banks, particularly for those that are very active overseas and in derivative markets. Our concerns stem from the fact that public disclosures about banks' sovereign debt exposures are useless in order to ascertain the level of risk with a reasonable degree of confidence. Derivative hedges used to lower the gross exposure are only as reliable as the creditworthiness of the bank's counterparties, and the ability to enforce the language embedded in the contract. Worryingly, some ideas recently floated by European officials raised doubts about the effectiveness of credit default swaps, a popular derivative instrument used in protecting against such default.
The history of financial crises around the world teaches us that creditors never come out unscathed. JP Morgan shares have been a rewarding investment throughout our ownership, providing us with positive returns in excess of the market. We felt, however, that with the deepening crisis across the Atlantic, the opacity of the bank's real exposure to the European situation was a risk that we were no longer willing to take.
Disclosure: Long EOG, PFE, MDT, NRG, AXP, BAC
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