JP MORGAN’S “EGREGIOUS ERROR”
By Surly Trader
When you are the most respected bank remaining in the United States, you tend to shy away from words like “egregious” when talking about your business. Actually, everyone who has made a mistake tends to shy away from the word. JP Morgan’s Jamie Dimon did not falter from using it in describing their mistake as:
…one we put in the egregious category and I understand fully why you or anybody else will question us generally.
The firm is describing the losses as $2B that have occurred in the last 6 weeks. They are also comically calling the rogue program a “hedge“. The interesting part will be what happens going forward:
There is going to be a lot of volatility here and it could easily get worse this quarter – or better, but could easily get worse – and the next quarter we also think we have a lot of volatility.
This is blood in the water (street) and there will surely be sharks circling and trying to make the most of the predicament. Jamie Dimon profited from the explosion of amaranth and many others, maybe Ken Griffin will profit from Jamie Dimon’s stalwart JP Morgan.
Read FT’s summary of the debacle here.
10 Comments
I threw up but don’t feel better.
Balance Sheet Size 12/31/11: $2.2 trillion
Off-Balance Sheet Commitments 12/31/11: $72 trillion
dimon trying to cover his ass
Remarkable.
I can remeber being at a Hotel with someone at the top of Wells Fargo who no longer works their. It was Tuesday and something was on his mind. Near the end of our lunch a question was asked. He then paused looked around and given the dynamics of this get together…he told a story of the Federal Reserve Bank on Sunday night saving Bears Sterns. This was Tuesday. He said the deal was done at the last minute late into Sunday evening early Monday morning. He said had this not happened the system would have collapsed. That his contact at the Federal Reserve was keeping him abreast to these events and called him Monday on the flight over to where this event was taking place.
I learned a couple of things that day. One- What ever is going on those who can profit or would lose their ass are being aprised of what is occuring. Two- while I tried to get closer to this person it was obvious I will not be connected to the phone tree these guys profit from.
All I have is the price action to tell me or help me in determining what is happening. That’s probaly all I need.
If I’m not mistaken…Bears Sterns was founded on May Day. And oddly enough it was bought by JP Morgan(such a great deal for Bears Sterns) for the very reason JP Morgan finds itself in trouble. 2 Billion is not much right? But I wonder..back in March of 2008..I heard nothing of this secret meeting over the weekend. I was lucky to get that ditty of information which..I did nothing with.
Now I wonder what happens to the daisy chain of LTRO/QE/ etc. once some of the money on reserves is speculated with and lost. Maybe beowulf knows how what happens next. May Day seems appropriate for JPM Morgan. Tuth comes out of error more readily than out of confusion.
But if your not confused with what’s going on the financial markets, you are just not thinking clearly.
Risk is part of this game. Nothing new. We all lose. I just wonder how 20% of ones 1/4 Profits get made up with out taking more risk.
I am under the impression the trading desk portfolio this $2 bln loss came from is worth north of $275 bln, or less than 1% loss. That’s probably too naive/simplistic a perspective?
If their portfolio is $275b, how much of that is leverage? Let’s say they have $25b in assets at risk?
I admit I don’t know, but I don’t know why institutions are allowed to trade with money borrowed from the Federal Reserve and backed by the taxpayer?
Bring back Glass Steagall before these pampered fools bring down the entire world financial system.
Perhaps JP Morgan thought they could earn a lot of money by betting that oil would peak in late may, june. Perhaps this was meant to compensate their dismal/negative income(-stream) from low yielding T-bonds/bills ?
Thank God Jamie is still at the helm. Hate to think what would happen without his leadership. Good to know even an egregious error can’t cost the great man his job.
Next step? Treasury or bust!
yeah..amaranth unwind…ltcm unwind…great deals !