Doubt JPMorgan at Your Own Peril

In 1991 we kept hearing worse and worse stories about commercial real estate. The stories were horrendous. Each month was more negative than the previous ones. What started in Texas spread to New York and then California. It was a wildfire. Panic everywhere. Headline after headline of the coming storm. Real estate tsunami ahead.

Then, one day, Wells Fargo (WFC - commentary - Trade Now) said the problems were winding down. The worst was behind us.

Everyone I know figured they were lying their darned fool heads off. Who were they? So what -- they were a dominant lender in California. They had to be talking their own book. They had to be trying to stay afloat. They obviously didn't even read the paper.

And it turned out they were right. We were wrong to question the credibility. The coming storm gathering? The storm had already happened. The worst was over.

That's how I feel about this morning's JPMorgan Chase (JPM - commentary - Trade Now) call. I am watching the TV, reading on the Web about the big coming spike in foreclosures, how things are getting worse and worse, that there is no end in sight.

And JPM says the worst is behind us for a whole host of loans and charge-offs for individuals, including residential real estate. It definitely is not getting worse. Given that JPM owns Washington Mutual, obviously the worst major residential lender on earth, even worse than the Golden West portion (pick or don't pay) loans of Wachovia, we have to listen to them. We have to.

But are people? No, they are just repeating what happened in 1991.

Now how can that be?

I have a theory.

That was 18 years ago.

That's a long time.

Most people who are in the media, many people who are trading and commenting, weren't trading or even knowledgeable of that period.

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