JPMorgan Chase Helps Cut the Dow's Losses, But Is Goldman Sachs the Better Stock?

Wall Street is trying to reawaken innovation, but will it be well-received by wary investors?

Jun 23, 2014 at 9:03PM

The Dow Jones Industrials (DJINDICES:^DJI) fell back on Monday from its record highs, but losses of less than 10 points reflected the continuing optimism among investors about the stock market's future prospects. Among the stocks helping the Dow hold steady today was JPMorgan Chase (NYSE:JPM), which climbed more than 1%. Yet even as enthusiasm about the future course of interest rates has helped to support financial stocks lately, Goldman Sachs (NYSE:GS) has introduced a bond-market innovation that could either reawaken demand for engineered financial products or bring back bad memories of the financial crisis.


Comparing Wall Street's finest
JPMorgan Chase and Goldman Sachs are both highly prestigious institutions, but they have somewhat different business models. JPMorgan has a strong reputation on Wall Street, but its Chase division has given the bank plenty of exposure to the retail side of the business. That has been a mixed blessing in recent years, as mortgage refinancing activity soared during the aftermath of the financial crisis to help bolster the bank's profits, yet billions of dollars in settlement liability against JPMorgan Chase has drawn the ire of shareholders and the public at large. Moreover, ongoing regulation has centered on fair treatment of retail banking customers, and that has limited some of the growth opportunities that investors had hoped that JPMorgan would be able to capitalize on in the future.

Goldman Sachs, on the other hand, still has its roots in corporate finance and underwriting, and that's where the institution is spending its effort these days. With even U.S. Treasury debt remaining unable to garner a coveted triple-A bond rating, Goldman Sachs has brought back some structured products that are reminiscent of the tranched asset-backed securities that infamously led to some of the biggest shocks during the financial crisis. According to a Reuters report, the new securities should get such a favorable rating by offering a combination of relatively secure assets, as well as added assurances from a Goldman Sachs joint venture that essentially gives security-holders several chances to recover their investment if something happens to the underlying assets. Similar claims made during the housing boom with respect to mortgage-backed securities proved to be incorrect, however, and so it'll be interesting to see how investors respond to the new securities despite the undeniable appetite for high-quality fixed-income investments.


At this point, JPMorgan arguably has more growth exposure, while Goldman Sachs has to demonstrate that it can overcome the headwinds that would come from a reversal in the long trend toward lower interest rates. Yet with regulators focusing both on the consumer finance segment and on ensuring fairness and safety in the securities markets, both Goldman and JPMorgan have to deal with substantial uncertainty looking forward. That makes investing in either one a risky endeavor, but also one with large potential gains.

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Dan Caplinger owns warrants on JPMorgan Chase. The Motley Fool recommends Goldman Sachs and owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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