Colossal JP Morgan Chase loss stirs fears - GoFuckYourself.com

Barefootsies · 05-11-2012, 06:32 AM

Quote:

(Reuters) - JPMorgan Chase & Co's shock trading loss of at least $2 billion from a failed hedging strategy knocked financial stocks across the globe on Friday, as well as the reputation of the biggest U.S. bank by assets and its CEO Jamie Dimon.

For a bank viewed as a strong risk manager that navigated the fallout from the 2008 financial crisis without reporting a loss, the errors are embarrassing, especially given Dimon's public criticism of the so-called Volcker rule to ban proprietary trading by big banks.

"This puts egg on our face," Dimon said.

He conceded the losses were linked to a Wall Street Journal report last month about a London-based trader Bruno Iksil, nicknamed the 'London Whale', who, the paper said, amassed an outsized position which hedge funds bet against.

JPMorgan had informed the UK's Financial Services Authority (FSA) of the situation, but this was a regulatory requirement and there was no indication at this stage that the regulator would take any action, a source familiar with the situation said. Talks between the bank and the watchdog were continuing.

Iksil, who is French and graduated in engineering from the Ecole Centrale in Paris in 1991, was not immediately available for comment. JP Morgan's Chief Investment Office - and Iksil in particular - are well known by credit traders for taking large positions.
Iksil was brought into the CIO unit to head its credit desk, an asset class the unit had not previously covered, a person who worked in the unit said. It built up credit positions over several years through trades vetted by management and the losses now likely resulted from a combination of these trades, the person said.

These traders say other banks have comparable functions to JPMorgan's CIO. The French banks, Citigroup, Deutsche Bank and UBS were all cited as examples of large treasury functions that hedge credit exposures in similar ways.

In a Securities and Exchange Commission filing, JPMorgan reported that since the end of March, its Chief Investment Office has had significant mark-to-market losses in its synthetic credit portfolio - these typically include derivatives intended to mimic the performance of securities.

While other gains partially offset the trading loss, the bank estimates the business unit will post a loss of $800 million in the current quarter, excluding private equity results and litigation expenses. The bank previously forecast the unit would make a profit of about $200 million.

"It could cost us as much as $1 billion or more," in addition to the loss estimated so far, Dimon said. "It is risky and it will be for a couple quarters."

BAD STRATEGY
The dollar loss, though, could be less significant than the hit to Dimon and the reputation of a bank which was strong enough to take over investment bank Bear Stearns and consumer bank Washington Mutual when they collapsed in 2008.
JPMorgan had $2.32 trillion of assets supported by $190 billion of shareholder equity at the end of March - an equity ratio of almost 13 percent. That is four times the industry mean and ahead of 10-11 percent at Citigroup and Bank of America Corp. JPMorgan has been earning more than $4 billion each quarter, on average, for the past two years.
"Jamie has always styled himself as one of the kings of Wall Street," said Nancy Bush, a longtime bank analyst and contributing editor at SNL Financial. "I don't know how this went so bad so quickly with his knowledge and aversion to risk."

JPMorgan shares fell almost 7 percent after the closing bell and dragged other financial shares lower, with Citigroup down 3.6 percent and Bank of America down 2.6 percent. FBR Capital Markets analyst Paul Miller cut his target for the stock to $37 from $50 in response to the disclosures. The shares were at $40.74 before the news.
Although the loss was specific to JPMorgan, it could have broader negative implications - raising the threat of further regulatory scrutiny and the difficulties of risk management, analysts said.

European bank stocks fell on Friday after news of the loss and as fears about the fallout on banks from debt crises in Greece and Spain rattled investors. The STOXX Europe 600 banking index was down 1.4 percent at 1000 GMT. Many banks were down more than 2 percent, including Barclays, Deutsche Bank, and BNP Paribas.

Dimon said he remained opposed to the Volcker rule. The problem, he said, was with the way the hedging strategy had been carried out. It had "morphed over time", he said, and was "ineffective, poorly monitored, poorly constructed and all of that."
On a hastily convened conference call with analysts, Dimon wouldn't take questions about specific people or their specific trading strategies. But he indicated that some people may lose their jobs as executives sort out what when wrong.

WHALE OF A LOSS

HushMoney · 05-11-2012, 06:42 AM

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these typically include derivatives intended to mimic the performance of securities.

They've learned nothing from their own history and our bail out. I hope they go under.

Brujah · 05-11-2012, 07:20 AM

Bankers thinking to themselves, "Fuck it, we can take big risks, they'll bail us out. We're too big to fail! *hahahahaha*"

David! · 05-11-2012, 07:26 AM

Another crazy French trader

Tom_PM · 05-11-2012, 07:29 AM

And there's still people crying that there's too MUCH regulation.

Nasty · 05-11-2012, 08:47 AM

Who wouldn't take big risks when there was no downside due to bailouts.

SwirlsGirl · 05-11-2012, 09:09 AM

Quote:

Originally Posted by Brujah

Bankers thinking to themselves, "Fuck it, we can take big risks, they'll bail us out. We're too big to fail! *hahahahaha*"

A banker would never have an outlook or attitude as such...just ask your fellow gfy ass kissing bank worshiping trolling assenheimer comrades who defend banks with such tenacity.

All the money in the world is not enough they will not stop until they have your souls, or at least convince you of the benefits of micro chips in your body...

In a few years they will be on gfy with the following promo...

Hey program owners have your affiliates inject this micro chip...that way we can pay out your affiiliates directly to their micro chips...paxum,redpass are so 2012 get with the times...join the club and receive your chips by the chip...

Why · 05-11-2012, 09:17 AM

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has had significant mark-to-market losses in its synthetic credit portfolio

something about synthetic wealth, scares me.

Brujah · 05-11-2012, 09:19 AM

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Originally Posted by SwirlsGirl

All the money in the world is not enough they will not stop until they have your souls, or at least convince you of the benefits of micro chips in your body...

I want micro chips in my body. I also want to jack in straight into my cerebellum, and increased memory storage because my brain is too forgetful.

L-Pink · 05-11-2012, 09:20 AM

Anyone know what this actually means?

"JPMorgan reported that since the end of March, its Chief Investment Office has had significant mark-to-market losses in its synthetic credit portfolio - these typically include derivatives intended to mimic the performance of securities"

.

Barry-xlovecam · 05-11-2012, 09:36 AM

Quote:

Originally Posted by L-Pink

Anyone know what this actually means?

"JPMorgan reported that since the end of March, its Chief Investment Office has had significant mark-to-market losses in its synthetic credit portfolio - these typically include derivatives intended to mimic the performance of securities"

.

They bet red and the ball landed on a black number ...

A hedge investment against their securities and/or loans that is highly leveraged e.g.; derivatives (or financial roulette).

JP-pornshooter · 05-11-2012, 10:34 AM

Quote:

Originally Posted by L-Pink

Anyone know what this actually means?

"JPMorgan reported that since the end of March, its Chief Investment Office has had significant mark-to-market losses in its synthetic credit portfolio - these typically include derivatives intended to mimic the performance of securities"

.

mark to market = fair value
synthetic credit portfolio = credit swab contracts
in other words big losses on dealing with contracts hedging against commercial loans.

i think this is how we got in trouble the first time.

V_RocKs · 05-11-2012, 11:45 AM

Awesome that one guy can do what he is doing and take down several hedge funds filled with guys supposedly smarter than he.

L-Pink · 05-11-2012, 11:51 AM

Quote:

Originally Posted by Barry-xlovecam

They bet red and the ball landed on a black number ...

A hedge investment against their securities and/or loans that is highly leveraged e.g.; derivatives (or financial roulette).

Quote:

Originally Posted by JP-pornshooter

mark to market = fair value
synthetic credit portfolio = credit swab contracts
in other words big losses on dealing with contracts hedging against commercial loans.

i think this is how we got in trouble the first time.

So basically they so mistrust their own judgment when making loans, that they are trying to cover their asses by other methods I really don't understand. Wouldn't prudent lending and the occasional loss be more logical the long run?

.

DWB · 05-11-2012, 12:13 PM

Looking forward to their next bailout. I love nothing more than knowing what little taxes I do pay are going towards helping out banks.

Elli · 05-11-2012, 12:35 PM

Quote:

Originally Posted by L-Pink

So basically they so mistrust their own judgment when making loans, that they are trying to cover their asses by other methods I really don't understand. Wouldn't prudent lending and the occasional loss be more logical the long run?

.

It would. But they can't lose money if they bet on both red and black in the long run, either. They basically use their bets on red to insure losses against bets on black. At least, that's how I understand it.

pimpmaster9000 · 05-11-2012, 12:39 PM

Next to public executions of bankers there is little that the cash hungry government can do....You can not stay clean in a dirty river as the saying goes...

IllTestYourGirls · 05-11-2012, 12:49 PM

Quote:

Originally Posted by PR_Tom

And there's still people crying that there's too MUCH regulation.

There are already laws on the books to stop them from doing most of what they do. But when you buy president after president it is unlikely you will get in trouble and even more likely you will get bailed out.

JP-pornshooter · 05-11-2012, 01:04 PM

credit default swaps

say a bank has a loan with greece.
financial institution offer a contract to cover the potentially bad debt in case of default, price depends on the risk.
bundle a bunch of these in a package and sell as investments.
these were leveraged, which basically means you "invest" say $5M at an out of pocket cost of only $500K but if it goes bad you are on the hook for the $5M.

above can go wrong in so many ways..

btw, it is my understanding that the french guy works for JP morgan, so he didnt take down several hedge funds, most likely he is looking at the door though (from the outside).

05-11-2012, 07:20 AM	#3
Brujah Beer Money Baron Industry Role: Join Date: Jan 2001 Location: brujah / gmail Posts: 22,157	Bankers thinking to themselves, "Fuck it, we can take big risks, they'll bail us out. We're too big to fail! hahahahaha" __________________ Free Premium Domain Lists and Tools at Clickmojo.com For Sale: Obscenity.com

05-11-2012, 07:26 AM	#4
David! By the wrath of Agamemnon Industry Role: Join Date: Apr 2004 Location: Miami Posts: 6,501	Another crazy French trader __________________ .

05-11-2012, 07:29 AM	#5
Tom_PM Porn Meister Industry Role: Join Date: Feb 2005 Posts: 16,443	And there's still people crying that there's too MUCH regulation. __________________ 43-922-863 Shut up and play your guitar.

05-11-2012, 08:47 AM	#6
Nasty Confirmed User Industry Role: Join Date: Aug 2002 Location: Sunny Fucking California Posts: 1,575	Who wouldn't take big risks when there was no downside due to bailouts. __________________ “Ours is a world of nuclear giants and ethical infants. We know more about war than we know about peace, more about killing than we know about living. If we continue to develop our technology without wisdom or prudence, our servant may prove to be our executioner.” ― Omar Bradley (1948)

05-11-2012, 09:20 AM	#10
L-Pink working on my tan Industry Role: Join Date: Mar 2005 Location: Florida/Kentucky Posts: 39,151	Anyone know what this actually means? "JPMorgan reported that since the end of March, its Chief Investment Office has had significant mark-to-market losses in its synthetic credit portfolio - these typically include derivatives intended to mimic the performance of securities" . Last edited by L-Pink; 05-11-2012 at 09:24 AM..

05-11-2012, 11:45 AM	#13
V_RocKs Damn Right I Kiss Ass! Industry Role: Join Date: Dec 2003 Location: Cowtown, USA Posts: 32,409	Awesome that one guy can do what he is doing and take down several hedge funds filled with guys supposedly smarter than he.

05-11-2012, 12:13 PM	#15
DWB Registered User Industry Role: Join Date: Jul 2003 Location: Encrypted. Access denied. Posts: 31,779	Looking forward to their next bailout. I love nothing more than knowing what little taxes I do pay are going towards helping out banks.

05-11-2012, 12:39 PM	#17
pimpmaster9000 Too lazy to set a custom title Industry Role: Join Date: Dec 2011 Posts: 26,732	Next to public executions of bankers there is little that the cash hungry government can do....You can not stay clean in a dirty river as the saying goes...

05-11-2012, 01:04 PM	#19
JP-pornshooter Confirmed User Join Date: Sep 2006 Location: westcoast usa Posts: 4,007	credit default swaps say a bank has a loan with greece. financial institution offer a contract to cover the potentially bad debt in case of default, price depends on the risk. bundle a bunch of these in a package and sell as investments. these were leveraged, which basically means you "invest" say $5M at an out of pocket cost of only $500K but if it goes bad you are on the hook for the $5M. above can go wrong in so many ways.. btw, it is my understanding that the french guy works for JP morgan, so he didnt take down several hedge funds, most likely he is looking at the door though (from the outside). __________________ "Obscenity is whatever gives the Judge an erection." -- Author Unknown