIAL JOBLESS CLAIMS: 366K V 380KE; CONTINUING CLAIMS:  3.166M V 3.180ME
- Prior Initial Jobless Claims no revision from 346K to 348K
- Prior Continuing Claims revised from 3.202M to  3.203MM

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JUN HOUSING STARTS:  1.07M V 960KE; BUILDING PERMITS:  1.09M V 965KE
- Prior housing starts revised from 975K to  977K
- no revision to Prior Building Permits
* Increase in Housing Starts attributed to change in New York City construction codes effective July 1 which added back to the survey 126K units.  Ex-the Northeast,  Housing Starts would have been down about 4% rather than up 9.1%

A change in how data is reported is the reason for the headline gain. The devil is in the details!

Pre market futures are up and the market appears that it will open higher. We are not chasing or swing trading this move yet. Too many pitfalls remain that could take this bear market rally and reverse it in an instant.