OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
"JPMorgan set aside a stunning $6.8 billion worth of reserves to insulate itself from loan defaults. That helped send JPMorgan's profit plummeting ..." (https://www.cnn.com/2020/04/14/investing/jpmorgan-earnings-coronavirus/index.html)
Why not $7.8B? $5.8B? Do I hear $3B?? The answer is simple: JPM management decided what P&L number they wanted and chose a reserve amount to suit.
The point, of course, is that most corporations will be socking away reserves without having the slightest idea what the future will bring. The game now is "What can we get away with?" Management hopes then the game will be followed in the future with the game: "Look what wonderful managers we are!" as reserves are unwound. Maybe that will happen. Maybe not. We don't know and they don't know either.
Many years ago at megacorp there was a huge loss in one of our divisions due to division management hiding defective product in an inventory account. Top management used that as an excuse to write off and reserve for every possible future negative event. Go big! was the mantra. And it worked.
The press will not understand this; be ready for words like "profit plummets" in the headlines.
Why not $7.8B? $5.8B? Do I hear $3B?? The answer is simple: JPM management decided what P&L number they wanted and chose a reserve amount to suit.
The point, of course, is that most corporations will be socking away reserves without having the slightest idea what the future will bring. The game now is "What can we get away with?" Management hopes then the game will be followed in the future with the game: "Look what wonderful managers we are!" as reserves are unwound. Maybe that will happen. Maybe not. We don't know and they don't know either.
Many years ago at megacorp there was a huge loss in one of our divisions due to division management hiding defective product in an inventory account. Top management used that as an excuse to write off and reserve for every possible future negative event. Go big! was the mantra. And it worked.
The press will not understand this; be ready for words like "profit plummets" in the headlines.