5/10/12

WSJ:
J.P. Morgan Chase 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.

Full article here.

Thoughts?

Comments (57)

5/10/12
http://www.jasonbondpicks.com
5/10/12

at least they didn't blame it on a rogue trader.

5/10/12

Do you think this might have any impact on hiring? I have an internship at JP in ER this summer which I'm pretty hopeful about converting....

5/10/12
In reply to motivator
5/10/12
motivator:

Do you think this might have any impact on hiring? I have an internship at JP in ER this summer which I'm pretty hopeful about converting....

Yes, but fortunately not for you.

Do what you want not what you can!

5/10/12

net loss was only 800 mm. read through the call

Here's the thing. If you can't spot the sucker in the first half hour at the table, you are the sucker.

5/10/12
5/10/12
5/10/12

I still have no effing clue what's going on. I don't speak in VaR

5/10/12
5/10/12

JPM CIO group = bank's internal hedge fund. I have a few friends that work on that desk. Group made $5BLN last year, now down -$2BLN.

5/10/12

$2bn loss + $1bn more potentially = total loss is...

about tree fiddy?

5/10/12

Somewhat funny since the CIO and the "London whale" were just in the news a while ago.

In reply to djrajio
5/10/12
djrajio:

JPM CIO group = bank's internal hedge fund. I have a few friends that work on that desk. Group made $5BLN last year, now down -$2BLN.

no you don't or your friends work at another group...CIO does not make a lot of money and you can confirm that in public statements so don't make untrue remarks.

Do what you want not what you can!

5/10/12
Nabooru][quote=WSJ:

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.

This no doubt has to do with the synthetic credit positions were heard being taken up by the London Whale a few weeks back, seems like they got to closing those out.. of course only AFTER the market heard about it, making the pain so much more.

PS = "CIO" is nothing more than prop trading, merely disguised due to Volcker rule enforcement. Every bank has it now.

5/10/12

Point is, we know the loss came from a position in the IG index... thing is if they were long it doesn't seem like there was that much of decompression in spreads in recent weeks - maybe around 10-15bp max depending on where they actually got in.
Would love to know the CIOs DV01 on that trade lol....

Hey djrajio can you find out for us from your friends?

http://www.jasonbondpicks.com
5/10/12
In reply to alphabravo89
5/10/12
bullbythehorns:

net loss was only 800 mm. read through the call

No, division loss is projected 800m, will depend on where final economics settle. That means the division would have made 1.2bn w/o this trade, so division net is 800m, not CIO net.

5/10/12
5/10/12

Anyone know what's this AFS portfolio that they have $8B in unrealized gains on?

5/10/12

I wonder if Buffet will get a piece of this bank too.

5/10/12

at least Dimon was man enough to admit the loss and tell the truth, unlike Bear and Lehman who tried to hide everything.

5/10/12

on conf call dimon said "they arent going to do anything stupid and unwind the trades at bad prices"...uh oh I've seen how this ends and it isnt pretty. Dude, just rip it off like a band-aid and take ur loss and go home.

In reply to blastoise
5/10/12
blastoise:

Time for new CEO.

Time for non targets to take over these firms.

5/10/12

I hope this doesn't give regulators the ammunition they need to make the volcker rule highly detrimental to ficc market making
http://mobile.bloomberg.com/news/2012-05-10/volcke...

For as much as I've enjoyed Jaimes criticism of over-encroaching regulation, this couldn't be worse timed

IVY for Life

5/10/12

btw is it possible to find out what the underlyers of their open CDS positions are? or is that not public info.

5/10/12

all going down the toilet.. and I thought we could have revoked the Volcker rule!

In reply to trailmix8
5/10/12
trailmix8:

btw is it possible to find out what the underlyers of their open CDS positions are? or is that not public info.

It's called the shadow banking system for a reason.

In reply to Bondarb
5/11/12
Bondarb:

on conf call dimon said "they arent going to do anything stupid and unwind the trades at bad prices"...uh oh I've seen how this ends and it isnt pretty. Dude, just rip it off like a band-aid and take ur loss and go home.

Ever seen the movie Margin Call. Ill admit somewhat fictitious but this reminded me of it lol. I doubt that they will allow much more lose in that area as it will be watched like a hawk after this mess.

5/11/12
In reply to JeffSkilling
5/11/12
JeffSkilling:
trailmix8:

btw is it possible to find out what the underlyers of their open CDS positions are? or is that not public info.

It's called the shadow banking system for a reason.

It was most likely the Markit CDX.NA.IG, either the most recent vintage (http://www.markit.com/assets/en/docs/products/data...) or the series 9 (http://www.markit.com/assets/en/docs/products/data...)

5/11/12

Dimon is a DEAD MAN WALKING.

5/11/12
5/11/12

Blood in the street brothers

In reply to bossman
5/11/12
bossman:
djrajio:

JPM CIO group = bank's internal hedge fund. I have a few friends that work on that desk. Group made $5BLN last year, now down -$2BLN.

no you don't or your friends work at another group...CIO does not make a lot of money and you can confirm that in public statements so don't make untrue remarks.

Or maybe you should go investigate stuff yourself. OP is entirely correct. Read this: http://www.zerohedge.com/news/worlds-largest-prop-trading-desk-just-went-bust

"Macris's team amassed a portfolio of as much as $200 billion, booking a profit of $5 billion in 2010 alone -- equal to more than a quarter of JPMorgan's net income that year, one former senior executive said."

In reply to Bondarb
5/11/12
Bondarb:

on conf call dimon said "they arent going to do anything stupid and unwind the trades at bad prices"...uh oh I've seen how this ends and it isnt pretty. Dude, just rip it off like a band-aid and take ur loss and go home.

I thought the same - let the predatory trading begin!

In reply to ezekiel
5/11/12
ezekiel:
Bondarb:

on conf call dimon said "they arent going to do anything stupid and unwind the trades at bad prices"...uh oh I've seen how this ends and it isnt pretty. Dude, just rip it off like a band-aid and take ur loss and go home.

I thought the same - let the predatory trading begin!

Yup. Would love to see IG9 pushed wider and wider by HFs as JPM screams in agony. Unfortunately for them, a dropping market typically comes with decompression in spreads as we've seen the last 2 weeks.

5/11/12

HFs on the other side of these trades must've made crazy coin

In reply to ezekiel
5/11/12
ezekiel:
Bondarb:

on conf call dimon said "they arent going to do anything stupid and unwind the trades at bad prices"...uh oh I've seen how this ends and it isnt pretty. Dude, just rip it off like a band-aid and take ur loss and go home.

I thought the same - let the predatory trading begin!

They can get really fucked if this is coming from those trades made by the London whale. This might be why they are thinking of holding it or at least saying so. If people know JP needs out and they have all the fucking market they are going to get destroyed.

5/11/12

Doesn't seem that big a deal. JPM made 19bn last year and has an EV of over 700bn. 2bn sucks but, keep it in perspective.

In reply to RufioandHook
5/11/12
RufioandHook:

Doesn't seem that big a deal. JPM made 19bn last year and has an EV of over 700bn. 2bn sucks but, keep it in perspective.

Probably correct that it's not that big a deal IF it is only 2bn, but NEVER again use EV when you're talking about a bank. You're literally begging to get cock-slapped

5/11/12

Haha well thanks for not cock slapping me.

In reply to englandwales
5/11/12
englandwales:
bossman:
djrajio:

JPM CIO group = bank's internal hedge fund. I have a few friends that work on that desk. Group made $5BLN last year, now down -$2BLN.

no you don't or your friends work at another group...CIO does not make a lot of money and you can confirm that in public statements so don't make untrue remarks.

Or maybe you should go investigate stuff yourself. OP is entirely correct. Read this: http://www.zerohedge.com/news/worlds-largest-prop-trading-desk-just-went-bust

"Macris's team amassed a portfolio of as much as $200 billion, booking a profit of $5 billion in 2010 alone -- equal to more than a quarter of JPMorgan's net income that year, one former senior executive said."

ha i saw that and I knew someone will quote this...but this statement is confusing and unconfirmed. Some execs are saying this...and you won't find this in any financial statements as the unit where this CIO is based almost runs at a loss...so i guess i'd like to know what they mean by $5bn profit? It's definitely not net income, but it might be unrealized market gain (paper profits), which as we all know just turned into $2bn loss...so let's verify info we read and not take things as facts from mysterious sources.

Do what you want not what you can!

In reply to RufioandHook
5/11/12
RufioandHook:

Doesn't seem that big a deal. JPM made 19bn last year and has an EV of over 700bn. 2bn sucks but, keep it in perspective.

Yeah, the problem is that it could just be the tip...of the cock about to be forcibly shoved into JPM's asshole.

5/11/12

I thought this was a good take on the situation...not necessarily true, but interesting
http://dealbreaker.com/2012/05/the-tale-of-a-whale...

Do what you want not what you can!

In reply to bossman
5/12/12
bossman:
englandwales:
bossman:
djrajio:

JPM CIO group = bank's internal hedge fund. I have a few friends that work on that desk. Group made $5BLN last year, now down -$2BLN.

no you don't or your friends work at another group...CIO does not make a lot of money and you can confirm that in public statements so don't make untrue remarks.

Or maybe you should go investigate stuff yourself. OP is entirely correct. Read this: http://www.zerohedge.com/news/worlds-largest-prop-trading-desk-just-went-bust

"Macris's team amassed a portfolio of as much as $200 billion, booking a profit of $5 billion in 2010 alone -- equal to more than a quarter of JPMorgan's net income that year, one former senior executive said."

ha i saw that and I knew someone will quote this...but this statement is confusing and unconfirmed. Some execs are saying this...and you won't find this in any financial statements as the unit where this CIO is based almost runs at a loss...so i guess i'd like to know what they mean by $5bn profit? It's definitely not net income, but it might be unrealized market gain (paper profits), which as we all know just turned into $2bn loss...so let's verify info we read and not take things as facts from mysterious sources.

Further info: "The CIO unit reported profits of $453 million in the March quarter, and had been expected to earn $US200 million in the three months to June. It is now expected to post a quarterly loss of $US800 million now, and JPM can digest that easily. It had $US2.32 trillion of assets and $US190 billion of shareholders' funds at the end of March, and should still post a $US3 billion-plus June-quarter profit."

Source: http://www.smh.com.au/business/jpms-bombshell-leav...

In reply to englandwales
5/12/12
englandwales:
bossman:
englandwales:
bossman:
djrajio:

JPM CIO group = bank's internal hedge fund. I have a few friends that work on that desk. Group made $5BLN last year, now down -$2BLN.

no you don't or your friends work at another group...CIO does not make a lot of money and you can confirm that in public statements so don't make untrue remarks.

Or maybe you should go investigate stuff yourself. OP is entirely correct. Read this: http://www.zerohedge.com/news/worlds-largest-prop-trading-desk-just-went-bust

"Macris's team amassed a portfolio of as much as $200 billion, booking a profit of $5 billion in 2010 alone -- equal to more than a quarter of JPMorgan's net income that year, one former senior executive said."

ha i saw that and I knew someone will quote this...but this statement is confusing and unconfirmed. Some execs are saying this...and you won't find this in any financial statements as the unit where this CIO is based almost runs at a loss...so i guess i'd like to know what they mean by $5bn profit? It's definitely not net income, but it might be unrealized market gain (paper profits), which as we all know just turned into $2bn loss...so let's verify info we read and not take things as facts from mysterious sources.

Further info: "The CIO unit reported profits of $453 million in the March quarter, and had been expected to earn $US200 million in the three months to June. It is now expected to post a quarterly loss of $US800 million now, and JPM can digest that easily. It had $US2.32 trillion of assets and $US190 billion of shareholders' funds at the end of March, and should still post a $US3 billion-plus June-quarter profit."

Source: http://www.smh.com.au/business/jpms-bombshell-leav...

"It had $US2.32 trillion of assets and $US190 billion of shareholders' funds at the end of March, and should still post a $US3 billion-plus June-quarter profit."

and by it they mean JPM not CIO

Do what you want not what you can!

5/13/12

What do you guys think, sell JPM and take the hit? Or stick it out?

5/13/12

A bit more info concerning the trade and CIO... + the chick is quite hot :-]
http://www.washingtonpost.com/business/jpmorgan-tr...

5/13/12

I love that there was so much PR in the past couple of years about how different JP Morgan was from other banks and how much of visionary CEO Diamond was and all of that nonsense... Nice reality check.

In reply to Relinquis
5/13/12
Relinquis:

I love that there was so much PR in the past couple of years about how different JP Morgan was from other banks and how much of visionary CEO Diamond was and all of that nonsense... Nice reality check.

I assume you mean Dimon, not BarCap Diamond

In reply to englandwales
5/13/12
englandwales:
Relinquis:

I love that there was so much PR in the past couple of years about how different JP Morgan was from other banks and how much of visionary CEO Diamond was and all of that nonsense... Nice reality check.

I assume you mean Dimon, not BarCap Diamond

Yeah. I mis-typed... Not much recent propaganda of how wonderful Bob Diamond of Barcap has been.

5/13/12
5/14/12

From the article above...

"Expected to leave as soon as Monday are Ina Drew, who has run the risk-management group tied to the losses since 2005; Achilles Macris, who was in charge of the London-based operation that placed the questionable trades; and trader Javier Martin-Artajo."

Do you guys think Jamie Dimon should resign from his post as CEO of JP Morgan as well? What about resigning from his position on the Federal Reserve Bank of New York's board as Elizabeth Warren has suggested?

Thoughts?

5/14/12

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In reply to Edmundo Braverman
5/14/12
5/14/12

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