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Business Analysis

                     JP Morgan trouble is on the horizon!


Overall, the bank's net income rose by one per cent to 30.72 billion euros, but profitability fell noticeably. In the second quarter, which ended on June 30, 2022, the US bank JP Morgan generated a profit of 8.6 billion US dollars. What sounds good at first was 27.7 per cent less than in the same period last year. Earnings per share fell 27 per cent from $3.78 to $2.76. Overall, JP Morgan also had to set aside $1.1 billion in loan loss provisions, which weighed on earnings.


Because JP Morgan was the first major bank to present its quarterly figures, investors looked at the numbers with anticipation. Since it was rather disappointing, the JP Morgan shares came under pressure and lost around two per cent before the US stock market opened on Monday. Numerous other US banks will report their numbers in the coming days - and investors are now warned.


Says Jamie Dimon, Chairman and CEO of JP Morgan, "In our global economy, we are dealing with two conflicting factors operating on different timetables." Because although the US economy is growing and the job market remains healthy, and consumer spending looks good, there are difficulties: "But geopolitical tensions, high inflation, dwindling consumer confidence, uncertainty about how high-interest rates will have to rise, and the unprecedented quantitative tightening and its impact on global liquidity, combined with the war in Ukraine and its detrimental impact on global energy and food prices, are very likely to have a negative impact on the global economy at some point," adds Dimon. But he emphasizes that his company is prepared.


Analysis of JP Morgan shares


At Bloomberg, 18 analysts recommend buying the stock, eleven recommend holding it, and two recommend selling it. The average target price is 145 US dollars, which means a potential of around 30 per cent.


The stock is attractively valued at 9.9 times earnings and a dividend yield of 3.64 per cent, but in a recession, bank stocks can suffer from defaults. Even though the stock has lost some ground so far and is in a downtrend, the long-term uptrend is still intact.

                          Volkswagen challenges Tesla


Volkswagen ordinary shares have developed a life of their own in the past few days. Within one month an increase of 50 per cent, it developed significantly better than the preferred share represented in the DAX. More experienced investors are almost reminded of the year 2008 when the takeover attempt by Porsche and, at the same time, panicked cover purchases by hedge funds lifted the value to over 1,000 euros for a short time.

And indeed there is one common element: targeted stock purchases. Only this time it is not a takeover attempt, but mainly US small investors. But what is your motive?


VW has announced a radical reorganization of its product range towards electric vehicles. A large number of e-cars could therefore be brought onto the market on the new platforms. At the same time, the Wolfsburg-based company confirmed that they now want to invest in their battery production. Six so-called giant factories are to be built in Europe alone by 2030. The first cells, which could be installed in 80 per cent of vehicles, are to be produced by 2023. Besides, the company will expand its fast-charging network in China, the USA and Europe. With its batteries, a range of globally known brands, its charging infrastructure and its strong global position, especially in China, VW could establish itself as a major challenger to Tesla. The only difference is that the Wolfsburg-based share is valued disproportionately lower. The price/earnings ratio of the US electric vehicle manufacturer goes up to 1000, with VW the multiplier is 14.


US investors are counting on reducing this discount. This mainly affects the common stock. In the United States, only so-called ADRs are listed that are backed by ordinary shares. The high volume of these escrow securities comes up against a less liquid common stock. The three major shareholders Porsche Automobil Holding, the State of Lower Saxony and Qatar Holding already hold more than 90 per cent of the shares with voting rights. In other words, if the targeted demand for ADRs continues, prices could rise much higher.


Investors who want the tribes to have a life of their own should take the detour via the Porsche Auto Mobil Holding shares. The company was reorganized after the failed takeover attempt in 2008 and has no business operations. The holding primarily manages its 53.3 per cent stake in VW ordinary shares. The calculation is simple: two Porsche shares represent one VW ordinary share. The arithmetical value of a Porsche share was around 154 euros at the time this issue went to press. In contrast, it is currently only traded at 91 euros.

                            The third wave of coronavirus


The third wave of coronavirus found Europe as unprepared as the previous two.

It seems that the crisis in the European health care system, which became obvious at the beginning of the pandemic, has not gone anywhere, and the Eurozone authorities have not come up with anything new over the past year, except for a massive mask regime and the introduction of lockdowns. At least, this is precisely the conclusion that can be drawn from the official statements of the EU authorities.


The official representative of the European Commission, Dana Spinant, announced on March 19 the beginning of the third wave of morbidity. Depending on the specific EU country, the incidence of coronavirus is increasing gradually or at an increasingly rapid rate. In some countries, the rate of increase in incidence has already reached record levels.
In her opinion, this situation has developed largely due to the extremely insufficient rates of vaccination of the population. For vaccination to be effective, 70% of the adult population must be reached. “We see the third wave, which comes gradually or even quickly in various EU countries. We are entering a very difficult period, the economy will be seriously affected by the situation,” she said.

So far, 70 million doses of approved vaccines have been shipped to Europe in total with a population exceeding 590 million.

Against the background of Spinant's statements, more and more European countries are suspending vaccination with AstraZeneca amid reports of severe cases of thrombosis in patients after administration of this vaccine. In total, 20 countries have refused to use the vaccine.

Following reports of possible side effects from the AstraZeneca vaccine, the European Medicines Agency (EMA), the UK Health and Medical Regulatory Agency (MHRA) and the Netherlands Center for Side Effects (Lare) stated that there was no relationship between thromboembolic complications in patients and the vaccine.


The Guardian newspaper writes about the return of strict isolation measures to Europe as almost the only response from the authorities against the background of low rates of vaccination of the population. In Germany, Poland, Hungary, the Czech Republic, and many cities in Italy and France, shops, catering establishments, swimming pools and fitness rooms are closed again. At the same time, local experts say that they expect a sharp increase in the incidence soon.

The Polish authorities are introducing a nationwide lockdown throughout the country from March 20 to April 9. According to official data, more than 20 thousand new cases have already been recorded. Previously, restrictions were imposed with a daily increase in the incidence of 1–2 thousand people per day.

The record number of new patients with coronavirus was recorded in Norway, whose Minister of Health Bent Høyeu announced on March 17 the beginning of the third wave of the pandemic in the country. More than 1000 people fall ill every day. The third wave has been triggered by a more contagious strain of coronavirus, he said, so tighter restrictions need to be introduced across Norway.

Austrian Health Minister Rudolf Anschober announced an increase in the number of cases in some regions of the country. The number of patients who need a course of intensive care due to coronavirus infection has increased to 397 people over the past day, which is 14% more than last week. The total number of people infected in Austria increased by 3515 people per day, he said.


The situation, described by EU officials, shows the inability of the health insurance system to work effectively in a pandemic. Such a system is aimed at providing a comfortable service to a solvent patient with a relatively low workload, but it is completely unsuitable for the mass reception of the population. This was most clearly manifested in the United States, where a record number of deaths from coronavirus were recorded.


It turns out that in a pandemic, only mess-free medicine, funded by the state directly from the budget, bypassing insurance funds, can work effectively.

The approach that the EU is taking in the fight against the pandemic is surprising. Namely, its immutability. All European officials have prepared to fight the coronavirus is to put masks on people and lock their houses while waiting for the vaccine. The first two waves have shown that these measures are ineffective.


There is no complete consensus in the scientific community about the effectiveness of vaccination, but this did not stop European politicians from insisting on the need to carry it out without exception. Now it turns out that the required number of vaccines is also not available, and the reaction of the authorities is increasingly reminiscent of panic.


Citizens of European countries, in turn, do not want to be locked up again. On March 20, mass protests swept across the EU countries.

                          Nothing personal - just business


It was quite obvious that the pharmaceutical giants, developing a vaccine against coronavirus, pursued not only purely humanistic goals. The pandemic is a great opportunity to make money.


The fact that people are not inclined to save on medicines and their health has been known for a long time (it is enough to estimate the share of pharmaceuticals in the total volume of television advertising). And here - a matter of life and death. And not only their own but also those of loved ones.


At the same time, the cost of the Pfizer vaccine is $20 per dose. It is the most expensive of all vaccines - twice as expensive as Johnson & Johnson's and nearly five times as expensive as one from AstraZeneca.

It is worth taking into account the important point that a full-fledged third stage of testing the Pfizer vaccine was not carried out - there was simply not enough time for it.


Those who are now vaccinated with this vaccine are participants in the final and most complete test.


As for the company itself, it turns out that it will be able to make plenty of money even at the stage of final testing of the effectiveness of the vaccine.


Nothing personal, just business.

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