Razorback,You are not confused at all. You get it very well....

Razorback,

You are not confused at all. You get it very well. This entire international securities lending business which JPM has gotten themselves into seemed like a good idea at the time! In fact, back in 2006, when share prices kept on going up, they made an absolute fortune by lending out shares to hedge funds and others, who had convinced themselves that the markets were headed down.

When the hedgies had to admit that they were wrong, cover their shorts and eat the losses. JPM had made loads of fees, a bit of interest, plus they got the shares back at a higher price than they were, when they loaned them out!

However, the reverse can happen and it can bite you on the bum. As we all now know, the big US investment banks are by no means infallible geniuses. They are, in fact, narcissitic idiots and criminals, who have gambled and lost. Now, the taxpayers of the world are bailing these cretins out.

Just because they are failures, however, doesn't mean they've stopped doing it. Just because they've already burned through trillions of dollars in government support, doesn't mean they lost faith in what they were doing beforehand - what else would an investment bank do? Start a manufacturing plant? All they know is financial alchemy, so if you give them a fist full of taxpayer dollars, they'll gamble it on what they know, not on something different.

So, it's a given that JPM's securities lending business makes no sense during a severe bear market. It's a given that it loses money, hand over fist. However, it's one of the only things that they know how to do! And, the US taxpayer has been bailing them out for every lost dollar. Why stop?

Your only problem, Razorback, is that you're looking at this thing logically. Logically, you wouldn't keep on doing the same old loss-making things which JPM keep doing. However, they're doing it with taxpayer's money.

If they stopped doing it, their hedge fund clients wouldn't have any reason to come to them anymore, so JPM wouldn't earn any fees from lending them the stock to short. What else would JPM do to earn a crust?

I'm convinced that much of the money kicked into these big banks by the taxpayers of the world is being used by them to help their hedge fund clients kick the crap out of shares, by shorting them all to hell. No pollie or regulator could ever figure this out, because they have no real idea what these multi-disciplinary broker/dealer/banks do. The bankers (who have employed the best salespeople in the world for years) simply put on a powerpoint presentation, replete with archival footage of the serfs rioting in the streets and 1930's soup kitchen lines, and the pollies are scared witless into thinking that these criminals are actually essential for society's survival.

I'd really like to know who, for example, Citi is serving: the sharemarket is stuffed, the bond market is stuffed, the housing market is stuffed, deposit interest rates are close to zero, Citi's share prices has gone from $52 to $1 in about a year. The only people who have benefited are the bankers employed by Citi, who have been paid hundreds of billions of dollars over the years and who now tell us that they are indispensible.

Well, excuse me, criminal. What about the farmers? The engineers? The manufacturers? etc.

Anyway, this post was all about one, little Aussie oil company, wasn't it? The thing is, some companies deserve to trade at PE's of less than 2, because they have major problems behind the scenes. I don't see ROC that way.

[Rant off!]