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  • JP Morgan Trading Loss: Still More Questions Than Answers

    By Jeff Macke | Breakout – Mon, May 14, 2012 11:40 AM EDT

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    It's been four days since J.P. Morgan (JPM) dropped a bomb on the financial world with a hastily arranged conference call announcing an unexpected $2 billion loss in their trading and/or hedging operation.

    The issue isn't the $2 billion. The issue isn't really even the degree to which analysts and the media remain ignorant as to precisely what happened, save for the fact that something went very wrong at J.P. Morgan's Chief Investment Office.

    What really frightens the Street is that it isn't at all clear that JPM or CEO Jamie Dimon knows precisely what happened. Dimon has guided the bank relatively unscathed. If anyone could be said to have a grip on what happens in the murky world of derivatives in the banking system, it's JPM and Jamie Dimon.

    Here's how Dimon responded on last week's conference call when asked if the $1 billion estimate of potential further losses was "the max that you envision":

    "No, that is...I said the volatility could easily be that. Obviously it could be worse than that. We're going to manage this for economics...we want to maximize the economic value of these positions and not panic or do anything stupid. Therefore we're willing to bear volatility—and that's life."

    It was a reply commendable for its stiff upper lip, but one that fell short of giving the impression that he has full command of the situation.

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  • The Right & Wrong Ways to Buy Facebook

    By Jeff Macke | Breakout – Mon, May 14, 2012 9:42 AM EDT

    After months of hype Facebook (FB) is expected to become a publicly traded stock at the end of this week. The richly valued company may not be for every investor, but those who've decided they need to own shares of the social media giant should know the right and wrong ways to buy the next hot stock. The frenzy surrounding any highly anticipated IPO can lead investors into mistakes that cost them real money. Josh Brown, author of Backstage Wall Street and editor of theReformedBroker.com, has some tips on how to buy Facebook shares.

    1. Avoid "Facebook Funds"

    Contrary to what you might hear, the funds and companies that already have Facebook stakes aren't likely to suddenly shoot up in value when the stock starts trading. Don't believe anyone who tells you to buy some company that either has an investment in or is "like" Facebook. Stick to the real deal.

    "Avoid any kind of indirect way of owning it, just own it," Brown emphasizes. That's what the company going public is all about.

    2. Use a Limit Order

    Placing a limit order means you're setting a ceiling on how much you'll pay per share. This is in contrast to a market order where you buy stock at any price.

    If you place a market order, you end up owning shares wherever the stock is trading at that very instant. On the first day of trading for a hot IPO, swings of 25% or more aren't uncommon. Obviously you don't want to be at the high end of that range.

    The success or failure of your Facebook investment may ride on deciding in advance how much you're willing to pay per share. The best way to do that is by placing a limit order.

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  • Consumers Will Struggle in Spite of Cheaper Oil and Gas: LPL’s Canally

    By Matt Nesto | Breakout – Mon, May 14, 2012 8:08 AM EDT

    Consumers are getting some welcome relief in a direct and tangible way. Oil prices are down about $10 a barrel, and the price of a full tank of gasoline is a few bucks cheaper than it was a month ago. Expectations are that prices will stay low—at least through the summer.

    Great news, right?

    Maybe not. That's because the broader economic worries that are causing the prices to drop are potentially far more destructive and entrenched than a few bucks of brief relief.

    The point is, while stocks have slid about 2.5% so far in May, the list of casualties is full of consumer and retail names at the very time that we are supposed to be feeling a little more flush.

    "There are still a ton of cons out there," says John Canally, Investment Strategist with LPL Financial, in the attached video. "But over the next couple months, I think the cons will outweigh the pros, and the consumer discretionary sector will continue to struggle."

    In fact, of the 81 stocks that make up the Discretionary Sector (XLY), half are having a worse May than the market. Of these laggards, half of them have done anywhere from 5% to 40%, including names like Fossil (FOSL), Priceline (PCLN), NetFlix (NFLX) and McDonald's (MCD).

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ABOUT BREAKOUT

Breakout is Yahoo! Finance’s daily all-out, roll-up-your-sleeves, dive-in, interactive investing show, offering fresh segments throughout the trading day. If you love making money, if you want to protect what you have, if you’re passionate about understanding these crazy markets, you’re in the right place. Welcome!

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