JPMorgan Chase & Co. (JPM), Goldman Sachs Group, Inc. (GS): How Is This Scandal Affecting Your Investment in Financials?

Page 1 of 2

Bloomberg has landed itself in hot water recently for a scandal involving the use of information gleaned by its reporters from its ubiquitous terminals. Bloomberg reporters had been “spying” on clients by accessing usage information from the clients’ terminals and using this information to track down stories. This practice angered Goldman Sachs Group, Inc. (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM), who have complained to Bloomberg. Even the Federal Reserve is examining whether its top regulators were subject to the snooping. Bloomberg has since cut off the information to its reporters, and said that it will prevent any further access of such information by its reporters in the future. However, there is a question as to whether Bloomberg’s practice rises to the level of fraudulent, or if it was merely unethical. Furthermore, to what extent were JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs, or other Bloomberg clients hurt by the practice?

JPMorgan Chase & Co (NYSE:JPM)

To be fair, the Bloomberg reporters only had access to limited information. By means of the option known as the Z function, reporters could see who had logged onto their terminals, and when they had logged in. Reporters could, in addition, see generally what functions the users were looking at, such as the news, corporate bond indices, or equities indices, as well as help desk chats. The reporters could not see the specifics of what the subscribers had viewed, including trades, securities or portfolios. However, in the hyper competitive world of Wall Street, clients are understandably concerned that even this general information would provide a glimpse into the possible strategies of the companies, which could be used against them. Reporters also had access to general analytic information showing how often articles had been accessed. This ostensibly helped the reporters identify which types of articles were popular amongst its clients, and helped focus the reporters on future story topics.

The use of the Z function was even implicated in the JPMorgan Chase & Co. (NYSE:JPM) London Whale scandal. Trader Bruno Iksil made large bets on credit default swaps that ultimately led to losses estimated to be in excess of $6 billion for the bank. Bloomberg reporters used the information to determine when certain traders had last accessed the terminals, and questioned whether they were still employed by the bank. Although JPMorgan Chase & Co. (NYSE:JPM) complained about this use of information, no formal complaint was ever lodged.

From a market perspective, it is difficult to tell if the individual investor is either helped or hurt by the scandal. Bloomberg would be the company most likely impacted by matter. However, Bloomberg is a private held company, albeit a large one, with estimated revenue of $7.6 billion in 2011. It was founded in part by Michael R. Bloomberg in 1982, more widely known now as the mayor of New York City. It is estimated that Bloomberg has 315,000 terminals around the globe, with a yearly subscription fee of around $20,000. Since the company is not publicly traded, it is difficult to tell what impact, if any, this scandal will have on its revenue, and there is no public share price to show the reaction of the market.

JPMorgan Chase & Co. (NYSE:JPM)’s stock price appears to not have been impacted by the scandal, as it is up 9.25% in the last month, trading around $53.50 after touching a near term high of $55.50 recently. JP Morgan currently sports a P/E ratio of 9.55, and a dividend yield of 2.84%.

Goldman Sachs Group, Inc. (NYSE:GS) is similarly up 9.88% in the last month, and currently has a P/E ratio of 11.24 with a dividend yield of 1.22%.  It is currently in the midst of buying Ebix in a potentially lucrative deal.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!