Trade Matrix: JP Morgan -- ABS

This week's economic data highlight the risks and potential rewards of JPMorgan's updated recommendation to take a more aggressive risk-taking posture in ABS and CDOs. The University of Michigan's May expectations component of the Confidence reading was particularly encouraging --- the jump from 79.3 to 91.4 brought it close to the highest level (92.7 in both May and March 2002) since it plummeted in late 2000. JPMorgan's aggressive view on ABS chooses alignment with the more positive expectations component, where the firm factors in the expectation that policy makers are prepared to work overtime to ensure that the grim current conditions do not persist (as apparently consumers doing as well).