| J P Morgan loses 2 Billon in six weeks | |
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| Tweet Topic Started: May 10 2012, 04:50 PM (926 Views) | |
| Baldo | May 10 2012, 04:50 PM Post #1 |
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JPMorgan Chase Says CIO Unit Suffered ‘Significant’ Loss JPMorgan Chase & Co. (JPM) said it lost about $2 billion tied to synthetic credit securities after positions taken by its chief investment office were riskier than expected. “This portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed,” the New York-based company said today in a quarterly securities filing. JPMorgan declined 5.5 percent to $38.50 in extended trading at 4:51 p.m. in New York. JPMorgan’s chief investment office has been transformed in recent years under Chief Executive Officer Jamie Dimon into a unit that makes bigger and riskier speculative bets with the bank’s money, five former employees of the bank said earlier this year. Some of the bets were so big that the bank probably couldn’t unwind them without losing money or roiling financial markets, the former executives said. Dimon said last month that the bank is “very conservative” in investing the firm’s excess cash. ...snipped http://www.bloomberg.com/news/2012-05-10/jpmorgan-chase-says-cio-unit-suffered-significant-loss.html Jamie Dimon is a big time Democrat and he has special access to the White House & Turbo Tax Timmie. Edited by Baldo, May 10 2012, 04:50 PM.
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| Baldo | May 10 2012, 04:53 PM Post #2 |
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| Baldo | May 10 2012, 05:05 PM Post #3 |
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Questions abound. What was the position that caused so much loss? Who was placing the bets? Was Jamie Dimon using the Jon Corzine Batphone? Edited by Baldo, May 10 2012, 05:07 PM.
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| Baldo | May 10 2012, 05:15 PM Post #4 |
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J.P. Morgan Flags $2 Billion Trading Loss J.P. Morgan Chase JPM & Co. has taken $2 billion in trading losses in the past six weeks and could face an additional $1 billion in second-quarter losses due to market volatility, Chief Executive James Dimon said Thursday in a hastily arranged conference call after the market closed. The losses stemmed from derivatives bets gone wrong in the bank's Chief Investment Office, a part of the corporate branch of the bank that manages risk for the New York company. The Wall Street Journal reported last month that large bets being made in that office had roiled a sector of the debt markets. The loss is a black eye for the bank, which sailed through the crisis in better shape than most of its peers, and Mr. Dimon. It comes at a time when large banks are fighting efforts by regulators to rein in risky trading with measures such as the so-called Volcker rule....snipped http://online.wsj.com/article/SB10001424052702304070304577396511420792008.html "derivatives bets gone wrong" That's a lot of wrong |
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| kbp | May 10 2012, 05:42 PM Post #5 |
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He hedged his investmant in corporate debt, which is wise. He evidently went a little further than he needed to. The problem, IMO, is not the derivatives, it's how you play them. |
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| Mason | May 10 2012, 07:00 PM Post #6 |
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Parts unknown
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. I have an Announcement -- about Gay Marriage. . |
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| Baldo | May 10 2012, 07:04 PM Post #7 |
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He hedged his investment in corporate debt, which is wise. He evidently went a little further than he needed to. The problem, IMO, is not the derivatives, it's how you play them. True, but the "Too Big to Fail Banks" like coming to Uncle Sam when their bets do fail. Playing on the House Money! Last time it only crashed our economy. Edited by Baldo, May 10 2012, 07:04 PM.
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| Baldo | May 10 2012, 08:02 PM Post #8 |
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Costly Position Was Wager On Corporate Debt Gone Wrong The trade that cost J.P. Morgan Chase JPM $2 billion in losses in just six weeks was likely a complex bet on derivatives linked to corporate debt. James Dimon, J.P. Morgan's chief, didn't give details of the trade on a conference call with analysts. But The Wall Street Journal reported in April that a London-based J.P. Morgan trader, Bruno Michel Iksil, had been selling protection on an index of 125 companies in the form of credit-default swaps through most of January and February. That meant he was essentially betting on the improving credit of those companies in the index and would lose money if the market went the other way. Mr. Iksil did so much bullish trading that he helped move the index, traders said at the time, prompting some hedge funds to bet against him in the belief he might have to exit some of his bullish trades. Mr. Iksil stopped selling the positions in March, said market participants. Credit-default swaps are a type of derivative that act as insurance against a debt issuer defaulting. The instrument rises in value and ultimately pays out to the buyer if a debt issuer defaults. The index Mr. Iksil was playing is called the CDX IG 9, which includes firms such as Campbell Soup Co. CPB +1.18% and bond insurer MBIA Insurance Corp. Mr. Iksil wasn't always bullish. He has in the past put on trades betting that corporate credit would decline. Some of his best performances have come during market downturns....snipped http://online.wsj.com/article/SB10001424052702304203604577396713183619478.html Try as I might I can't understand these complex derivatives. What I also can't understand is how one person can lose 2 Billion in six week and somehow "We" through the Treasury & Fed might have to rescue them. Oh wait, Big Jon Corzine is still free despite regulators still can't find 1.6 Billion, but former FBI Director is "still on the case." |
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| kbp | May 10 2012, 08:19 PM Post #9 |
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We're short on details, but it sounds like he played the 'double-down' - went long on the bonds and derivatives - and lost on both. The derivatives are not the problem. Just buying the bonds can lose money. Just buying/selling derivatives can lose money. If you're doing both, you better be hedging on the derivatives. If you're playing derivatives only, you're gambling, plain and simple. Edited by kbp, May 10 2012, 08:21 PM.
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| Baldo | May 10 2012, 11:58 PM Post #10 |
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JPMorgan’s Drew Embraced Risk Before ‘Egregious’ Loss JPMorgan Chase & Co. (JPM)’s Chief Investment Officer Ina R. Drew, head of the unit responsible for a $2 billion trading loss, built a 30-year career at the largest U.S. bank by embracing risk and avoiding the spotlight. “With everything she does, she thinks in terms of trading,” said Stephen Murray, head of CCMP Capital Advisors LLC, created from a JPMorgan private-equity unit in 2006. “There are risk-lovers, there are risk-haters, and the best traders will take the risk as long as they get paid for it.” Drew’s operation, which helps manage the bank’s risk, has been transformed under Chief Executive Officer Jamie Dimon to make bigger speculative bets with the firm’s own money, according to five former employees, Bloomberg News reported last month. Some bets were so big JPMorgan probably couldn’t unwind them without roiling markets, the former executives said. The loss disclosed yesterday came after an “egregious” investment-office failure tied to credit derivatives, Dimon said in a conference call. “In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored.” Drew, 55, is one of two women who sit on the New York-based firm’s operating committee. Her office oversees about $360 billion, the difference between money from deposits and what the bank extends in loans. Dimon, 56, had pushed the unit to boost profit by buying higher-yielding assets, including structured credit, equities and derivatives, two former employees have said. The shift to riskier bets underscores how blurry the line can be between so-called proprietary trading and what banks say is hedging....snipped http://www.bloomberg.com/news/2012-05-11/jpmorgan-s-drew-embraced-risk-before-egregious-loss.html Big Bets... What the hell is going on? JPMorgan Chase & Co is the USA's biggest Bank. |
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| Baldo | May 11 2012, 04:50 PM Post #11 |
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Why Don't We Know More About the 'London Whale'? Perhaps the most surprising thing about a man who was able to move trillion dollar markets in a single bet, is that we know so little about him. Especially when everyone has known what he was up to for weeks. Brunio Iksil's name first started to show up on newswires almost exactly a month ago, when Bloomberg first reported on April 6 that the JPMorgan trader had established such a massive position in credit derivatives that he was single handedly distorting market prices, a near impossible task in a market of that size. He was so overexposed that hedge funds and other big investors were lining up against him, taking the other side of his bets and waiting for him to inevitably fail. As Business Insider pointed out, those "rivals' may have been the impetus for the news stories. Drawing more attention to his unstable position certainly wouldn't have hurt their fortunes. Some people were immediately concerned. The bloggers at ZeroHedge chalked it up to JPMorgan's king of the mountain arrogance: "They lie about everything, fully aware they have perpetual immunity because they are more powerful than the Fed (just recall Jamie Dimon's symbolic spitting in the face of Ben Bernanke), they are a tri-party repo dealer thus in the center of the entire shadow banking system, and have the biggest single-bank derivative exposure in the world, at $70 trillion as of December 31. JPMorgan is modern finance. And because of that they can and will get away with everything, lying on prime time TV most certainly included." Others were more charitable ("To me this all seems like much ado about nothing"), but the biggest vote of confidence came from Iksil's boss, Jamie Dimon. A week after the story broke, Dimon called the whole thing a “tempest in a teapot.” His CFO Doug Braunstein said the positions were ”consistent with both, I think, the spirit and written rules of the Volcker rule as it is written today " and the firm was "very comfortable with the positions we have." That was April 13. Since that time we now know the firm lost more than $2 billion and that number could go higher. ...snipped .....Despite all the attention from the media and authorities, no one seemed to figure out much about who Iksil is, and how one trader was able to control such a massive amount of funds in this way. Over $100 billion in a single index, by most estimates. Even now, a month later, no one seems to know anything about him except that he has two cool nicknames — the "London Whale" and "Lord Voldemort" — and that he apparently doesn't spend a lot of time on the Internet. There appears to be almost no public trace of him before April. A Lexis-search turned up nothing. There are no pictures of him online. Bloomberg couldn't even find out his exact age. (A co-worker says he's in his late 30s.) All we — allegedly! — know is that he's French (though his family may have Russian ancestry); he commutes to London from Paris; favors dark jeans and no ties at work; and is, according to a self-administered Bloomberg profile, a "champion of 'kick it', walking over water and humble.. yes." Whatever that means....snipped http://news.yahoo.com/why-dont-know-more-london-whale-194022261--finance.html The Best & the Brightest in Finance? "Lord Voldemort" - That's explains it all. He is back! Edited by Baldo, May 11 2012, 05:02 PM.
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| Baldo | May 11 2012, 05:15 PM Post #12 |
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JPMorgan Credibility Cut With Fitch Downgrade NEW YORK (TheStreet) -- Fitch Ratings has cut JPMorgan Chase's (JPM_) long term-debt rating by one notch to A+ from AA- as the nation's largest banks continues to reel from a $2 billion trading loss it disclosed late on Thursday. The ratings cut caps a dramatic 24 hours after the trading loss was unveiled, which has humbled the bank's chief executive Jamie Dimon, one of Wall Street's most credible advocates, and reignited calls for financial industry reform. Fitch's move adds to mounting negative developments for JPMorgan that include reports of regulatory inquiries, analyst downgrades and lingering uncertainty over the magnitude of its trading loss. ...snipped http://www.thestreet.com/story/11532035/1/jpmorgan-credibility-cut-with-fitch-downgrade.html |
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| foxglove | May 13 2012, 06:54 PM Post #13 |
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http://www.businessinsider.com/glass-steagall-alone-wont-be-enough-to-stop-dimon-and-the-bankers-2012-5?utm_source=readme&utm_medium=rightrail&utm_term=&utm_content=6&utm_campaign=recirc#ixzz1umWwfPa0 Glass-Steagall Alone Won't Be Enough to Stop Dimon and the Bankers Gary Anderson, Strategic Default Books|May 12, 2012, 10:19 AM|366|2 Gary Anderson can be found at http://strategicdefaultbooks.com "Glass-Steagall worked for decades, as bankers were not allowed to take deposits and make risky bets with them. Risk can take two forms. It can be a bet on a less certain outcome, or a fairly safe bet levered up with funds from the Fed or who knows where. Apparently Jamie Dimon made a relatively safe bet on interest spreads, levered up, so that if anything went wrong, it could be really bad. I am no expert regarding the inner workings of trading. However, while many in NYC in media were praising Dimon, I was aware that this bank was making very risky bets in the City of London, where collateral can be put up over and over again to guarantee positions. Shoot, I live in Reno, Nevada and I knew Dimon was betting the farm in the Square Mile. I am a little disappointed that the NY financial media failed to be on this like a dog chasing a car. Of course, Max Keiser has been screaming that this is criminal behavior to do bets like this with deposits, for a long time. He supports regulation of the banks and fast. But it is my contention that Glass-Steagall won't be enough. It is necessary, or at least a really tough Volcker Rule is necessary. Perhaps some criminal penalties for screwing with deposits should accompany a Volcker Rule implementation. Don't be fooled, the bankers and the hedge funds and most Republicans hate the Volcker Rule. If the Republicans win, there will be even more gambling, more easy money, more housing bubbles and more madness..." |
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| Kerri P. | May 14 2012, 07:42 AM Post #14 |
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http://finance.yahoo.com/news/jpmorgan-executives-expected-leave-over-005855483.html JPMorgan executives to leave over trading loss: sources Reuters – 1 hour 24 minutes ago LONDON/NEW YORK (Reuters) - JPMorgan will move to limit the fallout from a shock trading loss that could reach $3 billion or more by parting company with three top executives involved in its costly failed hedging strategy, sources close to the matter said. The bank - the biggest in the United States by assets - is expected to accept the resignation this week of Ina Drew, its New York-based chief investment officer and one of its highest-paid executives, in the next few days, the sources said. Two of Drew's subordinates who were involved with the trades, London-based Achilles Macris and Javier Martin-Artajo, are also expected to be asked to leave, they said. Neither was available for comment on Monday. The departures come after the unit Drew runs, known as the Chief Investment Office (CIO), mismanaged a portfolio of derivatives tied to the creditworthiness of bonds, according to bank executives. snip.... |
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| Baldo | May 14 2012, 10:44 AM Post #15 |
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JPMorgan Chase's chief investment officer, Ina Drew, retires in wake of $2 billion trading loss. Is she going to get a golden parachute? I am growing tired of senior execs getting rewarded for crappy results. But that appears to be the norm on Wall Street & in Govt. Edited by Baldo, May 14 2012, 10:46 AM.
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