Amusing: DealBreaker Says Whale Trade No Big Deal
I used to like DealBreaker, I really did. Alas that was in my younger years before I made a (very) small name for myself and before I took the red pill offered to me by Tyler Durden. Now I realize that sarcastically apologizing for the nefarious character of the financial world is pretty much the same as just plain-old apologizing for it... except funnier. Case in point, here is an excerpt from an article published on DealBreaker a few days ago entitled "Regulators Close Aquarium Door Behind Escaped Whale":
For one trader, losing six billion dollars, give or take, really is in the far left tail of Worst Things You Can Do, and so the whale himself was fired in infamy, though an infamy mixed with a certain envy. For his direct manager and that manager’s manager, it is probably even worse, since failing to prevent your direct report’s $6 billion loss lacks the “wow-that-takes-balls” element of actually going out there and losing six billion dollars like a whale. So they were fired too. For the bank … meh. For the Second Bank of North-Central Indiana, I’m sure losing six billion dollars would be the sort of existential disaster that would require firing the CEO, tearing down the building, and salting the earth on which it stood, but there’s a reason this didn’t happen at the Second Bank of North-Central Indiana. It happened at JPMorgan. For which it wasn’t all that much of a disaster... What about for JPMorgan’s regulators? I go with, like, our financial system is still here, not really any the worse for wear...
Remember the whale’s problem was like one part bad directional bet, three parts everyone finding out about it and picking him off.
I see. So if you're the biggest financial institution in the country you are free to turn your $423 billion deposit-to-loan gap into a giant, off-shore, tax payer-sponsored hedge fund, because in the end, you've got the money (not to mention the political connections) to cover it. I'm not sure if depositors would agree, but thanks to people like DealBreaker's Matt Levine, they will never know the difference because they read shit like the above-cited passages which are written in a kind of "I'm being sarcastic about it so I must be on your side" type of way, and think, "Oh, the 'alternative' financial press is saying its no big deal, so I guess everything's ok." It's not. JPMorgan took your deposits and placed derivative bets so large that they displaced the market for one of the most liquid CDS indices on the planet -- that is no small feat. For more info on this, feel free to review my articles on the subject, links to which can be found in the sidebar of my blog under the not-so-inconspicuous title "JP Morgan and The London Whale."
Of course Matt Levine is right, "our financial system is still here, not really any worse for wear." Then again, one could say the same thing about the financial crisis right? I mean, the S&P 500 is back to 2007 levels so we are all "no worse for wear" after 2008. If you believe that, I've got some Canadian third-party asset-backed commercial paper I'd like to sell you (that's an obscure reference, but readers should Google it). In the end, if Levine's "Second-Bank Of North Central Indiana" agrees not to make $150 billion notional in curve trades on an off-the-run CDS index with my deposits, I'll be glad to store my money in their vault instead of JPMorgan's any day.
- advertisements -