CHASE posts a 2 BILLION DOLLAR trading loss, there is a g-d!

jkimcpa said:   enc0re said:   The Nordic countries (Norway, Sweden, Finland) had the right idea during their banking crises in the 90s. Any banks whose owner's equity went negative because of bad debts were nationalized. Shareholders got nothing since the book value was negative. The government stripped off the bad debts and auctioned the now solvent banks off IPO style.

Here we wouldn't dare nationalize (socialism!!!) a bank. We think we're so much more free market by giving them trillions in interest free loans to lend back to the government at a profit. Capitalism indeed. [/cynicism]Typical strategy of the left - cherry pick a capitalistic strategy implemented by socialist countries and present it as an auspicious socialist ideology, and cherry pick a socialistic strategy implemented by a so-called-capitalistic country and present it as capitalism.It sounds like you approve of what the Nordic countries did. Are you saying that the nationalization of a bank is capitalism and not socialism? Would you be in favor of the US nationalizing banks, car companies, or health care?

Sure others made the 2b that JPM lost. But this is a mute point. The scandal will contribute to deflation, as it inhibits banksters' ability to continue acting out and lever customer money. So these 2b changing pockets will eventually lead to 2t leaving the system

You can even argue that ^
When I followed the volume closely in the pit, it was quite an eye-popper to see same pit-broker for same prop trade-house both Buy and Sell in size at the same price in almost no time. It's like what the banks do with you: you dwell and count your $100-$500 bonuses they award - while they count your taxpayer funds floating to them in trillions from the back door

Don't see how what the Nordic countries do is relevant - their banks do not run their countries.

Here, it's a bad Yakov Smirnoff-style joke: "In America, banks regulate government!"

No matter ... this loss will be in the financial headlines for a few days, bloggers will pointlessly overanalyze "what this means", some politicians will make speeches to fool the great unwashed into believing regulations might be tightened by their heroic lawmakers, the market will stop panicking after a week, and Chase's stock price will return to its previous level in a month or two. In the end, no laws will be effectively implemented or strengthened (because politicians aren't going to offend those who finance their re-election campaigns) and normal service will be resumed ...

SinglePapa said:   http://www.zerohedge.com/contributed/2012-19-11/too-big-wean

enc0re said:   The Nordic countries (Norway, Sweden, Finland) had the right idea during their banking crises in the 90s. Any banks whose owner's equity went negative because of bad debts were nationalized. Shareholders got nothing since the book value was negative. The government stripped off the bad debts and auctioned the now solvent banks off IPO style.

Here we wouldn't dare nationalize (socialism!!!) a bank. We think we're so much more free market by giving them trillions in interest free loans to lend back to the government at a profit. Capitalism indeed. [/cynicism]
Neither is a good solution to capitalism at all, and I would argue that the Nordic solutions are even worse for society than what we did.

Let's examine bankruptcy concepts in general. Why does it occur? They owe money that they cannot repay.

Before
Value of the business: $500
Debt: $700
Common Stock sold: $300

After
Value of the business: $500
Debt: $200
New common stock: $300
Old common stock: $0

See the issue in the before situation? They have more debt than the business is worth, and if they cannot repay their liabilities, they will be pushed into bankruptcy. What should happen? If we actually follow the laws in this country, common stock is wiped out, some of the debt holders now own the business, and they are made solvent. The value of the business in this case has not changed, just simply how it is financially structured. This is why even good companies can go into bankruptcy.

In the crisis, the government should have let the banks go under and come out recapitalized. The risks they were facing included the possibility that the bankruptcy process could take way too long and hold things back, because a company under bankruptcy will be less effective/productive than one that is not.

LeveragedSpeculator said:   blackie7955 said:   I am not usually one to get any pleasure from someone elses misfortune, but this is a rare exception. Maybe they should focus their resources on managing their rediculous risk and spend a little less time and energy closing the credit card accounts of paying customers with perfect credit. CHASE I have one word for you.


HAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA

Chase earned 19B last year and has $2T in deposits. $1B is .05% of this.

Even if it grows to 8B under a crazy worst case scenario, it's not a lot of $ to a megabank.

Chase don't care. What probably happened is the administration talked him into a govt post if he cooperates and backs down from volker opposition and goes along with the re-election campaign. They might've told Jamie: "you either play along and allow volker rule & we give you sweet govt post or we try to break up TBTF banks" and he might've picked the lesser evil. That's what I think anyway.

How much Chase has in deposits is irrelevant, since it acts as a custodian to much of these funds. Chase holds Vanguard and TIAA-CREF among others and doesn't make money on these funds beyond custodial fees (hopefully).

A $2B loss on $19B earnings represents ~10.5% loss not 0.5%. This was a $100 billion bet, and it could be much more than $2B in losses in the end. Chase is already estimating their bonus pool will be 50% of what it was last year. This is potentially a much bigger problem for Chase then you are making it out to be.

Spac3d said:   The CIO office lost $2.3B on these sets of hedge for the quarter, they also made more than $1B of gains on other trades QTD, or $1B+ QTD.

Most media stories ignored their gains.
Thank you for bringing this up - the attention is only around what didn't work. If they made 50 bets like this, and 49 worked out, then maybe they're perfectly happy with this loss, because over the long term it works really well.

Funny u should mention: Dimon is no longer hirable by ANY administration

Chase don't care. What probably happened is the administration talked him into a govt post if he cooperates and backs down from volker opposition and goes along with the re-election campaign. They might've told Jamie: "you either play along and allow volker rule & we give you sweet govt post or we try to break up TBTF banks" and he might've picked the lesser evil. That's what I think anyway.[/Q said:

nycll said:   ankitgu said:   Spac3d said:   The CIO office lost $2.3B on these sets of hedge for the quarter, they also made more than $1B of gains on other trades QTD, or $1B+ QTD.

Most media stories ignored their gains.
Thank you for bringing this up - the attention is only around what didn't work. If they made 50 bets like this, and 49 worked out, then maybe they're perfectly happy with this loss, because over the long term it works really well.
Trust me, they are not happy.

Exactly, heads are rolling.

http://www.cnbc.com/id/47407166

LeveragedSpeculator said:   Kat009 said:   ankitgu said:   Spac3d said:   The CIO office lost $2.3B on these sets of hedge for the quarter, they also made more than $1B of gains on other trades QTD, or $1B+ QTD.

Most media stories ignored their gains.
Thank you for bringing this up - the attention is only around what didn't work. If they made 50 bets like this, and 49 worked out, then maybe they're perfectly happy with this loss, because over the long term it works really well.

That would be great if the whole world wasn't now aware of JP Morgan's position on a $100 billion bet. Hedge funds are going to be hammering this position until (and while) Chase exits. I wish them luck mitigating the losses.

Hedge funds were already well aware for weeks+. When the WSJ reported some trader from France who wore black jeans to the London office WEEKS AGO and the position he built up you can guarantee hedge funds were on or ahead of the curve with that article. But yeah they built up a huge position around an index that isn't that liquid.

Very true. I guess my poorly stated point is that the $800 million only accounts for losses on this bet as of Q2 2012. There is a high likelihood that this is only the beginning.

On the facts so far, this is a story of incompetence, rather than malevolence.

I take them at their word that they intended to hedge existing exposure. This means that having already "bet" on red, they should have placed an offsetting "bet" on black. But someone didn't get the memo, and placed a different, incorrect "bet."

The regulators should encourage/demand that JPM and other banks to make the "right" bet, but they should not be barred from the table altogether, else they would have potential for even larger losses.

delzy said:    Why should banks be allowed to gamble with deposits at all. If they want to invest, they should use their own capital and become a hedge fund.

SO: What would you suggest banks do with deposits? Buy only "riskless" securities? Or, more likely, lend money to you and me, to buy houses & cars, start businesses, get college educations, etc.? If you think the latter, then -- guess what -- that's "gambling," essentially making a bet that the borrower will pay back the loan. The way to reduce the risks (credit, interest, currency, etc.) that come along with that activity is to hedge the bet. Correctly executed (vs. what JPM did), hedges reduce risk, by transferring it to another party.

If you're in favor of banks lending money, and you're against hedging, then you're for banks taking on more risk than required.

jkimcpa said:   Except what they are calling hedges aren't really hedges. Synthetic credit products are not appropriate for deposits.

They were not trying to hedge deposits, they were trying to hedge corporate credit risk. Doing so via an index based on corporate credit risk is just as valid as hedging equities using S&P index products, or selling covered call options.* Granted, the position they took did not actually provide any protection, due to ineptitude, miscommunication or something else, but the point is that hedging works when properly executed.

* I bet every mutual fund in which you are invested uses some hedging strategy.

tuphat said:   jkimcpa said:   Except what they are calling hedges aren't really hedges. Synthetic credit products are not appropriate for deposits.

They were not trying to hedge deposits, they were trying to hedge corporate credit risk. Doing so via an index based on corporate credit risk is just as valid as hedging equities using S&P index products, or selling covered call options.* Granted, the position they took did not actually provide any protection, due to ineptitude, miscommunication or something else, but the point is that hedging works when properly executed.

 

* I bet every mutual fund in which you are invested uses some hedging strategy.I don't own any mutual funds, but I bet you there are zero mutual funds that hedges using synthetic credit, and very few use any hedging strategies.

Aside from the fact that I was saying they were using bank deposits as collateral to their faux-hedge positions, sounds like you agree with what I said.

If the position does not provide protection, by definition it is not a hedge. I never bought off on the stipulation that longing HP and shorting Dell = hedge. Traders call it a hedge to defend their gamble.

Mutual funds aren't playing with federally insured money. They also aren't party to creating the money supply. As such, they get to do more or less whatever they want.

If you want to be part of a fractional reserve banking system, you should have to play by very tight rules. Want to gamble? Go raise your own capital and pay market rate for it.

Spac3d said:   The media always hypes the bad news and downplays good news.

The good news: Someone else posts a 2 BILLION DOLLAR trading gain.

Man, this happened right before the NATO summit. Lets give those crazy hipster protestors another reason to act a fool in Chicago this week.

BNizzle said:   nsdp said:   Fox News says time to bust up the big banks!!! http://www.foxnews.com/opinion/2012/05/11/after-jpmorgan-chase-m...

Did they just air condition Hell?

No, Fox plays to the tea party viewer.

Fox invented the tea party. If you pay attention and remember things, you might recall they planned the very first tea party event and broadcast the meeting details over and over on their TV station. It snowballed from there. I don't know much more than that.

footprints of JPM unwind ... or something else?
The timing of this highly unusual maneuver is intriguing....

+------------------------------------------------------------------------------+

State Street Junk ETF Used to Obtain Up to $780 Million of Bonds
2012-05-14 17:38:33.488 GMT

By Lisa Abramowicz
May 14 (Bloomberg) -- An investor used State Street Corp.’s
exchange-traded fund to anonymously obtain almost $780 million
of speculative-grade bonds without moving prices in the
secondary market.
The investor on May 10 exchanged as much as 19.7 million
shares in the SPDR Barclays Capital High Yield Bond ETF for the
equivalent of about $779.3 million in bonds held by the fund,
according to data compiled by Bloomberg.
The redemption, the biggest in the four-year history of the
$11.4 billion fund, came after the investor had accumulated
shares over several weeks, according to Knight Capital Group
Inc., which brokered the trade. The investment in the fund,
which tracks the Barclays Capital High Yield Very Liquid Bond
Index, may mark a new way for investors to gain control over a
large group of bonds without tipping off other investors.
“He used the ETF to get his exposure initially; he figured
it was an easier way to maintain his anonymity,” Eric
Lichtenstein, the global head of ETF trading at Jersey City, New
Jersey-based Knight Capital, said in a telephone interview. “It
was a unique approach. This was his plan going into it.”
An additional 700,000 shares were redeemed on May 11,
Bloomberg data show.
ETFs typically allow individual investors to speculate on
securities without directly owning them. Unlike mutual funds,
whose shares are priced once daily, ETFs are listed on exchanges
and are bought and sold like stocks.
ETFs generally don’t buy securities directly when they
receive inflows or sell them to meet outflow requests. Instead,
an authorized participant receives cash from investors and uses
it to buy securities in exchange for ETF shares. With redemption
requests, the approved participant returns shares to an ETF’s
fund manager and receives securities.
Knight Capital is the largest market-maker of ETFs, trading
more than 20 percent of the daily volume, Lichtenstein said.
Junk bonds are ranked below Baa3 at Moody’s Investors
Service and lower than BBB- at Standard & Poor’s.

For Related News and Information:
News about high-yield bonds: NI HYL <GO>
News about ETFs: NI ETF <GO>
High-yield bond league tables: LEAG44 <GO>

delzy said:   jkimcpa said:   OliverQuackenbush said:   BNizzle said:   nsdp said:   Fox News says time to bust up the big banks!!! http://www.foxnews.com/opinion/2012/05/11/after-jpmorgan-chase-m...

Did they just air condition Hell?

No, Fox plays to the tea party viewer.

Fox invented the tea party. If you pay attention and remember things, you might recall they planned the very first tea party event and broadcast the meeting details over and over on their TV station. It snowballed from there. I don't know much more than that.Pretty sure it was Rick Santelli.My Lord, your historical recollections have been programmed. The original Tea Parties were Libertarian gatherings promoting Ron Paul's ideas attacking the Federal Reserve and the government overspending that it facilitates. No, you won't find that on wikipedia or any other main-stream outlets because the fundamental idea is abhorrent to the establishment. Once the teaparty movement had a head of steam, Rick Santelli and other neo-con jerkoffs like Dick Armey somewhat successfully jumped in front of it and took it over. The Libs tried the exact same thing with the occupy movement but were unsuccessful because occupiers were less brainwashed TV-Heads than granny with her yellow flag.

In fact, Fox News was the primary organization that diverted the growing grass roots movement from its original objective of ending the fed and its demon-spawn of deficit spending.1) Who's programming me?
2) Were the original libertarian gatherings marketing themselves as "tea parties"?
3) Rick Santelli is a neo-con?
4) Why you mad though?