JPMorgan reveals $2bn trading loss

[Common as Mook]

Oh don't come over all precious and typically NSC 'right on' with me because I would hedge a bet (something I don't do globally with people's pensions) that you are in a minority in defending these casinos that have caused MILLIONS of redundancies and misery worldwide.
If this American investment bank is ten times the size then it will mean ten times the satisfaction in seeing these unregulated 'bookies' that caused the shit we are in .

Behave.

I had a close friend who lost his job through no fault of his own after the Lehmann's crash. Do you honestly see thousands of people losing their jobs as mere collateral damage?

 

[Norman Potting]

Can't they just go into administration, write off the debts, and then recruit a load more traders on massive salaries to try and get back to the top level again?

Don't be silly Edna, no business or other trading organisation could possibly get away with doing that sort of thing once, let alone twice.

 

[Lower West Stander]

Very embarrassing for Jamie Dimon. He was the one who was trying hardest to loosen the Volcker Rule. No chance now. Talk about shooting yourself in the foot.......

 

[Kumquat]

Very embarrassing for Jamie Dimon. He was the one who was trying hardest to loosen the Volcker Rule. No chance now. Talk about shooting yourself in the foot.......

He even said today that the hedging that led to the losses wouldn't have violated the Volcker rule!!

 

[SweBHAFC]

And here is me thinking they simple hedged (read overhedged a bit) their own credit risk by going short CDX.NA.IG.9 ala Goldman 2008 and the losses are not as bad as USD 2bn.....

I suppose NSC knows best.

 

[Lower West Stander]

Depends at what level they shorted the CDX and where the basis and skew were at the time......if you're asking...........

 

[SweBHAFC]

Not really.. Think you missed my point. A banks own credit charge is an accounting adjustment recognised at reporting periods and jp would not report that as a mtm gain today. The bad news (happily shared with the community today) serves to push CDS levels higher and therefore hedge net loss eventually.

This is normally a conversation I would have on wilmott forum but suppose NSC could do.

Ig9 skew has been constantly negative for a while now. No surprise as people (including myself) are not willing to write significant protection on single names in current environment.

I could be wrong on jp but I trade skew whenever I can (difficult in today's environment with large bid offers) and jp has been my main macro hedge counterparty over the last year or so.

 

[SweBHAFC]

Also worth noting that Goldman did the same a couple of years ago while jp has come out to say that they would be able to enter into this position under new proposed regulation which supports my view on hedging their own credit risk.

I am normally wrong though so don't take my word for it.

 

[Lower West Stander]

I think that's true. Jp has been big counterparty for a fair few houses for a while - as much a function of over zealous risk departments as anything else. Surely they should have known that skew lists would get triggered.

Oh and very rarely do I come across a trader who says they are wrong!

 

[The Peanut Roaster]

As a layman on this subject, if someone 'loses' money on these trades, then someone surely 'wins'?

It can't be that 2 billion or whatever is lost in capital to the economy.

 

[SweBHAFC]

I think that's true. Jp has been big counterparty for a fair few houses for a while - as much a function of over zealous risk departments as anything else. Surely they should have known that skew lists would get triggered.

Oh and very rarely do I come across a trader who says they are wrong!

Re being wrong... Just trying to insert a disclaimer so people don't take my drunken gospel as investment advise

 

[SweBHAFC]

As a layman on this subject, if someone 'loses' money on these trades, then someone surely 'wins'?

It can't be that 2 billion or whatever is lost in capital to the economy.

Partially true but the CDS markets (even with clearing houses and troptima runs) are that big nowadays that it is difficult to say who is up.

In this case though... Imagine jp borrowed money and have liabilities. For the lender they have taken on jp default risk. This risk is not valued in the trading books (daily valuation) and the bank would make a month-end adjustment to adjust their liability in line with their own credit risk. To hedge this they sell protection on a index (125 big corporates) names which is positively correlated with financials. If credits deteriorate, the bank loose money on short position on the index but at the same time gain money on their own liabilities. I think this is the case with jp. However they got the calculation of their own liabilities wrong.

 

[Gangsta]

I edited what I posted, I posted something which is common knowledge in the mkt, however I and my company do a lot of business with JP Morgan,and discretion is the better part of valour, the internet scares me !

Most wise. I have a friend who works in that part of JPM and cant help but think he was asleep at his desk or summit. In fairness to JPM they are a pretty well run company and if they lost the money due to betting on a Greek default they have only lost out due to the continuing cheating of Greece & EU. If that isn't a default then I don't know what is. Down with the Fourth Reich.

 

[Gangsta]

Partially true but the CDS markets (even with clearing houses and troptima runs) are that big nowadays that it is difficult to say who is up.

In this case though... Imagine jp borrowed money and have liabilities. For the lender they have taken on jp default risk. This risk is not valued in the trading books (daily valuation) and the bank would make a month-end adjustment to adjust their liability in line with their own credit risk. To hedge this they sell protection on a index (125 big corporates) names which is positively correlated with financials. If credits deteriorate, the bank loose money on short position on the index but at the same time gain money on their own liabilities. I think this is the case with jp. However they got the calculation of their own liabilities wrong.

The problem stems from the age-old accounting methods of banks. They consider money loaned out as an asset. Imagine if you leant a mate £100 - would you see it as an asset - even if he was supposed to pay interest? This is all well and good back in the day when they would put our Mums and Dads back in the 1960's through the wringer for a £5,000 mortgage on a secured property, but is it really an asset when they are just chucking it out willy nilly? Nothing wrong with prudent banking - its how 1st world countries have evolved to live in relative wealth and comfort. Unfortunately we havent seen prudent banking for a very long time. Bring back Captain Mainwaring!

 

[Tom Hark Preston Park]

Trouble is , these c*nts are still absulutely convinced that they are Masters Of The Universe and that it's all somebody else's fault. And they'll continue to believe that right up to the point where they are frogmarched out the building with a single cardboard box. At which point the'll all decide to retire from their chosen market sector - which they all freely admit they always hated anyway - in order to grow grapes in East Sussex.

 

[User removed 4]

Trouble is , these c*nts are still absulutely convinced that they are Masters Of The Universe and that it's all somebody else's fault. And they'll continue to believe that right up to the point where they are frogmarched out the building with a single cardboard box. At which point the'll all decide to retire from their chosen market sector - which they all freely admit they always hated anyway - in order to grow grapes in East Sussex.

The thing is tom, ive seen people rack up huge losses before and STILL get another job, there is a single trader at an unnamed investment bank who lost £250 million on api2/api4 coal arbitrage trades (these were sanctioned at higher levels) and he has managed to walk into another job because the perception is that he, and others who have done the same at different places are comfortable trading "size" !! the mind boggles !

 

[Tom Hark Preston Park]

The thing is tom, ive seen people rack up huge losses before and STILL get another job, there is a single trader at an unnamed investment bank who lost £250 million on api2/api4 coal arbitrage trades (these were sanctioned at higher levels) and he has managed to walk into another job because the perception is that he, and others who have done the same at different places are comfortable trading "size" !! the mind boggles !

It's a funny old parallel universe for sure!

 

[Pinkie Brown]

Behave.

I had a close friend who lost his job through no fault of his own after the Lehmann's crash. Do you honestly see thousands of people losing their jobs as mere collateral damage?

If any of them lose their jobs, chances are it'll be to that well used phrase, 'market forces'. Much used by the Tories in the 80's when Britain's manufacturing industry was allowed to go to the wall. The banks have played fast & loose with people's money & lives in recent years. If they fall on their sword, I can't imagine there will be outpourings of public sympathy for a few wide boys from the square mile to be honest......

 

[User removed 4]

If any of them lose their jobs, chances are it'll be to that well used phrase, 'market forces'. Much used by the Tories in the 80's when Britain's manufacturing industry was allowed to go to the wall. The banks have played fast & loose with people's money & lives in recent years. If they fall on their sword, I can't imagine there will be outpourings of public sympathy for a few wide boys from the square mile to be honest......

Nor should there be............but what about the clerical staff , secretaries, building maintenance staff etc etc , all on normal salaries, all struggling to pay mortgages , and while its well known on here that i hold a particular brief for the working class, one of the main factors british industry failed in the 80's was that it was extremely uncompetitive, and one of the main factors of that was the way the unions had forced through ridiculous working and grievance practices in the 70's, for british industry to really grow again, root and branch reform in attitudes is needed from both the management and workforce , and as herr tubthumper has pointed out on another thread , we ned investment in craft apprenticeships,and a whole new way of looking at things , we can learn from the germans.