The Slant

Housing: Still Going Strong

Jeff Reeves — Fri, 17 May 2013 15:56:54 +0000

The housing market hit a bit of a snag this week with a 16.5% drop in housing starts in April announced Thursday. It was difficult to spin that data, because even after removing the more volatile multifamily data, the numbers still were down slightly from March for single-family homes.

But this month-over-month cooling is not the final word or even the beginning of the end. The fact is there’s much to be excited about in housing.

Remember, just like the general improvement in the unemployment rate, it is highly unlikely we are going to see housing go steadily higher in every data point. Investors have been lulled into thinking this in part because housing has snapped back more dramatically than the job market, but also because there is a hard investing thesis to be had behind housing trends.

In addition to the dollars and cents of simply buying real estate, there are soaring homebuilders like Toll Brothers (TOL) and PulteGroup (PHM), home improvement stocks like Home Depot (HD) and Lowe’s (LOW), and building materials companies like Sherwin-Williams (SHW) and Lumber Liquidators (LL).

Every single one of these stocks is up more than 40% in the past 12 months.

It’s natural to fret about housing, because it has a hard connection to your investments — and the fear that the run might be over after big-time gains.

But that worrying is very much uncalled for, even after the starts data this week.

First, looking beyond the month-to-month comparisons, single-family housing starts were actually up 20.8% year-over-year in April, proving the longer-term trend is soundly higher.

Furthermore, permits hit their highest levels in five years — so while starts themselves were soft, permits for future housing starts are flying out the door. Remember, the idea of watching housing starts is to gauge future supply (and hopefully demand) trends. Whether it’s an actual start or a permit in anticipation of a start, the idea of future growth is the same.

Earlier this week, Bill McBride over at Calculated Risk posted some great info from economist Tom Lawler about the continued decline in distressed sales: “In every area that has reported distressed sales so far, the share of distressed sales is down year-over-year — and down significantly in many areas,” McBride writes.

The fact remains that more houses are going up, sales are brisk and distressed properties are becoming less common.

That all adds up to a housing recovery, even if the recent starts numbers disappointed.

Sorry, JCPenney: Investors Ain’t Got Time for That

Jeff Reeves — Fri, 17 May 2013 13:39:01 +0000

JCPenney (JCP) is down 45% in the past 12 months thanks to a rather horrific plan to reinvent the company. After eliminating a plethora of coupons and discounts and experimenting with a “stores-within-a-store” model, sales imploded.

It was so bad that the 16% revenue drop reported in May was actually an improvement over last year.

But even if you think wonderboy Ron Johnson — the former retail chief for Apple (AAPL) who was recently canned from the top spot at JCPenney — was a wreck, it’s hard to get enthusiastic about the new CEO, or the new plan for JCP.

Or should I say, the old plan for JCP.

Myron Ullman, who previously ran the company into a stale and stagnant corner of department-store retail, has been tapped to turn back the clock. But the problem is that Ullman’s reign was far from awe-inspiring — and his lack of agility and foresight in the face of e-commerce margin-squeezers like Amazon.com (AMZN) was part of the reason Johnson was hired in the first place.

Ullman ran JCPenney from 2004 to 2011, when Ron Johnson took over. Under his tenure, the stock went nowhere — from the high $30s when he was hired to the high $30s when he left. Meanwhile, Nordstrom (JWN) more than doubled in that same period, as did Dillards (DDS). Even lowly Sears (SHLD) tacked on more than 50%.

Sales were in a slow tailspin, profits were lackluster … not a track record to get thrilled about.

Of course, flat is better than bleeding red. But JCP clearly does not just need a stable hand at the helm. It needs someone to remedy the damage done by Ron Johnson and also address the original problem of stagnant sales that prompted Ronnie’s hire to begin with.

Ullman is not that man. And he admits as much.

“I wouldn’t recommend that we go back to the way J.C. Penney was when I left. Things change,” Ullman said, according to The Wall Street Journal.

He quickly added, “There’s no reason to try and alienate customers who want to try and shop at J.C. Penney.” And that’s true.

But again, the problem here is not simply failing to turn off existing customers. It’s finding new ones and growing the brand — something Ullman and Penney have been miserable at.

Penney has secured a new $1.75 billion loan and brought back brands such as St. John’s Bay. There might be some incremental gains here since St. John’s Bay admittedly brought in $1 billion in sales annually before Ron Johnson dropped it for fashionable replacement brands.

But reverting to stale, old ways is not a path to growth. And it’s certainly not a plan that can save a company on the brink.

Gold Slumps Again, But Floor the Might Be In

Jeff Reeves — Thu, 16 May 2013 15:03:34 +0000

Predictably, goldbugs — and, of course, gold-related businesses out to make a profit on bullion — have been very reluctant to believe the multiyear run for gold prices are over.

Check out these recent headlines about a “demand surge” for gold coins in the U.S., “China’s gold-buying surge” and the chance that “Gold Imports by India May Surge.”

That’s a lot of surging … even though that verb is decidedly the opposite of what gold prices have been up to.

Case in point, gold dropped to its lowest level in a month on Thursday morning to tally a 18% loss year-to-date. Another 5% or so down from here, and gold prices will push through multiyear lows of $1,322 set in April.

So is the precious metal caught in a death spiral, or are we bouncing along the bottom?

I think it’s the latter.

The reasons for the decline are numerous and complex, but the basic factors are:

Western investors have lost their faith in the precious metal as a safe haven, and there’s rotation out of the asset as a result.
Even if gold was a safe haven, the “risk-on” nature of the market right now means investors are chasing returns in equities and not turtling up for trouble.
Securitization of gold via ETFs like the SPDR Gold Shares (NYSE:GLD) and the iShares Gold Trust (NYSE:IAU) make gold easy to buy, but also incredibly easy to sell. That makes the market more volatile.
The persistent strength of the U.S. dollar is keeping all commodity prices soft, from aluminum to oil to gold.

However, while I question the agenda of certain gold-peddling websites, it’s worth noting that the reports of “surging demand” are legit … at least in Asia. Cheaper gold prices have supported strong jewelery sales, and of course China’s central bank does buy commodities like gold as well as U.S. Treasuries for its reserves. India also remains a very strong market for gold.

This provides a decent floor, even if speculators are selling.

Furthermore, the recent jump in jobless claims and concerns about a tepid U.S. economy could hold back the dollar — and that might cause commodity prices to firm up.

Throw in some overdue consolidation for the stock market, and it could result in gold getting a little bit of its swagger back.

After the washout we’ve seen for gold, it’s reasonable to wonder how far it has to fall. And considering the stock market seems to go nowhere but up, it might seem foolish to chase gold when so many stocks are soaring.

However, it seems a real possibility that the selloff in gold is, in the short-term, exhausted. That might provide traders an entry point in the precious metal … presuming investing in gold at all is part of your strategy, which it admittedly isn’t for everyone.

Google Is Going to $1,000 … and Then Some

Jeff Reeves — Thu, 16 May 2013 11:00:41 +0000

Google (NASDAQ:GOOG) has been on a tear in the last year or so. In summer of 2012, Google stock was trading as low as $560 — and now, GOOG is above $900 for a 60% gain.

After the recent Google I/O conference, enthusiasm is at a fever pitch. But with GOOG at all-time highs, the million-dollar question is “Will Google stock keep this up?”

Or if you’re a fan of round numbers, perhaps you prefer the variant “Can Google stock crack the $1,000 mark this year?”

I think the answer to both is in the affirmative.

Google has the wind at its back, both in regards to share appreciation and product rollouts, and I think $1,000 is just a stop on the way to much higher prices for this tech giant.

The natural comparison people make is to Apple (NASDAQ:AAPL), a one-time tech darling that has crashed and burned as of late. Who’s to say Google won’t do the same? Or perhaps you prefer the analogy of Facebook (NASDAQ:FB), which is a cult sensation with many Internet users but has seen its stock stagnate thanks to struggles created by the move to mobile from desktop advertising.

There are some fair comparisons here. Apple’s fading dominance and decaying margins are a cautionary tale, and Facebook’s struggle to monetize mobile is a shared risk. Just recently, in Google earnings released in late April, we saw GOOG revenues fall short of analyst expectations. More importantly, the “cost per click” — a key advertising rate — fell 4%, the fourth consecutive quarter that figure has fallen.

But here’s what Google has going for it that Apple and Facebook do not:

Momentum: While Facebook and Apple continue to suffer in the eyes of consumers and investors alike, Google stock is red-hot and its brand remains powerful with Internet users, even in 2013.

Strong Top Line: There are zero top-line growth problems at Google despite some hiccups lately. Google’s sales have increased over 30% in each of the last three consecutive quarters while many other tech stocks — heck, many other blue chips in every sector — have resorted to cost-cutting to juice profits as sales flatline.

Diversified Revenue Plans: Sure, online advertising remains its bread and butter. But in its 10-K for 2012, the company reported that “other revenues” hit $829 million in the last fiscal year — 6% of total revenue. With recent announcements including subscription-based YouTube channels to compete with streaming video providers like Netflix (NASDAQ:NFLX) and the more recent Google Music venture that could battle Pandora (NYSE:P) or privately held Spotify, clearly it is gunning for a way to make cash beyond display ads.

Hardware: This is worth its own bulleted item, since Google is starting to gather steam in the wake of its 2011 buyout of Motorola for $12.5 billion. Its Nexus family of devices — recently revamped and revealed to great fanfare at the I/O event — is starting to catch on with smartphone and tablet users. Its rumored “X Phone” and Google Glass remain favorites of the rumor mill and gadget geeks everywhere. And yet Google is still very much seen as an Internet media company. If it figures out higher-margin hardware, look out.

Patience: But this quest for cash in either services or hardware is not born out of desperation — a point that must be made. Facebook and Apple are under pressure to change the narrative, but Google continues to be patient and focused in its ventures. Take Google Fiber, a growing venture that is trying to compete with the likes of Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) by providing cheap, high-speed Internet. When you have the confidence of investors and a whopping $50 billion in bank, you can afford to be patient and stick with long-term projects even if there’s no immediate payday.

Buyout Behemoth: Nothing keeps your company on the cutting edge like a steady influx of new ideas and, more importantly, very talented folks with an entrepreneurial bent. Consider that Google acquired Android Inc. for a mere $50 million in 2005 … and it took years to figure out how to make this smartphone OS fit into the company strategy. But now it’s a smash hit — a testament to incubating good ideas instead of throwing up desperation long-shots because you have to impress Wall Street or fix flagging fundamentals. While many investors think serial buyouts are a dumb idea, for an innovative tech company like Google, it’s an important long-term strategy.

There are admittedly concerns that new money is buying a top in Google. But most of the valuation metrics are pretty fair, especially considering the high growth GOOG has seen and is predicting going forward.

Google has a forward P/E of only about 17 right now — right on par with the forward P/E of the entire Nasdaq 100. Is the entire market overbought? Well, that’s a separate debate. But based on its strong fundamentals and analyst optimism, Google is pretty fairly valued.

And remember that earnings multiples are based on estimates. If GOOG continues to exceed expectations, there’s certainly no problem.

I Was Dead Wrong on Netflix

Jeff Reeves — Wed, 15 May 2013 15:22:31 +0000

Back in December, when Netflix (NASDAQ:NFLX) was under $100 a share, I penned a column about how the stock seemed overvalued despite analyst upgrades and strong earnings.

Now that NFLX is at $225, it’s time to admit that was a bad call.

In my defense, I did a bit of an about-face and more recently wrote that Netflix might move big after earnings in April … and it’s up 40% since then. But now I’m ready to move beyond a swing trade and admit that Netflix is legit, and that this stock might have some serious upside potential beyond just earnings beats and short squeezes.

My previous concerns included common complaints among the bears. It went a little something like this:

The forward P/E is insanely high, even for a high-growth tech stock.
Brand tarnish after the Qwikster debacle.
International growth is burning cash but not generating profits.
The big spending on programming, both in-house and partner content, is a gamble.
Competition — Amazon (NASDAQ:AMZN) Prime, subscription-based YouTube programming from Google (NASDAQ:GOOG) and Hulu Plus, among others — is going to eat into Netflix market share.

While some of these concerns are still valid, it hasn’t held back Netflix at all — nor has it affected the company’s impressive string of recent earnings beats.

Netflix stock exploded after strong earnings in January, squeezing out the shorts and tacking on some 70% in just a few days. NFLX surged because it posted an unexpected Q4 profit thanks to an influx of 2 million U.S. subscribers and another 1.8 million folks added internationally.

But that wasn’t enough — the company reported Q1 earnings in April that beat forecasts handily and resulted in another big pop for shares. Netflix topped $1 billion in revenue for the first time, and topped 30 million domestic subscribers.

This stock is for real, folks.

Does that mean you should run out and buy Netflix stock? No — I think that the meteoric run of 2013 has to cool off a bit, so don’t buy a top here. A lot of the gains were made by short-sellers buying because they had to cover their positions, and you have to admit that some profit-taking is likely after this big run.

Netflix had about 10 million shares held short as of April 30 — or 25% of available shares for trading. That’s after two huge earnings beats in three months that squeezed out other bears. And back in early November, there were some 17 million shares held short, or roughly 34% of the available shares.

In other words, 7 million shares were bought by short-sellers who threw in the towel over the last six months or so. There assuredly were people going long on the stock, but it seems to me that there aren’t that many buyers left right now.

Thus, I think sellers have the upper hand in the short-term, but after the inevitable dip — maybe back to under $200 or so — it might be time to ride this streaming video powerhouse.

The risks for Netflix remain, but the stock has proven itself to have staying power. While shares are frothy and I think a pullback is likely, you might want to consider staking out a position in NFLX.

Penny Stock Miners Are Sure to Cave In Your Portfolio

Jeff Reeves — Wed, 15 May 2013 15:00:17 +0000

Every few weeks, I get a note from a reader about a penny stock. And when I respond, I always say roughly the same thing: that OTC, microcap issues trading for a few cents (or a few fractions of a cent) are an all-out gamble, not an investment.

I reference the 2000 movie Boiler Room, I mention past articles about penny stock scams and real penny stock horror stories I’ve heard firsthand from real investors.

But it never seems to matter. Certain people are wired to trade penny stocks because those stocks are cheap and fast-moving, dangling the allure of turning a few hundred bucks into a few thousand overnight.

Like I said, it’s glorified gambling. But hey, who am I to judge?

Instead of pointing out the obvious perils, this time I’d like to share a question from a reader that could help you penny stock investors steer clear of the obvious losers and perhaps invest more … um … responsibly in OTC microcaps.

The idea I want to riff on today regards microcap miners, a big growth industry judging by the makeup of OTC penny stock rolls. I have had a pair of questions in the past week or so about this shady little corner of the stock market, and while I won’t name specific penny stocks — it only incurs the wrath of pump-and-dumpers and oddly enough legitimizes these scandalous operations — I’d like to speak broadly about this common penny stock scam.

The idea is simple: You prey on investors who see soaring commodity prices and dangle the idea of a brand-new mine that is about to get up and running, hopefully cranking out tons of silver and gold a few years down the road.

You can see how this works — it’s the classic Wimpy scam from Popeye: “I will gladly pay you on Thursday for a hamburger today!” In other words, you give these companies the capital to build out their mining operations, and they (in theory) will eventually pay you back in spades once the metal comes out in big shiny hunks.

Here’s the problem:

Many of these penny stock scams involve no mines, no practical process to get permits or equipment to operate a mine, and sometimes not even any tangible land holdings. And in the off chance there indeed is land or a few machines, there is no guarantee that any metal — precious or otherwise — exists underground.

In other words, the penny stock scam is predicated on you buying into a mining company that has no intention of mining anything.

You might hear about a permit submission (not approval, of course) or an aerial survey (how does flying at 10,000 feet inform you about underground deposits?) or other clever ruses that indicate things are humming along. But remember that unless actual metal can be proven to exist in the ground and the actual infrastructure exists to extract it, these companies are just messing with you.

Now, with the collapse of gold prices, we might see this kind of penny stock scam roll back. But I doubt it. One reader recently wrote into highlight a penny stock miner that actually is trying the same shtick, but with copper instead of gold. It works with any commodity, really, so don’t think it’s only gold penny stocks that apply.

I won’t chide penny stock investors with further complaints about how this is an irresponsible way to invest. Heck, I waste money on plenty of things and have been known to play blackjack when the mood strikes me … so if it’s a hobby or pastime, have at it.

Just keep in mind this common penny stock scam if you must dabble in OTC microcaps.

8 Stocks Soaring on Short Squeezes

Jeff Reeves — Tue, 14 May 2013 14:25:23 +0000

Bears, beware: The short squeeze is officially on.

The obvious canary in the coal mine here is Tesla Motors (NASDAQ:TSLA), the electric car manufacturer that the bears love to hate. Thanks to strong numbers and improving sentiment, short sellers have been stampeding for the exit — and the stock has doubled in the past 30 days.

It’s no wonder, with some 44% of TSLA float (that is, publicly tradable shares when you back out restricted stock) held by short-sellers as of April 30. Nobody wants to be the last to buy back shares and cover their trade — so the rush to buy after you’ve sold short results in a classic “short squeeze” that drives up prices dramatically.

Some of the S&P’s most hated (and heavily shorted) stocks have soared in the past few weeks thanks to similar conditions.

Take also brick-and-mortar bookseller Barnes & Noble (NYSE:BKS), with more than 30% of the float held short and 19% gains in the last 30 days — even after the rout yesterday on news that Microsoft (NASDAQ:MSFT) isn’t as set on a Nook deal as some rumors indicated.

Here are some others of note:

3D Systems (NYSE:DDD), a red-hot momentum stock in the emergent 3D printing business, had more than 30% of its float held short as of April 30. It is up 33% in the past 30 days.
Supervalu (NYSE:SVU), a grocery store chain, had nearly a third of its float held short at the end of April. SVU is up about 28% in the past 30 days.
Video game retailer GameStop (NYSE:GME) had 46% of its float held short on 4/30. It’s up 20% in the past month.
Electronics retailer RadioShack (NYSE:RSH) had 41% of its float short as of 4/30. It is up 16% in the past month.
Streaming video giant Netflix (NASDAQ:NFLX) had about 25% of its float short on 4/30. It is up 32% in the past month.

The craziest pick of all? For-profit education stock ITT Educational Services (NYSE:ESI) had a whopping 94% of its shares held short (at least according to the data on this Yahoo! Finance page)! That could be an error, but with only 23 million total shares outstanding and only 14 million or so actively traded as the float, it’s not unrealistic. Consider that right now, BlackBerry (NASDAQ:BBRY) has more than 150 million shares held short — but because it has more stock available, it’s a much lower percentage.

Needless to say the race for the exit in ITT can quickly turn into a stampede with that kind of crowded short — and it has, judging by the 50% gain in the past 30 days for ESI.

The list goes on. But the million-dollar question, of course, is whether this is good or bad for the market and for investors.

On the plus side, scaring out the shorts and providing upside for even battered stocks is a very good thing for sentiment. On a basic level, when stocks go up, it’s good for investors.

On the downside, however, it’s hard to imagine these gains sticking if they are based on a short squeeze. Just because the bears are capitulating doesn’t mean the bulls are willing to bid the stock higher … or that gains will stick.

A perfect example is Sears Holdings (NASDAQ:SHLD), which nearly tripled from under $30 at the end of 2011 to over $80 in early 2012 on a short squeeze. By the end of 2012, however, it crashed back to $40 again.

Short squeezes are great if you are on the right side of the trade and can capitalize on overly bearish investors getting burned. But don’t fool yourself and think that when Wall Street bails on a downside bet, it is a guarantee for more upside.

So watch the short interest in your stocks — particularly small caps with fewer shares outstanding, which are more succeptible to short squeezes — and be prudent about taking at least partial profits when these kinds of big moves happen.

Don’t fool yourself into thinking a gap up is deserved or long-lasting, particularly in stocks like RSH or BKS that have systemic problems that continue to weigh on their core business. At the end of the day, a short squeeze can’t fix margins squeezed even more by Amazon.com (NASDAQ:AMZN) in these retail dogs.

Sell Apple, Buy Google

Jeff Reeves — Tue, 14 May 2013 13:44:51 +0000

Google (NASDAQ:GOOG) just set new all-time highs close to $900. And Apple (NASDAQ:AAPL) is up some $75 a share or so since its mid-April lows.

So what does this mean for tech investors? I say sell Apple and buy Google stock instead.

I recently talked with my friend Liz Claman to explain my reasons. In a nutshell, I think Apple is a decent buy — particularly with a plan to return $100 billion in capital to shareholders through 2015 — but Google will be better across the next 18 months or so thanks to strong leadership, better fundamentals and a fair valuation.

GOOG isn’t a slam dunk, of course, with recent softness in its online ad business. And there certainly is a risk of buying a top after the run. But I like Google better.

For more on the topic, read my recent MarketWatch column on Google vs. Apple or check out my recent post on 5 reasons to buy tech stocks now.

The post Sell Apple, Buy Google appeared first on The Slant.

What’s the Outlook for Muni Bonds?

Jeff Reeves — Tue, 14 May 2013 12:48:35 +0000

A reader recently wrote in to ask me, “What will happen to the price of municipal bonds when the Fed raises interest rates?”

This is a straightforward but complex question. Here’s my simplest answer up front:

Your existing muni bonds will fall in value as new issues of municipal debt offer higher yield. It’s simple supply and demand — why buy an old bond with a smaller rate of return when you can simply buy a new one? The demand for new muni bonds (and all bonds, really) will make them more expensive, and the lack of demand for old bonds will make them cheaper.

If you sell before maturity, that is. You can always keep collecting the coupon payments, even if they aren’t as big as the alternative. If you have the right portfolio of bonds, even if inflation picks up you may be able to squeak out at least a small return.

Here’s the more complex answer, however, since this topic strays far from just the idea of municipal bond investors, and into the idea of asset allocation and the impact of the Federal Reserve on stocks and bonds generally:

The bottom line is that when the Fed raises base rates, EVERY rate goes up in credit markets. That goes for mortgages, student loans, credit card debt, corporate bonds, municipal bonds … you name it. That’s because the fed funds rate is the level at which it trades with banking institutions.

In other words, right now banks can get short-term loans for effectively zero — so they can afford to lend to you and me (or businesses) at only 1% or 2% and still make some money. Qualified borrowers get rock-bottom rates and unqualified borrowers must pay a premium. Maybe 3% or 4%.

Municipal bonds that are currently offered at a low rate will naturally be offered at a higher rate, even to qualified borrowing municipalities, and troubled governments will have to borrow at a much higher rate.

What does all this mean for bond prices? Well, conventional wisdom is that yield and price are inversely related — that is, when yields are down prices go up … and when yields are up prices then fall. So when the Fed raises rates, eventually — though perhaps not overnight — municipal bonds will have a lower price (or par value) but you’ll see debt offered at increasingly higher yields.

This all orbits the idea of a “bond bubble” coming, not just for munis but corporates and Treasuries and everything else, when the Fed raises rates. After all, super-low rates mean super-high prices for bonds right now … and eventually rates HAVE to rise simply because they cannot move any lower. I mean, the fed funds rate is effectively zero, so unless it goes negative there’s little upside for prices (considering the inverse relationship with yield we just mentioned).

If inflation picks up, bond investors will be caught between a rock and a hard place. Imagine your 2% yield in intermediate- or long-term bonds isn’t even pacing the rate of inflation anymore but your bond prices keep falling and you have a long way to maturity … do you sell into a downdraft, or ride it out with your measly coupon payments?

Keep in mind, however, the idea of a bond bubble or the “great rotation” out of bonds and into equities has been bandied about for a while now and nothing has really come of it. Even as the market sets new highs, bonds haven’t collapsed yet.

But a prudent investor should start to look down the road and what will happen in 2014 or 2015 when zero-interest-rate policy runs out of gas. Even if you’re not interested in moving out of bonds and into stocks, it’s worth noting that you could see a significantly higher yield on bond investments a few years down the road – so don’t tie up too much capital even if you intend to simply preserve it in low-risk bonds or bond-backed funds.

Got a question for me about a stock? Send an email to editor@investorplace.com, drop me a Tweet @JeffReevesIP on Twitter or post to our “Ask InvestorPlace” Facebook feature.

Related Reading

More bond basics, in case I didn’t make sense in my explanation. (InvestoPedia)
Is the Great Rotation a grand illusion? (Net Net via CNBC)
Or put another way by Dan Burrows, the Great Rotation is Bull$@#!. (InvestorPlace.com)
Waiting for the bond bubble to pop. (CNNMoney)

The post What’s the Outlook for Muni Bonds? appeared first on The Slant.

The Indomitable Jamie Dimon Will NOT Leave JPM

Jeff Reeves — Mon, 13 May 2013 18:58:49 +0000

Jamie Dimon is one of the most iconic — and some say divisive — figures on Wall Street. But based on the current news, there’s no guarantee the bank exec will be around to admire or admonish before long.

Shareholders of JPMorgan Chase (NYSE:JPM) will vote later this month at their annual meeting whether the chairman and chief executive roles should be unlinked at the banking behemoth. Dimon currently holds both roles, and recently told The Wall Street Journal that he would sooner quit than relinquish power.

The motives for the vote are, on the surface, obvious — a $6 billion trading loss last year by the “London Whale” made some wonder about who was really running the show and whether JPM needed more oversight.

“Dimon has either failed to supervise, failed to tell the truth, or both. Pleading ignorance doesn’t help,” Tufts University business professor Amar Bhide told Eleanor Bloxham in a recent Fortune article.

That just about sums things up.

However, the idea of a vacuous move like stripping Dimon of his chairmanship just to send a message about “oversight” seems both myopic and ineffective.

Consider that a host of companies with separate CEOs and chairmen have crashed and burned. How about Chairman Thomas Engibous of JCPenney (NYSE:JCP), who presided over the Ron Johnson debacle, joining the board in 2012 just to watch the retailer driven into the ground? The stock is down 50% and the brand might be forever ruined … so much for strategic oversight thanks to a second set of eyes, right?

Furthermore, as CEO of JPMorgan since 2005, Jamie Dimon has a longer-term track record that sets him far above peers in the financial sector. If they can even be called peers, that is. Ken Lewis was quickly pushed out at Bank of America (NYSE:BAC) for his failure to mitigate risk in the bank’s mortgage business, and though Vikram Pandit was forced out at Citigroup (NYSE:C) more recently, his track record was equally ugly.

JPM, on the other hand, has emerged bigger and more dominant than ever thanks to its Washington Mutual acquisition and thanks to a much healthier balance sheet than its peers.

JPMorgan stock is back to 2008 levels, while Citi and BofA are down 80% and 65%, respectively. It boasts a 3% yield and has buybacks approved by the Federal Reserve while Citi and Bank of America pay a mere penny per quarter for a measly yield — and lately, they haven’t even had the confidence to request an increase, let alone get one denied.

JPM is well capitalized, a model of profitability and dominance, and even in the face of trading losses that could climb to $9 billion, it manages to beat earnings expectations.

You want to get rid of this guy, shareholders?

I don’t contend that JPMorgan stock owners should be desperate for him to stay. There undoubtedly are some culture problems at JPM, and the divisive nature of Mr. Dimon could certainly cause more harm than good in some circles.

But you have to wonder who wins if Jamie Dimon gets fired from one post, or decides to quit both.

The bottom line is that most shareholders vote with their wallets … and love him or leave him, Jamie Dimon has been good for JPM stock in the last few years — London Whale and all.