Ahead Of Tomorrow's Dimon Hearing, Presenting JP Morgan's 93.5% Historical Winning Trade Perfection

Tyler Durden's picture

We are just about 16 hours away from Jamie Dimon's sworn testimony before the Senate Banking Committee, which even has the theatrical name: "A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?" Will anyone learn anything? Of course not: Jamie Dimon has been well-schooled in not disclosing critical trading information, and will certainly use the "proprietary position" and "more shareholder losses" excuse for any directed question asking how big the JPM CIO loss has become. Because while the hearing could have been productive, if indeed its purpose was to seek to prevent future massive losses of scale such as the suffered by the JPM prop trading unit and its hundreds of billions in CDS notional position, the last thing anyone will care about tomorrow is market efficiency and actual regulation. First and foremost: grandstanding and posturing, in the case of the politicians, and not disclosing anything, without saying too many "I don't recall"s in the case of Dimon. Which is why we have little hope to get anything out of tomorrow's formulaic 2 hours of largely meaningless droning. That said, considering we have already covered the topic of the JPM loss from a mechanistic standpoint more than any other media outlet, there is one more chart we would like to share with readers.

The reason for this chart was predicated by a small note in the latest WSJ article on who knew what and when (which came out at just the same time as the Bloomberg piece - as if the JPM CIO leaks can't decide who to dump information to so does it to both BBG and the WSJ), in which it is said that in "2010, another bad trade caught the attention of a senior finance executive who notified top J.P. Morgan executives. Joseph Bonocore, then chief financial officer of the CIO, became concerned when London-based traders lost about $300 million in a few days on a foreign exchange-options trade, without any offsetting gains to balance out the losses."

We decided to go back to the firm's 2010 filings and see what it had disclosed about its losses based on trading days reporting.

Here is what JPM reported publicly:

  • Q1 2010: zero days with any trading losses; 64 profitable trading days
  • Q2 2010: 8 trading loss days; 57 profitable days; of which the worst were 2 losses between $100-$120 MM
  • Q3 2010: zero days with any trading losses; 66 profitable trading days
  • Q4 2010: 5 trading loss days; 61 profitable days; of which worst was 1 loss day between $80-$100MM

Most importantly, in JPM's own words: "During 2010, losses were sustained on 13 days, none of which exceeded the VaR measure." Recall that this is the fudged VaR, which upon the discovery of the Iksil trade, had to be massively adjusted upward having been found to be completely meaningless and to exclude all CIO positions.

We wonder: was the CIO responsible for all of these losses, and more importantly, is the abovementioned loss captured in any of the JPM public reports? And if not, why not? More importantly, can someone explain how it is possible that a firm that over the past 9 quarters has disclosed a total of 41 days on which it has lost money trading, and 546 days on which it was profitable, or a 93.5% win rate of the total 587 days in the past 2 years and 1 quarter

All this is shown in the chart below:

To borrow a phrase from Taleb: was JPM's now mega-loss merely the non-scalable outlier event that occurs when a firm has an artificially impossible winning ratio, and uses complexity to mask the fact that it is in fact merely accumluating losses which have to be booked eventually?

Does being successful nearly all the time explicitly imply there is a time bomb in your books just waiting to be detonated? If JPM is any indication, the answer is a resounding yes.

 

* * *

Below is the breakdown of the past 9 quarters of JPM trading days from the company's own filings:

Q1 2010: Zero trading loss days: "The following histogram illustrates the daily market risk-related gains and losses for IB, CIO and Consumer Lending positions for the first three months of 2010. The chart shows that the Firm posted market risk-related gains on all 64 days in this period, with 9 days exceeding $180 million. There were no losses sustained during the three months ended March 31, 2010."

Daily IB & Other Market Risk-Related Gains (95% Confidence Level VaR) Three Months Ended March 31, 2010.

 

(BAR CHART) 

Q2 2010: 8 Trading Days Losses of which 2 Days with losses between $100 and $150 MM. "The following histogram illustrates the daily market risk-related gains and losses for IB, CIO and Mortgage Banking positions for the first six months of 2010. The chart shows that the Firm posted market risk-related gains on 121 out of 129 days in this period, with 10 days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the 95% confidence level VaR exceeded the actual loss on each of those days. Losses were sustained on eight days during the six months ended June 30, 2010, none of which exceeded the VaR measure."

(GAINS LOSS GRAPHIC) 

Q3 2010: Zero Trading Day Losses: "The chart shows that the Firm posted market risk—related gains on 187 out of 195 days in this period, with 12 days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the 95% confidence-level VaR exceeded the actual loss on each of those days. During the nine months ended September 30, 2010, losses were sustained on eight days, all within the second quarter of 2010, none of which exceeded the VaR measure."

 

(BAR GRAPH)

Q4 2010: 5 Trading Day Losses. "The following histogram illustrates the daily market risk–related gains and losses for IB, CIO and Mortgage Banking positions for 2010. The chart shows that the Firm posted market risk–related gains on 248 out of 261 days in this period, with 12 days exceeding $210 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the 95% confidence-level VaR exceeded the actual loss on each of those days. During 2010, losses were sustained on 13 days, none of which exceeded the VaR measure."

(GRAPH)

 

Q1 2011: Zero Trading Day Losses: "The following histogram illustrates the daily market risk—related gains and losses for IB, CIO and Mortgage Banking positions for the first three months of 2011. The chart shows that the Firm posted market risk—related gains on each of the 64 days in this period, with seven days exceeding $160 million."

(PERFORMANCE GRAPH)

Q2 2011: 2 Trading Day Losses: between $80-$100MM;  "The chart shows that the Firm posted market risk-related gains on 127 of the 129 days in this period, with four days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days. Losses were sustained on two days during the six months ended June 30, 2011, none of which exceeded the VaR measure."

Q3 2011: 16 Trading Day Losses., 5 Days over $200MM "The chart shows that the Firm posted market risk related gains on 177 of the 195 days in this period, with five days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days. Losses were sustained on 18 days during the nine months ended September 30, 2011, of which three days exceeded the VaR measure."

Q4 2011: 9 Trading Day Losses: "The chart shows that the Firm posted market risk related gains on 233 of the 260 days in this period, with seven days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days."

 

Q1 2012: 1 Trading Day Loss:  "The chart shows that the Firm posted market risk-related gains on 64 of the 65 days in this period, with one day exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days."

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SHEEPFUKKER's picture

So wait, the banksters are not doing god's work then? WTF?

spankthebernank's picture

They are stealing in broad daylight. These hearings are utterly sickening!

nope-1004's picture

JPig is wholly insolvent.  Accounting standards have been changed to meet the pigs' needs by fooling the average person into believing they provide a legitimate service and have value.  Is Cramer that dumb?

A pig knows no limits, and JPig proves its a pig by its actions.  This sucker is corrupt as hell and one day will bring down the financial system.

Why anyone would allow this firm to hold their money is beyond any rational comprehension.

 

Bay of Pigs's picture

You won't hear any of that tomorrow in the Senate, that for sure.

It'll be Comedy Hour...with a bunch of people like 87 year old Daniel Akaka of Hawaii trying to read his prepared script before he takes his morning nap and dump.

knukles's picture

"Nap n' Dump"

The New Normal

El Viejo's picture

If Corzine didn't incense 'the representatives of the people' then Dimon will have a cake walk.

piceridu's picture

...nap and dump

That has franchise written all over it...franchises available only in D.C

PiratePiggy's picture

Damn.  What am I going to do with the property in Arlington that I just bought for a new Nap'n'Dump?  I already hired contractors to remove the plumbing and put in a cesspool.

Unprepared's picture

"I fail to see how this is any of my business" Joe6Pax

Jendrzejczyk's picture

We Joesixpacs know what's going down.

General Debility's picture

Someone on CNBC just referred to JPMorgan as "still the prettiest girl in the neighbourhood." Humph I would love Banzai to get his crayons out. I have a great photo of a pig with lipstick and long eye-lashes.  That would just about do it!

holdbuysell's picture

"Does being successful nearly all the time explicitly imply there is a time bomb in your books just waiting to be detonated? If JPM is any indication, the answer is a resounding yes."

Indeed: Bring out the rest of the cockroaches such as GS, et al.

Unprepared's picture

And fuck modern corporate finance, if you know what I'm talking about: massaging results and commoditizing profits.

Raynja's picture

what the govt needs to do is make losses illegal, it would solve all these silly problems.

earleflorida's picture

As in baseball, if you hit a .333 lifetime average your an automatic first time eligible pick for the 'hall of fame', period!

In the casino business your even with the house, even though your losing with a .500 average? But... in the banking business, the rules state implicitly that TBTF Bank's need only show the winnings. That's right,... think of it as, 'The Babe Ruth House of Mandrake the Magician', that the 'Dimon' built'! The 'Law of TBTF's Averages' counts the slugging average plus a gratuitous 25% handicap from the 'SEC  Scorekeeper?  Who wrote this crap? Why,... Pete Rose did of course! 

jmo

youngman's picture

You do not get a big bonus with loses....winning.....even if its with bailout money...

Zero Govt's picture

bailout money is winning..

ROI in political puppets and your hedging at The Fed

TrainWreck1's picture

93.5% in a rigged market.

Guess someone figured out that 6.5% is the magic number to give up to appear legit.

NotApplicable's picture

I'd say that's the measure of difference between influence and control. They're way too greedy to give that much up willingly.

El Viejo's picture

So you are sayin that the justice dept should look the winners in a rigged market???

HAHAHAHAHAHAHAHHAHAHAHAHAHHAHAHAHAHHAHA

Unprepared's picture

No dude. Those fuckers destroyed all values in the market and all there is left is for their risk alchemists to transform a huge amount of risks into steady stream of profits. It is just normal that from time to time, the whole thing blows up in their faces and destroys all the profits they made.

But that happens too late, they already cashed out and the taxpayers foot the bill of saving the bankers.

Rinse... repeat...

 

Downtoolong's picture

Does being successful nearly all the time explicitly imply there is a time bomb in your books just waiting to be detonated? If JPM is any indication, the answer is a resounding yes.

Put another way; even when everything is rigged in their favor, even when they have unlimited amounts of free chips, even when they hold all the aces, even when they get to deal from the top, bottom, and middle  of the deck, and even when they get to see everyone else’s hand, these bumfucks still manage to figure out a way to lose now and then. And that’s what they get paid the big bucks for.

amadeusb4's picture

Some losses are necessary in every profitable company in order to game tax code.

EverythingEviL's picture

It boils down to absolute pure GREED, plus all this so perfectly foretold:

2 Timothy 3:1-5

1 But know this, that in the last days critical times hard to deal with will be here. 2 For men will be lovers of themselves, lovers of money, self-assuming, haughty, blasphemers, disobedient to parents, unthankful, disloyal, 3 having no natural affection, not open to any agreement, slanderers, without self-control, fierce, without love of goodness, 4 betrayers, headstrong, puffed up [with pride], lovers of pleasures rather than lovers of God, 5 having a form of godly devotion but proving false to its power; and from these turn away.

Bay of Pigs's picture

93.5%? That's pretty good, right? LOL.

Come on Jamie....keep whispering softly in our ear as you ram us all in the ass.

PeaBird's picture

"Winning Trade"?

The word "win" has the implied connotation that the act was done with honour. There is no honour with cheating & fraud. In fact, I would not call these "wins" at all. They are profits, and that is all. And paper profits at that. They might as well just print it for themselves, this "win" is THAT meaningless....Oh wait, they already are printing it for themselves....End of story.

CommunityStandard's picture

The chart is misleading.  I can have a profit of $1 every day, and lose $1,000,000,000 in just one day, and then show a chart about how I had gains in 279 out of 280 trading days, or a 99.64% win rate.  Or am I missing the point?

 

Also Tyler:

"More importantly, can someone explain how it is possible that a firm that over the past 9 quarters has disclosed a total of 41 days on which it has lost money trading, and 546 days on which it was profitable, or a 93.5% win rate of the total 587 days in the past 2 years and 1 quarter." 

is not a sentence.  "Can someone explain how ... a firm ..." does what?  I love your articles and your research, but some of these grammar issues makes it even harder to understand you.

jcaz's picture

Wow- so you had an 8th grade Stats class AND grammar classes too?

They clearly masks your grasp of trading-  this is JPM, you pretentious twat-  they don't deal in the tiny numbers that could prove you actually know what you're talking about;

Go back to your Cramer tapes....

oddjob's picture

tapes?....beta or VHS?

Ness.'s picture

Tapes are ok - steak is better.  But Mexican food gives me the shits.

 

!Viva Espana!

iDealMeat's picture

CS, Save yourself some time..  Read the BOLD to get the gist. Look at the bottom for 5ish stars.. Then peruse the comments..

None of it is really worth wasting time on or caring about anymore.

 

Dr. Engali's picture

I don't know about you, but I'm here for the truth and for the financial education. I also love the commentary. I'm not here for grammar, spelling , and punctuation lessons.

rambo1028's picture

Agreed! Often the comments are more educational than the OP. I have learned and laughed much since I started reading here! Thanks all for helping me understand and making me laugh even when what I learn here often makes me want to cry.... or go postal...or both...

CommunityStandard's picture

You're one of my favorite commenters here and seem to know what's going on, so maybe you can help summarize the main idea of this article. JPM has a 93% win rate, however (fill in the blank).

TN Jed's picture

I appreciate wordplay as much as the next mutant and must admit when sourcing fact, the superfluous descriptors and tangential thoughts, interspersed amongst fact, perhaps, can and will make it difficult if not downright impractical, unless you enjoy the journey as opposed to the destination and who can truly ever know when one arrives, to ever know what the fuck was said. 

I thought you made a few practical points but everybody is a genius here so tough shit.  We were weened on Rushdie.

VisualCSharp's picture

One time, I posted about how ZH's summaries are often laden with digressions, making them difficult to read; having to track 10 different thoughts in one sentence doesn't make for easy-to-digest information. I'm not knocking the quality of the information, just its presentation.

Carl Spackler's picture

I beg to differ.

So your point is that your mind/emotions is/are not capable of multi-tasking.

Clearly, you are NOT a trader or an asset manager, because SUCH is the nature of the business.

A million things happen simultaneously across many markets around the globe, EVERY DAY, and it all has to be processed and cogently argued for a buy/sell/hold decision.

You deal with it and you move on to the next thing. Otherwise, you find a new career.

q99x2's picture

Are you an outcomes based community standard or just a substandard community?

Unprepared's picture

In case you are still unsure, your example is exactly what Tyler is saying and what the Business Model of those financial instiutions is: collecting pennies in front of a storm. Sorry bad example: a better example would be if the storm gets stronger with every penny collected.

Boxed Merlot's picture

If you were as careful about math as you are about "grammer" you would have been able to read the charts and decipher the "reported" amount of "losses" as miniscule in comparison to the average "gain", yet alone the total "gain" reported and syphoned off by tptb.

 

In Short, JPM is the house and anyone that walks into the casino is worse off than if you tried to win at an Indian casino, consistently.  The politicians that will be doing the "grilling" are nothing more than slot machine technicians at best.  Besides which, when a person reads verbatim speech, rarely if ever can the passion show through until and unless the grammer suffers.

 

I apoligize for writing such a lengthy response, I didn't have time to write a shorter one.--A.Lincoln-(Ithink) 

imo.

CommunityStandard's picture

Thanks for the response.  I'm open to criticism, and the importance of grammar is a debatable opinion that in the long run doesn't matter.  But I do appreciate you actually attempting to give me an answer as to the main idea of the article, instead of just pretending you knew.  When I get comments like "just read the bold and look at the charts", it is a little worrying about how much of Tyler's ideas beyond "JPM is bad" is getting across.