Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

  • Shop at Amazon!

    Use the Observer's Amazon.com link to shop normally. MFO will receive a small commission for each sale, and it won't cost you a penny more.

JPM Has Surprise Conference Call to Announce "Significant" Loss

edited May 2012 in Off-Topic
Tomorrow will be fun.

JPM Crashing After It Convenes Emergency Call To Advise Of "Significant Mark-To-Market" Losses In Bruno Iksil/CIO Group/JPMORGAN SAYS CIO UNIT HAS SIGNIFICANT MARK-TO-MARKET LOSSES

http://www.zerohedge.com/news/jpm-crashing-after-it-convenes-emergency-call-advise-significant-mark-market-losses

JPM Down 6.5% in the after hours (now nearly 7%). Many other financials also down significantly (almost not as bad as JPM.)

Dimon on conference call (CNBC): "Risk (from situation) could last for a couple of more quarters and result in more losses."

Dimon also on conference call: (CNBC): "Just because we were stupid doesn't mean everyone else was." (one: I'm sure that bit of humor was not appreciated by shareholders. Two: it wouldn't surprise me if other financial institutions are doing similarly stupid things.)

And: " At the end of the day, the real question is why did JPM put in so much money at risk in a prop trade because we can dispense with the bullshit that his was a hedge, right? Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least "net" is not "gross" and we know, just know, that the SEC will get involved and make sure something like this never happens again"

http://www.zerohedge.com/news/worlds-largest-prop-trading-desk-just-went-bust

Not saying to buy/sell off of this news, just the messenger so when the market is down tomorrow, people are aware of a primary reason why.

Comments

  • edited May 2012
    Scott - I assume you won't be loading up on Spain's Banco Santander (STD) shares anytime soon? :-)

    By the way, Cisco also slid down more than 10% today.

  • edited May 2012
    Reply to @Kenster1_GlobalValue: I would be mildly interested in the Brazil financials ETF and some other things of that nature if they came down far enough.

    I own a resort property fund that's heavily in Greece. lol. Maybe I'll buy more of that at 30-something cents. It's gone from around $4 in 2007 to 31 cents (I bought it much more recently.) Net Asset Value, however, is quite a bit higher. Whether or not that value is realized, who knows. It is, however, a very pretty-looking (literally, the areas in Greece and elsewhere are gorgeous - chart-wise it is not pretty) lottery ticket.

    It's not on my list, but I find Cisco interesting, especially if it goes towards 14-15.
  • Ouch. I hold a handful of JPM shares. Should have bailed when it was at $45 not too long ago (still below what I bought it at circa 2005). Hey, but I'm still raking in that 2.95% dividend, though. For now.

  • Jamie Dimon was lashing out to Fed for having overly strict regulation. If they take such risks now with this oversight that is considered too intrusive, I do not want to imagine what they would do if oversight is reduced. Deposit taking banks should be very strictly regulated like a utility.
  • Reply to @Investor: You might want to check out the book "13 Bankers". Simon Jonhson (think he's an MIT prof of econ) appears to be in agreement with you. System still very very broken. Expect another banking crisis, soon.

    http://13bankers.com/
  • Yes, yes, yes and a hearty "Amen!!" to that. My favorite comment on ZeroHedge: "This will trigger a bunch of well-deserved bonuses."
  • edited May 2012
    Reply to @Old_Joe: From Bloomberg a month ago: "The shifting role of the CIO group at JPMorgan, which reported record firmwide profit for 2011, underscores how blurry the line can be between “proprietary trading” and hedging, and it highlights the challenge U.S. regulators face in curbing speculative bets by federally backed lenders under the so-called Volcker rule. JPMorgan, whose $2.27 trillion of assets at year- end made it the biggest U.S. bank, says the CIO manages the firm’s risks, with trades like Iksil’s forming a part of that effort.
    ***“It’s a complete tempest in a teapot,”*** Dimon said on a conference call with investors today after the bank announced first-quarter earnings. “Every bank has a major portfolio and in those portfolios you make investments that you think are wise.”"

    "The CIO’s growing size and market power have made it an increasingly important customer to Wall Street’s trading desks and a market influence watched by hedge funds and other investors, the former employees said. Iksil’s positions in credit-derivatives have become so large that some market participants dubbed him “Voldemort,” after the villain of the Harry Potter series who’s so powerful he can’t be called by name."

    "Some of Macris’s bets are now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets, the former executives said, based on knowledge gleaned from people inside the bank and dealers at other firms. Bruno Iksil, a London-based trader in Macris’s group, gained attention last week after moving markets with his trades, drawing a comparison to Federal Reserve Chairman Ben S. Bernanke’s power in the government-bond market."

    "Tempest in a teapot", indeed. Or, better yet, as Jamie Dimon noted earlier: "Just because we're stupid doesn't mean everyone else was."

    Now, why are people angry at Wall Street again? CNBC is confused as to why people are so upset at the financial industry.

    http://mobile.bloomberg.com/news/2012-04-13/jpmorgan-said-to-transform-treasury-to-prop-trading?category=/

    So, we bailed all of these entities out and, as I've been saying FOR THREE YEARS NOW, they haven't learned a DAMN THING from what happened in 2008. Too Big to Fail has become bigger - and anyone who believes that these banks will not be bailed out again if something serious comes unglued is delusional. No regulation, no lessons and history will almost certainly repeat itself because rather than making them into utilities, they have so cozied up to government that there will be no attempts at real changes until another crisis.

    As for investing in these supposed "values", don't be surprised when there's another "surprise" conference call that's far worse than what JPM announced today when another bank gets into trouble with some ridiculously outsized bet that it can't unwind.

    Um, lastly, if JPM has large problem positions that it is finding difficult to unwind, I think other players just may push on those positions.

  • Max Keiser entertaining view of Jamie Dimon:
  • Jamie Dimon: Financial Predator, Exhibit A. Spooge-licking suckbag.
  • Took advantage of today's "microrally" to drop equity fund exposure down to 24% from 27%. (Jamie called me last night and gave me the word...) Talk about pure luck!
  • Canadians Dominate World’s 10 Strongest Banks

    http://www.bloomberg.com/news/2012-05-02/canadians-dominate-world-s-10-strongest-banks.html

    Canadian banks invoke their strong capital levels, the country’s conservative lending culture and strict regulatory oversight under a single supervisor as reasons for their showing. The supervisor requires Canadian banks to hold a higher level of capital than do international standards.

    Major banks around the world follow the rules of the Basel Committee on Banking Supervision -- an arm of the Bank for International Settlements, based in Basel, Switzerland, that draws banking regulators from 27 nations to set standards for lenders. The committee issued its first internationally accepted capital guidelines in 1988.

    Beyond Basel
    Those rules, known as Basel I, focused on credit risk: the possibility that borrowers might not pay back their bank loans. The committee required banks to hold total capital, at least half of it in Tier 1 capital, equal to at least 8 percent of their risk-weighted assets.

    Canada’s regulator, the Office of the Superintendent of Financial Institutions Canada, has gone beyond those levels in its requirements, a stance that has shielded lenders from some of the financial follies that undermined other global banks, especially in 2008. As far back as January 1999, OSFI sent a letter to Canadian banks telling them to set aside at least 10 percent of total capital as a cushion for losses. “I do not think it was popular at the time,” says Julie Dickson, OSFI’s superintendent. “That’s where having a supervisor with a pretty clear mandate allows you to take those unpopular decisions.”

    {...}

    Some of Canada’s lenders elected to exceed OSFI’s requirements. Investors criticized Bank of Nova Scotia (BNS), CEO Richard Waugh says, for holding too much cash. “So many people in 1999 and 2001 said: ‘Scotia, you’ve got excess capital because you’re way above Basel, way above OSFI. You should do stock buybacks and extra dividends,’” Waugh recalls in an interview at an annual investor meeting in Saskatoon, Saskatchewan. “We said, ‘It’s not excess, because it was getting 18 percent return on capital, which was a very good place, and our shareholders would have had a difficult time reinvesting elsewhere.’”

  • Chase's Savings Rate (APY) is a whopping 0.01% --- how will they ever keep that up? Will they have to drop it to 0.005%?

  • Here's what happened...blame it on one of their traders nicknamed the "London Whale."

    http://www.marketwatch.com/story/stock-futures-sunk-by-london-whale-2012-05-11?pagenumber=1

    The trading losses, revealed by Dimon in a surprise conference call after Thursday’s closing bell, stemmed from trades in the bank’s chief investment office, where a single trader — dubbed the “London Whale” — reportedly took massive positions in credit-default swaps.



  • have you folks watch ground hogs day?
    sounds like summer 2008 again, stocks starting to head down/plateau. many banks have tons of collaterals. then a major crash happen. Banks don't want to take the blames but they did not learnt a dame things since 2008. still takings lots of risks. if EU goes down, so does the US bank and our economy. Another 25% down on the way heh? By the ways, we could never figure out what happens behind close doors and smaller investors are the last ones out of the tides
  • Reply to @johnN:

    You noted: "Banks don't want to take the blame but they did not learn a damn thing since 2008. still taking lots of risks."
    The banks known exactly what they are doing and who is running the financial show. Until the banking units are divided; and the invesment bank side is at risk to whomever invests money into these; nothing will change.
    Those who can control the aspects of banking regulations need to know and change. I suspect there is too much cash (lobbyists) floating around to be of value for a change. Many see the dark, black smoke; but do not expect a resulting large fire.

    Regards,
    Catch
  • These guys need to go to rehab then emerge in a land far away.
  • Reply to @catch22:
    Hi catch, I don't know if you watch PBS frontline on banking industries done recently. There was NO CHANGE in terms of their thinking/manage strategies the past 3 years. In fact, THEY SPENT moderate amount of tax payers $$ during the bail outs to make the lobbiests go away. I highly recommend watching this show. You'll be mad as hell if you are a taxpayers. Their practices remain the same and they act like nothing happened since 2008. dodge frank overhaul did not get approved/passed - according to frontline
    http://www.pbs.org/wgbh/pages/frontline/
  • Not much reaction from Wall Street --- S&P 500 is still up.

  • Reply to @bee: Here is another take on JPM so called "hedge" . For sure US banks will have another round of disaster given the current laws have not corrected the existing problems.

    http://www.bloomberg.com/video/92465009/

  • A bit more on this,,,

    ⇒ NY Times
  • As I guessed would be the case, there were apparently a number of hedge funds on the other side of JP Morgan's trade:

    http://www.efinancialnews.com/story/2012-05-11/bluecrest-blue-mountain-profit-jp-morgan-losses
Sign In or Register to comment.