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
Longview

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.

Jpm

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.

Jpm

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.

These stocks beat the big banks
Here's your chance to pocket big dividends. Over time, dividends can make you significantly richer. And guess what? The big banks are laggards when it comes to paying dividends. So instead of waiting for a cash windfall that may never come, check out these stocks that are paying big dividends to their investors right now. Click here for the exclusive free report.

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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers