What about that JP?

RobertBrusca's picture

JPMorgan Chase this past week exhibited perfect timing; not for itself but for regulators trying to slip the noose of tighter regulation around its neck. The $2billion loss reported may be a loss that stemmed from exactly the kind of thing that the Fed has been trying to limit by constricting banks’ trading activities.

But with new revelations the plot thickens, or thins depending on what you believe…

JPMorgan’s huge loss is now rumored to be in the process of leading to three top-level departures. Interestingly ‘The Whale’ is not among them.

This loss is being portrayed as the result of hedging activities gone-bad in responses to risk-management stemming from the European debt crisis. And that might be the way it happened. Jaime Dimon is furious with his people for this mistake. Heads are rolling. This big public black eye will set him back as the mouth-piece for banks against heavier regulation.

But the real question is whether this loss was from actual hedging and was the result of an attempt to mitigate risk or whether it was from an attempt to profit from the debt crisis itself. By not firing The Whale up front the PR angle is that it was not a big trading loss, but something else. But, of course, JP is aware that it is being watched.

While The Whale is not being dispatched immediately he is rumored to on his way out too. But this time it is very much to JP’s advantage to portray this as a hedge gone wrong than as a bet gone wrong. But how do we know which it was and will anyone ever really find out?

When you are too big to fail you can take all kinds of risks because the sun always comes up in the morning for you. Was JP gaming its TBTF status or was it really a hedge gone wrong?

Was this a sub-zero hedge or an outright loss?

Inquiring minds want to know.

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Reptil's picture

Possible alternative #3:
The "dumb mistakes" are all by design, it's a slow an controlled takedown of the global economy. The goal is 20% not so free survivors (enough to sustain a society so the elite can live comfortably). By trying to comprehend somewhat strange events using financial or economical "strategy" the true drive behind this descent remains "tinfoilhat" territory and thus out of focus, because those that planned this are beyond "rules and regulations". In a planned economy, some just are.
I'm not saying that's it. I'm saying it's a possibillity, and there are plausible arguments, as there are for the other two. This being ZH, I think ppl. don't shy away from considering some theory just because it's not within "normal expectations".

Possible alternative #4: Some men just want to watch the world burn.

contrabandista13's picture

I just love this pundetry.  Everybody is an expert after the fact...  2bill is small potatoes for JPM....  The problem is not that they lost 2 to 4bill...  The problem is that someone leaked the loss to the press bofore JPM could smooth it out over a few quarters....  So from here on, I'm going to call Liz Warren to get her aprooval before I put on a trade, or better yet, I'll post it right here to get your approval....  Give me a motherfucking break....!  What a bunch of pussies....!

BeetleBailey's picture

Robert....I am utterly disappointed that you came up with this seemingly 5th grade book report on something that is so obvious that a fellow 5th grader could have come up with - and done a better job with it.

You missed putting in "all in all" - 3 words that gin up the required word count for Ms. Flargum's 5th grade class requirement.

Inquiring minds here really want to know how....you derive a paycheck.....and who pays it.

ebworthen's picture

Goop point.

FED Operation Twist ends in June.

This could be a subtle strategy employed in a loud way to grease the rails for QE3.

At the same time - if it brings about new "regulations" - would be a convenient way to get bailed out again after another crisis - blaming the regulations for the need to gamble ("hedge").  The next crisis, already here in many ways, include:  runs on Spanish and Italian banks, collapse of the Euro, no improvement in unemployment in Europe and U.S..

More FED cotton candy will keep equities on their sugar high but not improve the economy.

If the TBTF institutions could cry "crisis" in 2008 and get bailed out they can do it again.  Remember how they blamed Congressional legislation and regulations for playing craps and roulette with MBS's and CDS's?  Yeah, like that.

mt paul's picture



Sequitur's picture

"Was this a sub-zero hedge or an outright loss? Inquiring minds want to know."


Professor Brusca:

Wonderful article. Your JPM trading hypotheticals are as useful as my Congressional testimony concerning the $1.6 billion that was stolen from my customers.

- John Corzine, MF Global

Charles Wilson's picture

"Jaime Dimon is furious with his people for this mistake."


Jamie's mad!

That oughta change the setting a little bit!

"No, seriously. Those little Greek people may have to eat dirt.  Tough.  They should try the Georgia Red Clay diet.

But this has really made me...irate.  Darlin', howza 'bout pouring a little more of that wine, OK?"

If there's ONE THING I RILLY don't need to read about right now is how mad ol' JD is.



williambanzai7's picture

If you don't know why the Whale has not been cut loose yet, you have no clue what is going on.

You don't need to watch Margin Call.

All you need to do is think about Joe Cassano.

El Oregonian's picture

This whale's oil lights many, many lamps...

Hedgetard55's picture

Robert the Brusca, didn't he betray Mel Gibson in that film about Scotsmen in kilts?

Elmer Fudd's picture

Damm, economists sure are smart...

piceridu's picture

Imagine for a second, you're paying bills, and you have to make a payment for your kid's tuition. Now it's the end of the quarter so you're checking out your son's next quarter schedule and this is what you see:
Economics - Professor Robert A. Brusca

Clowns on Acid's picture

Bobby - Seriously....this "master of the obvious" tripe has taken a new meaning.

Having worked for a number of institutions in the past where one would have the morning "analysis" by the on staff economist, rarely meant anything for the traders.

Yes when "figures" were coming out, and indeed after they were out, traders would dissect the economic analysis team's opinions and breakdown of the figures. But not today, or in fact in the last 3 or so years.

Today, as a trader, one takes the economists view as a lark. With money printing and QE and Twist by the Fed, any typical economists view is worthless. Who can predict when the Fed will intervene in the bond, FX or Equity markets?

Pull yourself toward yourself.....take a long look at the environment and use your skill set for more insightful commentary.

Your present contributions are embarrassing. Best of Luck.

BandGap's picture

Bob needs to step back, shut the fucking TV off, take a deep breath and see the big picture.

Or drink more kool-aid and be the poster child for Wall Street ADHD.

nmewn's picture

JP is part of the machine...so welcome to the machine.

sof_hannibal's picture

What did you dream? It's alright we told you what to dream.
You dreamed of a big star, he played a mean HFT guitar...

Disenchanted's picture




I'll just leave this here:




Overhead the albatross
Hangs motionless upon the air
And deep beneath the rolling waves
In labyrinths of coral caves
An echo of a distant time
Comes willowing across the sand
And everything is green and submarine.


And no one called us to the land
And no one knows the where's or why's.
Something stirs and something tries
Starts to climb toward the light.


Strangers passing in the street
By chance two separate glances meet
And I am you and what I see is me.
And do I take you by the hand
And lead you through the land
And help me understand
The best I can.


And no one called us to the land
And no one crosses there alive.
No one speaks and no one tries
No one flies around the sun....


Almost everyday you fall
Upon my waking eyes,
Inviting and inciting me
To rise.



And through the window in the wall
Come streaming in on sunlight wings
A million bright ambassadors of morning.


And no one sings me lullabyes
And no one makes me close my eyes
So I throw the windows wide
And call to you across the sky....



BandGap's picture

You know, I'm really starting to wonder WHEN the fucking obvious is going to be recognized as obvious. Is it not enough that Corzine is still wining and dining about the world after pillaging to his heart;s content? Now, JPM says, "oops" and the fucking talking heads "wonder" how this shit happnes. Un-fucking-believeable.

Robert, you truly represent the thinking of the masses. Stop looking at the fucking trees, asshole, the forest is on fire.

fuu's picture

Jamie's Lament

Just for the fun of it.

BandGap's picture

I went to Michigan. I have a PhD. Bob, get back to Ann Arbor and demand your money back!

One more insightful post by you, Mr. Brewski, and I will bleed to death through my eye sockets!


El Gordo's picture

Who has who by the short hair?  What if JP tell the Whale to take a swim, and he swims right over to HSBC?  The only way the Morgue can safely deal with the Whale is to put him away, either in an institution or to publically humiliate him so bad that no one will touch him.  We will begin to see that scenario unfold soon I expect.  I don't think any amount of money can assure safety from reprecussions from the Whale, but Jamie may have a trick or two up his sleeve as well.

Azwethinkweiz's picture

Mr. Brusca, this has to be one of your best articles yet. This little masterpiece, wow----I'm at a loss for words.

I hope you didn't stay up all night writing this work of brilliance; your students must feel overwhelmed with admiration as you impart your knowledge upon them.

Be honest, you teach Kindergarten and this was an essay submitted by you on their behalf....right?

sumo's picture

In his next article, Mr. Brusca will explain how leverage can magnify your gains, but also magnify your losses.

Thunder_Downunder's picture






Hulk's picture

Followed by "The Leo method of averaging down and winning big" !!!

El Oregonian's picture

No not winning big, but "Winning!!!"

TrustWho's picture

Time will tell, but I predict more SIGNIFICANT losses on the way. JD needs The Whale because he knows the transactions and his knowledge is required to minimize the future losses.

Dead Canary's picture

Or they are afraid to fire him. He has been in the thick of this and he knows where the bodys are buried.

General Debility's picture

My thinking also but your version is more eloquent especially for dead canaries. It would be a helluva thing to bury a dead whale. Especially in London.

HungrySeagull's picture

No need to bury.

Just chop it up for the Whale Oil and light everything so all is revealed.

Aye away hey me hearties, bound for the whale on the Black Diamond!