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SINCE JULY 21, 1979
JP Morgan boss says more ‘cockroaches’ will emerge after private credit sector failures
Jamie Dimon expects further weak links in ‘shadow banking’ sector to be revealed after collapse of two US firms
https://www.howestreet.com/2025/10/jp-morgan-boss-worried-about-small-banks-mark-leibovit/
U.S. Stocks Move Back To The Upside As Bank Credit Concerns Quickly Fade
After showing a lack of direction early in the session, stocks moved mostly higher over the course of the trading day on Friday. The major averages all moved to the upside, regaining ground following the downturn seen in the previous session.
The major averages finished the day off their highs of the session but still firmly in positive territory. The Dow advanced 238.37 points or 0.5 percent to 46,190.61, the Nasdaq climbed 117.44 points or 0.5 percent to 22,679.97 and the S&P 500 rose 34.94 points or 0.5 percent to 6,664.01.
With the rebound on the day, the major averages posted strong gains for the week. The Nasdaq surged by 2.1 percent, while the S&P 500 and the Dow jumped by 1.7 percent and 1.6 percent, respectively.
The strength that emerged on Wall Street came as the concerns about bad loans that dragged the markets lower on Thursday seemed to evaporate as quickly as they materialized.
Shares of banking stocks like Jefferies (JEF) and Zions Bancorp (ZION) showed strong moves back to the upside after leading the markets lower in the previous session.
Jefferies and Zions benefitted from positive analyst comments, while banks like Truist Financial (TFC), Fifth Third (FITB) and Huntington Bancshares (HBAN) also moved higher after reporting better than expected quarterly earnings.
Stocks also benefited from easing concerns about the trade dispute between the U.S. and China following the latest comments from President Donald Trump.
In an interview with Fox Business this morning, Trump said the high tariffs he has threatened on Chinese imports are “probably not [sustainable]” but argued “they forced me to do that.”
Trump also confirmed he would meet with Chinese President Xi Jinping at a summit in South Korea later this month after previously casting doubt on whether the planned meeting would be worthwhile.
Sector News
Despite the strength that emerged in the broader markets, most of the major sectors ended the day showing only modest moves.
Gold stocks showed a substantial move to the downside, however, with the NYSE Arca Gold Bugs Index plummeting by 7.4 percent after ending Thursday’s trading at a record closing high.
The sell-off by gold stocks came as the price of the precious metal has pulled back sharply after soaring to record highs in recent sessions.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index slumped by 1.4 percent, while China’s Shanghai Composite Index plunged by 2.0 percent.
Most European stocks also moved to the downside. While the German DAX Index tumbled by 1.8 percent, the U.K.’s FTSE 100 Index slid by 0.9 percent and the French CAC 40 Index dipped by 0.2 percent.
In the bond market, treasuries gave back ground amid profit taking following yesterday’s advance. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.1 basis points to 4.007 percent.
Looking Ahead
A report on consumer price inflation that is due to be released despite the government shutdown is likely to be in focus next week along with the latest earnings news.
The Big Cap Tech earnings ahead:
GOOG Oct 29, Wednesday
META Oct 29, Wednesday
MSFT Oct 29, Wednesday
AAPL Oct 30, Thursday
AMZN Oct 30, Thursday
NVDA Nov 19, Wednesday
AMD Nov 4, Tuesday
QCOM Nov 5, Wednesday
Things are looking dire for U.S. manufacturing, as U.S. executives recently visited China and were “terrified” of the level of robotic automation they witnessed there.
The CEO of Ford very nearly declared that Ford would be obsolete if they couldn’t turn things around and compete with China. Could Ford collapse?
The weakness that materialized on Wall Street was attributed to the emergence of concerns about bad loans following the recent bankruptcies of two auto industry-related companies First Brands and Tricolor Holdings.
“When you see one cockroach, there are probably more,” JPMorgan CEO Jamie Dimon said during the financial giant’s earnings conference call earlier this week.
Regional banks Zions Bancorp (ZION) and Western Alliance (WAL) plunged amid concerns about band loans, while Jefferies (JEF), which has some exposure to First Brands, also tumbled.
Earlier in the day, the tech sector benefitted from upbeat earnings news from Taiwan Semiconductor (TSM), although the chipmaker slumped by 1.6 percent after reaching a record intraday high.
Taiwan Semiconductor, which produces chips for Nvidia (NVDA), reported a bigger than expected surge in third quarter profits amid strong AI chip demand and raised its forecast for full-year revenue growth.
On the U.S. economic front, the Federal Reserve Bank of Philadelphia released a report this morning showing a substantial pullback by its reading on regional manufacturing activity in the month of October.
The Philly Fed said its diffusion index for current general activity plunged to a negative 12.8 in October after spiking to a positive 23.2 in September, with a negative reading indicating contraction. Economists had expected the index to slump to a positive 10.0.
Sector News
Banking stocks showed a substantial move to the downside over the course of the session, dragging the KBW Bank Index down by 3.6 percent.
Significant weakness also emerged among brokerage stocks, as reflected by the 1.9 loss posted by the NYSE Arca Broker/Dealer Index.
Airline, energy and retail stocks also came under pressure as the day progressed, while gold stocks continue to turn in a strong performance as the price of precious metal surged to new record highs.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index jumped by 1.3 percent, while Australia’s S&P/ASX 200 Index advanced by 0.9 percent.
The major European markets also moved to the upside over the course of the session. While the French CAC 40 Index surged by 1.4 percent, the German DAX Index rose by 0.4 percent and the U.K.’s FTSE 100 Index inched up by 0.1 percent.
In the bond market, treasuries moved notably higher amid the weakness that emerged on Wall Street. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.0 basis points to 3.976 percent, closing below 4.0 percent for the first time since early April
RESISTANCE AT 6900, SUPPORT 6600
SUPPORT AT 5300 RESISTANCE 7500
NOTE: ANNUAL FORECAST MODEL PUBLISHED IN JANUARY PREDICTED AN OCTOBER SELL-OFF! NOT A SEPTEMBER SELL-OFF
NOTE THAT DESPITE ALL THE FUSS REGARDING THE DISCOUNT RATE, M2 CONTINUES HIGHER WHICH THE REASON STOCKS ARE MOVING HIGHER.
DOWNWARD FEAR AND GREED INDEX SAYS MORE SELLING AHEAD
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The Truth About Fort Knox and Gold Leasing
Whatever happened to the Donald Trump and Elon Musk visit to Fort Knox?
You’ll recall the buzz from earlier this year. Trump and Musk loudly announced they were going to visit the U.S. bullion depository at Fort Knox, Kentucky to make sure the U.S. gold was actually there. The press was invited to tag along. Musk claimed that his DOGE team was ready to “audit” the gold bars to see that there were none missing. I had my own views on the announcement (described below) but I certainly agreed this would be the mother of all photo ops.
For the record, the U.S. Treasury holds 8,133.5 metric tonnes of gold in the U.S. reserve position. Slightly less than half of this gold is stored in Fort Knox. The remainder is mostly stored in a secure vault at West Point, New York. The exact location of that vault is classified although I happen to know where it is. A small amount is held at the Denver Mint for coinage purposes. Legally the U.S. Treasury owns the gold reserve, but I point out that the U.S. Army actually controls it since almost all of the gold is stored on two Army bases – Fort Knox and West Point.
A Fort Knox Extravaganza
None of this nuance about storage and location deterred Trump and Musk. In the popular imagination, all of the gold is in Fort Knox. That’s where they were headed to prove once and for all that the gold was actually there. Elon Musk planned to livestream the entire visit using his Starlink satellite system. Trump vaguely threatened that if any gold were missing, there would be disastrous consequences for any wrongdoers who removed it. The plot was set. The drama seemed irresistible.
As an aside, I was hoping that Trump and Musk were each reasonably fit and had been lifting some free weights. Gold is heavy! In fact, it’s one of the most dense materials in the periodic table of the elements, leaving aside radioactive elements like uranium and some of the trace elements that only exist in minute atomic-level quantities. A standard 400-Troy Ounce bar weighs 27.4 pounds in the English system. I’ve lifted a few during my visits to secure gold vaults. I always smile for the camera, but inside it takes a lot of strength to keep the gold bar in the air. I was concerned that Trump or Musk might strain their backs putting on a show for the press.
Trump mentioned the proposed visit to Fort Knox in a meeting with French President Emmanuel Macron. He mentioned it to reporters aboard Air Force One. He mentioned his plan again in remarks before the National Governors Association Conference and at the Conservative Political Action Committee (CPAC) annual meeting.
Then suddenly the whole story went away. Trump never mentioned it again after February 26. Musk went radio silent on the topic after April 6. There was no visit to Fort Knox. There was no announcement about why there would be no visit. It was as if the whole story never happened. It just went away.
Now, Elon Musk is leaving his position as head of the Department of Government Efficiency (DOGE). That was always in the cards. Musk’s appointment was as a temporary government employee; he was always going to leave about now. But why not put on a memorable gold show during his time in office? It simply never happened.
The Question Is, Why?
Let’s answer that beginning with the obvious point that the gold is all there. There have been rumors of missing and stolen gold almost from the day the bullion depository was built. Some suggested that European bankers stole the gold in the 1930s. Others said the Rockefeller clan looted the gold. The 1964 James Bond film Goldfinger is built around a plot to steal the gold.
This speculation makes for good rumor-mongering but, in fact, the gold is all present and accounted for. The last public audit was conducted in 1974, but annual audits are done by the U.S. Treasury (although the results are not made public). Treasury Secretary Scott Bessent recently said, “I can tell the American people … all the gold is there.”
If the gold is there (and it is), then why not go ahead with the visit? It would be great PR in any event and would reassure a skeptical American public.
A Money Monopoly
There are two reasons why the visit did not proceed and why you won’t hear more about it. The first one is that the U.S. government and the Federal Reserve (Fed) do not want to call attention to gold’s role as a monetary asset. The Fed (along with commercial banks) has a monopoly on the money printing press. The government has done everything possible to diminish and deny the role of gold as money, beginning with FDR’s confiscation of gold from U.S. citizens in 1933 and continuing through Nixon’s closing of the gold window for foreign trading partners in 1971. At this point, we have three generations of students since 1971 who know almost nothing about gold.
Gold is not taught in economics classes. Gold is not discussed in economic or Fed policy circles. Younger students don’t even know that the U.S. was ever on a gold standard or that gold once circulated freely as a form of money (usually in ¼-ounce or 8-gram coins). The government has eradicated any memory of gold as money. Why bring it back to life with a high-profile visit to Fort Knox? Better just to ignore gold if you want to maintain your money monopoly.
Of course, gold is a monetary asset. As noted, the U.S. has 8,133 metric tonnes (tonnes). Germany has 3,351 tonnes. Italy has 2,452 tonnes. France has 2,437 tonnes. Russia has 2,333 tonnes. And China reports that they have 2,292 tonnes although they are non-transparent and probably have much more. Among multilateral institutions, the European Central Bank has 506 tonnes and the IMF has 2,814 tonnes. If all of the members of the Euro area including the ECB combined their gold holdings, they would have 10,770 tonnes. All of these holdings should be put in the context of 36,118 tonnes, which is the amount of combined official gold holdings of every country in the world.
Why have such large gold holdings persisted for a century or more in some cases and increase on a continual basis if gold is not money? The question answers itself. Gold is a form of money.
It’s simply the case that major countries don’t want to acknowledge it because they want to maintain their monopoly on paper money, or they are still acquiring it and don’t want to spike the price, at least until they complete their acquisition programs. One of the Marx Brothers’ classic punchlines was, “Who ya gonna believe … me or your own eyes?” When it comes to gold, I believe my own eyes. Official holdings of 36,118 metric tonnes of gold bullion tell me all I need to know.
The Leasing Scheme
There’s another even more insidious reason why Trump and Musk backed off from their Fort Knox visit. Even allowing for the fact that the gold is actually in Fort Knox the deeper question is whether that gold is leased?
Gold leasing is an established market but not well-understood by non-specialists. Even experts in stocks and bonds know little about gold leasing. Basically, it’s a way for a gold holder to earn a return. Gold does not pay dividends or interest like stocks and bonds. But you can lease it to a third party and make 2% or so annually in lease payments. The party leasing the gold does not back up a truck and take it away. The gold stays in the original vault. Gold leasing is a purely paper transaction.
The gold lessor gets the lease payment. The lessee gets what’s called a right of rehypothecation. That means the lessee can lease the same gold to another party. And that party can lease it to a fourth party and so on. With rehypothecation in play, one metric tonne of gold could support 100 metric tonnes of “paper gold” transactions.
At each step in the chain, a party acts like it owns the gold for its own purposes of further leases or sales of “unallocated” gold. Everyone has price exposure and can make money if the price of gold goes up or lose money if the price of gold goes down. The same principle applies to gold futures, gold options, gold swaps, gold ETFs and an entire world of gold derivative transactions. The point is that the paper gold world is leveraged about 100:1 to the physical gold world starting with the physical gold in Fort Knox.
The danger is obvious. It’s no different than any run on the bank when it comes to bank deposits. If a group of paper gold investors suddenly demands physical delivery, the counterparties have to buy gold in the spot market since the leased gold is not in their physical possession. The gold market is liquid, but not liquid enough to support delivery if there were demand for more physical than a small slice of the paper gold market. A full-scale gold panic could emerge quickly. The spot price of gold would go to $25,000 per ounce before an investor could yell “buy!”
I take it that someone (possibly Scott Bessent) sat down and patiently explained the paper gold reality to Trump and Musk.
Once you understand how the market actually works, you quickly back away from putting on a show at Fort Knox. For the masterminds of the paper gold market at JPMorgan and Goldman Sachs, the less said about gold the better. They need to keep the game going. And that’s why Trump and Musk won’t be showing up at Fort Knox anytime soon.
For the rest of us, the solution to this problem is simple – buy gold.
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MARK LEIBOVIT is Chief Market Strategist for LEIBOVIT VR NEWSLETTERS a/k/a VRTrader.Com. His technical expertise is in overall market timing and stock selection based upon his proprietary VOLUME REVERSAL (TM) methodology and Annual Forecast Model.
Mark’s extensive media television profile includes seven years as a consultant ‘Elf’ on “Louis Rukeyser’s Wall Street Week” television program, and over thirty years as a Market Monitor guest for PBS “The Nightly Business Report”. He also has appeared on Fox Business News, CNBC, BNN (Canada), and Bloomberg, and has been interviewed in Barrons, Business Week, Forbes and The Wall Street Journal and Michael Campbell’s MoneyTalks.
In the January 2, 2020 edition of TIMER DIGEST MAGAZINE, Mark Leibovit was ranked the #1 U.S. Stock Market Timer and was previously ranked #1 Intermediate U.S. Market Timer for the ten year period December, 1997 to 2007.
He was a ‘Market Maker’ on the Chicago Board Options Exchange and the Midwest Options Exchange and then went on to work in the Research department of two Chicago based brokerage firms. Mr. Leibovit now publishes a series of newsletters at www.LeibovitVRNewsletters.
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