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Who Will Be The Next JPM?

Reggie Middleton's picture




 

So, in today's news we have Greek bank runs (again), remnants of JP Morgan yield grab gone bananas, and European Banks Battered As Reality Sets In. I know there has to be at at least a small contingent of you who truly don't want to hear me say "I told you so". Well, guess what I have to say to that small contingent...

Better yet guess what very popular American bank has their fingers in all three of the fires fanning above? You see, I not only warned of a European bank collapse nearly three years ago, I actually went on a European banking collapse tour throughout, of all places, Europe!

 The bank run thingy was actually a foregone conclusion. Greece is only step one, albeit a very obvious step one, but still the first step nonetheless - reference How Greece Killed Its Own Banks!, written exactly TWO years ago - Tuesday, 27 April 2010. The MSM should stop harping on Greece, its done. The real story is what will Greece's bust bring about. Well, there are quite a few banks in much 'allegedly" stronger domiciles primed to do the 'ole accelerated one-two step (that's bank run for those without a sense of humor), reference "How to Prevent Bailouts, Bank Runs and Other Fun Things To Do With Your Hard Earned Dollars". 

Now, the question for the truly big boys is what happens after the inevitable Pan-European bank runs get started. Well, the answer to that is already stored in the BoomBustBlog archives. Come on, y'all, where the strategists, the chess players, those who are able to look more than two moves ahead. I made this post so, now others may start "Hunting the Squid", looking at JPM Morgan as the sovereign entity that it wants to be and DB as the leveraged powder keg that it appears. Then there's BNP and BofA. You heard it all here first. Despite that, the MSM has put analysts in the consistent spotlight who I feel (without intending to disrespect them, of course) have been serially incorrect on banks. I have addressed this in my blog posts, namely Question the Quality Of BoomBustBlog Bank Research, Will You? Bove and Fitch Follow "The Blog"! and CNBC Favorite Dick Bove Admits To Being Wrong On Banks, But For The Right Reasons, But Those Reasons Are Still Wrong!!!

You see, with things crumbling so predictably, I don't have to do much along the lines of new content or writing. This entire mess has already been laid out in my archives, and in rather illustrious detail. Let's start archive grabbing with...

Goldman Sachs

The hardest hitting investment banking research available focusing on Goldman Sachs (the Squid), but before you go on, be sure you have read parts 1.2. and 3: 

  1. I'm Hunting Big Game Today:The Squid On A Spear Tip, Part 1 & Introduction
  2. Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?"
  3. Reggie Middleton Serves Up Fried Calamari From Raw Squid: Market Perceptions of Real Risk in Goldman Sachs

So, what else can go wrong with the Squid? 

Plenty! In Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?" I included a graphic that illustrated Goldman's raw credit exposure...

So, what is the logical conclusion? More phallic looking charts of blatant, unbridled, and from a realistic perspective, unhedged RISK starring none other than Goldman Sachs...

 image006image006

And to think, many thought that JPM exposure vs World GDP chart was provocative. I query thee, exactly how will GS put a real workable hedge, a counterparty risk mitigating prophylactic if you will, over that big green stalk that is representative of Total Credit Exposure to Risk Based Capital? Short answer, Goldman may very well be to big for a counterparty condom. If that's truly the case, all of you pretty, brand name Goldman counterparties out there (and yes, there are a lot of y'all - GS really gets around), expect to get burned at the culmination of that French banking party
I've been talking about for the last few quarters. Oh yeah, that perpetually printing clinic also known as the Federal Reserve just might be running a little low on that cheap liquidity antibiotic... Just giving y'all a heads up ahead of time...

And for those who may not be sure of the significance, please review my presentation as the Keynote Speaker at the ING Real Estate Valuation Seminar in Amsterdam, below. After all, for all intents and purposes, Dexia has officially collapsed - [CNBC] France, Belgium Pledge Aid for Struggling Dexia... and its a good chance that it's a matter of time before BNP follows suit - exactly as BoomBustBlog predicted for paying subsccribers way back in July.

A step by step tutorial on exactly how it will happen....

 The European banking debacle was predicted at the start of 2010, a full year and a half before this has come to a head. If I could have seen it so clearly, why couldn't the banking industry and its regulators? 

Now, back to GS, and considering all of the European falllout coming down the pike, of which Goldman is heavily leveraged into, particulary France (say BNP/Dexia/etc.)...

image009image009

Let's go over exactly how GS is exposed following the logic outlined in the graphic before this series of videos, as excerpted from subscriber document Goldmans Sachs Derivative Exposure: The Squid in the Coal Mine?, pages 3,4 and 5.

GS__Banks_Derivatives_exposure_temp_work_Page_3

And to think, many thought that JPM exposure vs World GDP chart was provocative. I query thee, exactly how will GS put a real workable hedge, a counterparty risk mitigating prophylactic if you will, over that big green stalk that is representative of Total Credit Exposure to Risk Based Capital? Short answer, Goldman may very well be to big for a counterparty condom. If that's truly the case, all of you pretty, brand name Goldman counterparties out there (and yes, there are a lot of y'all - GS really gets around), expect to get burned at the culmination of that French banking party I've been talking about for the last few quarters. Oh yeah, that perpetually printing clinic also known as the Federal Reserve just might be running a little low on that cheap liquidity antibiotic... Just giving y'all a heads up ahead of time...

 

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Thu, 05/17/2012 - 13:50 | 2436314 sbenard
sbenard's picture

This is precisely the question I have been asking for the past week! Who else, and who next? Thanks!

Thu, 05/17/2012 - 13:17 | 2436178 bankruptcylawyer
bankruptcylawyer's picture

rest assured the only rats on the sinking ship will goldman's client's money, the md's will be long gone , 'sue me' they'll smugly say. 

Thu, 05/17/2012 - 12:49 | 2436043 Widowmaker
Widowmaker's picture

Obuma will be the next JPM.

Thu, 05/17/2012 - 12:42 | 2436001 Zero Govt
Zero Govt's picture

"Goldman may very well be too big for a counterparty condom.."

Not your best analytical discription Reggie but that made me laugh ;)

Well done Reg, you're one of the few out there to give us a clear picture of the true magnitude of the financial dominos (and gambling junkie bankers) about to collapse

Thu, 05/17/2012 - 12:42 | 2435910 AlaricBalth
AlaricBalth's picture

Reggie,

Always a great analysis.

As you know, fair value accounting on Level 3 assets is an inexact endeavour which leaves the banks much room for, shall we say, creative price discovery.

At the end of Q1 2012, the Level 3 assets as a % of total assets of the 6 largest bank holding companies was as follows:

JPM  4.7%    BAC  2.1%   C 3.5%   WFC 3.9%   GS  5.0%   MS  3.8%

However, their Level 3 assets as a percent of total assets at fair value were:

JPM  12.0%    BAC  6.3%   C 8.6%   WFC 14.9%   GS  7.2%   MS  9.3%

Would you agree that the higher the percentage of Level 3 assets to total assets implies that there is a greater risk associated with the bank?  With that in mind, GS may have some serious problems lurking, but what do you make of Wells Fargo? I am sure that they are still trying to digest the junk they inherited in the Wachovia merger, but aren't their Level 3 assets as a percent of total assets at fair value a bit excessive?


Thu, 05/17/2012 - 12:14 | 2435875 Money 4 Nothing
Money 4 Nothing's picture

BOA or a Spanish Bank, choose one.

Thu, 05/17/2012 - 12:09 | 2435858 SILVERGEDDON
SILVERGEDDON's picture

Well pimp my ride Reggie, you are the cat's pajama's once again ! I sign up for your newsletter every day just because you are the best at whatever the heck it is that you are the best at. What is better than best ? YOU ARE, BAYBEE !!!!!!  

Sarc set on stun.

Thu, 05/17/2012 - 12:02 | 2435841 white rose
white rose's picture

I thought there was only one in Stan "the man" Musial, but now there are two. Way to go Reggie.

Thu, 05/17/2012 - 11:18 | 2435635 navy62802
navy62802's picture

Who will be the next JPM? I don't know, but Jim Rogers does. He claims that he his short a "major US financial institution" because of major problems that will be revealed soon. During the CNBC interview, he declined to name the institution, of course, but he claimed that the problems are completely unrelated to JPM's revelations last week.

Thu, 05/17/2012 - 11:35 | 2435718 Hulk
Hulk's picture

He revealed it the other day with Maria (Maria actually revealed it). Its JPM he has been short on

Thu, 05/17/2012 - 10:40 | 2435379 Fíréan
Fíréan's picture

tHIS WAS WORTH COMING TO THE ZH WEB SITE TODAY ( WHICH I DONT DO HARDLY  ANYMORE SINCE THEY SPEND SO MUCH TIME AND WORDAGE ON GREECE AND EUROPE, AND NOT AS MUCH AS DESERVED ON THE STATES, INDIVIDUALLY AND COLLECTIVELY

BUT I HAVE LOGGED IN TO POINT OUT THAT THE LINK IN THE ABOVE ARTCILE , AS PER BELOW, ONLY GOES TO THE DISCLAIMER PAGE AND NOT TO THE NAMES PAGE WITHIN THE LINK.

Goldmans Sachs Derivative Exposure: The Squid in the Coal Mine?

 

 

http://boombustblog.com/component/option,com_docman/Itemid,200023/gid,413/task,doc_download/

 

 

Thu, 05/17/2012 - 10:44 | 2435419 Reggie Middleton
Reggie Middleton's picture

That's because you are trying to download a subcription document. Subscribe to the site and the research is yours to download.

Thu, 05/17/2012 - 11:59 | 2435832 Canadian Dirtlump
Canadian Dirtlump's picture

Great work as always Reggie, can you give this joker a new keyboard if he subscribes?

LMAO.

Thu, 05/17/2012 - 11:06 | 2435566 falak pema
falak pema's picture

the best things in life are freeeee, but give me money! 

Thu, 05/17/2012 - 09:49 | 2435038 CPL
CPL's picture

Let's see...

...the shit list from 2008 is still in effect.

 

CitiBank

Goldman Sachs

  - any of their baby banks

TD/Waterhouse Price Coopers...whatever hyphenated addition to the shit show in Canuck Banking

HBC

CIBC - lots of exposure to European debt and derivatives.

Lloyds and the etnire British Banking system is tits up.

France and everything in the country.

JPM - still has a lot more red ink than black

GM Financing.  Ford Financing.  Honda Financing...auto industry.

All airline credit facilities. Peak Air travel bitchez.

Dot.Com 2.0 will Dot.Bomb 2.0

...everyone that got it in the ass in 2008 and then some.

 

 

Iceland...all of europe...Iceland btw is still in deep shit, just because they refuse to pay doesn't make it safe to give them any money.  I wouldn't give a penny to someone that lost my money and their own.  It'll be fixed in a couple of human generations.

Thu, 05/17/2012 - 19:44 | 2436095 Zero Govt
Zero Govt's picture

Nice list, thanks

there's one BIG counterparty to the banking explosion left out and well worth a mention:

Government

if the big banks go tits up there's no more baby milk for European Govts whose politicians require bankers to sell their debt

if we ever wonder why Prime Ministers Tony Blair, Gordon Brown and David 'call me tosser' Cameron always get their knickers in a twist 'defending The City of London' and bend over backwards to please/pleasure the bankrupt British Banks 'interests' it's because these babes are in the bankers pockets

So go Big Banks, so goes Big Govt ....and the sooner the better (for recovery)

Thu, 05/17/2012 - 08:55 | 2434771 asteroids
asteroids's picture

The FED should do absolutely nothing. More QE won't work. There is no miracle, just pain. The sooner we go through it, the better.

Thu, 05/17/2012 - 11:29 | 2435687 slackrabbit
slackrabbit's picture

i want $40,000+ gold....print Ben print.....

 

gold guns and plenty of food...

Thu, 05/17/2012 - 10:58 | 2435518 Nels
Nels's picture

More QE won't cure anything real, but it will shift the pointer  to who hurts the most.  BOHICA.

Thu, 05/17/2012 - 08:54 | 2434768 lakecity55
lakecity55's picture

Thanks, Reggie!

Keep Stackin!

Fizz Rules.

Thu, 05/17/2012 - 08:54 | 2434766 Badabing
Badabing's picture

Move the pawn in front of the king first.

So predictable,  Thanks Reggie

Thu, 05/17/2012 - 08:12 | 2434623 Quinvarius
Quinvarius's picture

JP Morgan will be the next JP Morgan.  If you think they are not already getting trillions in bailout money on the sly, think again.  JPM traders all use the same stupid playbook.  Leverage up and become the market.  You can only lose money that way.  It is like the dot com business model--Lose on every trade but make it up in quantity.  JPM will get bailed out and start the cycle again.

Thu, 05/17/2012 - 08:58 | 2434779 johnnymustardseed
johnnymustardseed's picture

JPM is not getting money on the "sly" they are a primary dealer, they get money from the FED for free. This is a end run to the to big to fail prevent defense. JPM and Goldman run the country, most of the sheep have just not figured it out yet.

Thu, 05/17/2012 - 12:54 | 2436064 Zero Govt
Zero Govt's picture

yes and who makes the likes of JP Morgan too big to fail?

The Fed

..by giving them Primary Dealer status.

What has the Fed and US Govt done to solve this problem? Sweet nothing.

Thu, 05/17/2012 - 07:55 | 2434596 rufusbird
rufusbird's picture

Great Read! nice and concise. ( I had to blow up the the page with the chart several times, to read the text )

Thu, 05/17/2012 - 07:45 | 2434580 NoClueSneaker
NoClueSneaker's picture

Thx, Reggie. Calamaris long ?

Thu, 05/17/2012 - 07:31 | 2434548 lynnybee
lynnybee's picture

go Reggie !     i enjoy reading his stuff .     

Thu, 05/17/2012 - 07:23 | 2434525 buckethead
buckethead's picture

It's frightening how accurate you've been and how absent any other voices making similar judgements have been.

It's almost like there's something they don't want us to know.

 

Thu, 05/17/2012 - 07:20 | 2434506 trgfunds
trgfunds's picture

NY Times reporting JPM losses now over 50% higher!! Accelerating faster than expected, hedge funds to blame :/ popcorn moment is imminent.

http://dealbook.nytimes.com/2012/05/16/jpmorgans-trading-loss-is-said-to...

Thu, 05/17/2012 - 07:21 | 2434521 EscapeKey
EscapeKey's picture

If there ever was a guarantor of QE3, this is it.

Thu, 05/17/2012 - 06:57 | 2434482 Watts_D_Matter
Watts_D_Matter's picture

Reggie you are spot on....Keep up the great work!! 

Thu, 05/17/2012 - 10:07 | 2435153 battle axe
battle axe's picture

It will be either Citicorp or B of A. Or BOTH.....You can take that to the bank, or better yet, stuff the gold under your mattress.....

Thu, 05/17/2012 - 12:30 | 2435845 midgetrannyporn
midgetrannyporn's picture

Pandit will do for C what he did for Old Lane. Moyboy is a retard. Both will fail without constant bailouts.

Thu, 05/17/2012 - 08:15 | 2434634 WmMcK
WmMcK's picture

Thank you, Reggie.

RE: chess players
(those who are able to look more than two moves ahead) --
Sometimes I can see one move ahead, often not that many.

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