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It's Not Over Yet For JPM

Tyler Durden's picture


IG9 10Y spreads re-surged today and were very choppy into the close as they broke back above 155bps (at 155.5/157.5bps now) for the first time since Mid-December with a 31% rip in the last two weeks. This fits perfectly with our ongoing thesis of this being a tail-risk hedge (not a simple 'spread' as other ignorant commentators presume) whose risk management has exploded in their face. While the skew (the difference between the index and its portfolio fair-value) has collapsed and arbs will be happy and likely exiting - the same correlation shifts (that we discussed earlier) that drove the big bank to sell more and more protection into a spread compressing market are now back-firing as systemic risk re-surges and the correlation shift is forcing them to buy back more and more protection into a spread decompressing market. Oh the fun of negative convexity - especially when you ARE the market and there is no-one to unwind the actual tranches to.

While we among others expected the selling to slow as the skew collapsed, the secondary effect of the actual rise in systemic risk is now taking over and forces the bank to buy protection back into a rising spread market...

but the velocity of the change is incredible...

Data: CMA


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Thu, 05/17/2012 - 17:37 | 2437459 johngaltfla
johngaltfla's picture

Thus why the Fed can't/won't engage in QE. If they announce a new round of 2's and 10's buying, they screw themselves.

Or for those who have forgotten, JPM IS the LARGEST shareholder in the Federal Reserve as they founded it.

Thu, 05/17/2012 - 17:40 | 2437479 Levadiakos
Levadiakos's picture

When was the lesst time the fed cared about "screwing themselves". It is, in the end,  taxpayer hunded OPM

Thu, 05/17/2012 - 17:42 | 2437488 johngaltfla
johngaltfla's picture

Yes, but by letting JPM play the victim role of their own stupidity, it provides a window for the Fed, aka JPM, to redefine policy and regulation by bottlenecking it in D.C. The Fed will screw everyone over when the time is right and the banksters have their new derivatives trade based on a full blown panic in the markets. After all, how do you think they saved GS when it was in the $40's.....

Thu, 05/17/2012 - 18:36 | 2437657 Dr Benway
Dr Benway's picture

OK this is like the fifth article claiming that JPM wasn't stupid at all, it was just unforeseen events that fucked with the assumptions that underpinned their model.




It's results that counts. JPM were idiots because the result was shit, I don't care how mathematically brilliant their models are in theory IF THEY DON'T WORK. That's the yardstick. History is filled with fucking financial "geniuses" whose models "should" have made them money if not stuff had happened.

Thu, 05/17/2012 - 18:42 | 2437687 Comay Mierda
Comay Mierda's picture

hit the nail on the head

phd quants can program insanely complex models that have zero common sense

Thu, 05/17/2012 - 18:45 | 2437695 UP Forester
UP Forester's picture

In theory, the Tacoma Narrows Bridge should still be standing.

Also in theory, bumblebees can't fly.

Thu, 05/17/2012 - 19:08 | 2437762 The Alarmist
The Alarmist's picture

There is TBTF and then there is TBTBHA ... too big to be held accountable.  

Yes, there will be a show trial, but rest assured that no bankers will be harmed in the production of that theater.

Thu, 05/17/2012 - 19:13 | 2437777 sessinpo
sessinpo's picture

I can imagine it now. In the green room, Jamie and Corzine are chatting it up, drinking champagne.  "So how is your house in the Hampton's." Good, just hired me a hot new maid. Schumer invited me for dinner but I already booked with Biden. Damn bastards want in on that facebook IPO. Anyway, see ya after the senate party.

Thu, 05/17/2012 - 19:35 | 2437844 Cdad
Cdad's picture

Just nail plywood over the front door of every JPM branch location...already.  Good grief...why does the Dimon still have his job?

Thu, 05/17/2012 - 20:05 | 2437886 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Let's see........... US treasuries at record low yields, oil is above $90 a barrel and inflation is still present. No QE is coming until the Grim Reaper takes his toll on the markets. If he did, it would too obviously look like Zimbabwe.

Thu, 05/17/2012 - 20:22 | 2437934 AldousHuxley
AldousHuxley's picture

How about Bank of Greece?

back down to lowest low of $1.4


are they going to wait until NBG gets delisted?

Thu, 05/17/2012 - 20:57 | 2438006 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Greece is yesterday's news.

Fri, 05/18/2012 - 00:42 | 2438432 palmereldritch
palmereldritch's picture

From the data it is fairly obvious now that an old fashioned hex is on JPM and will not be lifted until Corzine is made accountable.

They better get the corporate exorcist on this pronto...that or throw him under the bus.

Thu, 05/17/2012 - 19:09 | 2437767 sessinpo
sessinpo's picture

Bumblebees can fly! Oh, but the bees know. Glenn Beck said so. LOL. Anyway love ya post.

Thu, 05/17/2012 - 18:42 | 2437688 Dr Benway
Dr Benway's picture

So I guess ZH is taking a softer stance on the issue of (lacking) accountability.


If this trade had benefited JPM, there would have been backslaps and bonuses all around, JPM would have hailed themselves as the smartest people in the room and the biggest swinging dicks.


When the trade fails, it's not their fault, it was Ben who fucked their model. Well that's just great.

Thu, 05/17/2012 - 18:54 | 2437718 Joe The Plumber
Joe The Plumber's picture

You miss the point

Yes it was idiotic and jpm would prefer everyone think it was an idiotic "economic" hedge rather than idiotic proprietary trading which is now illegal for FDIC insured banks

Thu, 05/17/2012 - 19:10 | 2437771 Dr Benway
Dr Benway's picture

But the ZH articles claim it was a hedge gone wrong rather than prop trading. So actually, you're the one missing the point.

Thu, 05/17/2012 - 22:25 | 2438191 Dr Benway
Dr Benway's picture

Fucking retard.


The articles on ZH we are discussing had AS THEIR MAIN POINT that the JPM fiasco was due to a tail-risk hedge gone wrong.


You fucking retard. Learn how to read or shut the fuck up.



"As we described first here and here - and has now been accepted by the mainstream media as fact (of course we are flattered by the mimicry) - the reason that the hedge got out of control was the massive amount of delta-hedging that Iksil had to do to manage the position as the Fed and ECB crushed the systemic risk out of the system and blew up the correlation assumptions in his models."


Fri, 05/18/2012 - 00:51 | 2438555 dannyboy
dannyboy's picture

I know some of them are long, and use very big words. And it is difficult to read entire articles, reading the first line is much more fun then commenting and assuming you know.

From "Is JPM Staring At Another $3Billion Loss?"

This was very evident when one looks at the net notional being soaked up by the Whale and this 'hedge' position had clearly grown extremely large as it became a momentum trade not a hedge (at which time we suspect Iksil started to lose control). In early April, as news of this broke across the market, the credit and equity markets were beginning to quiver again at European contagion and US macro data and as a proxy for the volatility JPM must have been feeling we can see very significant (2-3 sigma) swings in the credit index they held.

Read the entire article, and the ones subsequent before posting your rediculous bullshit.

Thu, 05/17/2012 - 19:22 | 2437806 Global Hunter
Global Hunter's picture

Its kind of like in a football game where one team has possession of the ball for 40 minutes but fails to score any points and the other team gets 4 touchdowns, the team that had the ball for 20 minutes still wins the game.  There's no points awarded for being "close".

Thu, 05/17/2012 - 19:54 | 2437867 upWising
upWising's picture

CLOSE does count with:



•atom bombs

Thu, 05/17/2012 - 21:22 | 2438055 citizen2084
citizen2084's picture

Its all about results in the interzone Dr.

FWIW - dont think the OP is claiming JPM inst stupid. The series has had the opposite tone.



Thu, 05/17/2012 - 23:17 | 2438351 duncangraper
duncangraper's picture

Their strategy will work as they will be rewarded for every large swing in the absolute value of the swing.

One way they steall it with inside trading that unwits the trading actual populace(less and less people each day)

Other way as bailout paid by everyone else, gun to head giant balls style(yea, enough people see it coming, but it will happen anyway)

That's it.  Nothing in the model for anything outside one or the other


Thu, 05/17/2012 - 17:44 | 2437497 dannyboy
dannyboy's picture

Fuck em, hope Iksil and Dimon eat shit all the fucking way. Hope this parabolic chart goes parabolic-er. Something along european parabolic lines.

Hope they get crushed all the way, sacks of shit.

Thu, 05/17/2012 - 17:50 | 2437521 ctiger2
ctiger2's picture

There is perpetual QE going on right now. The QE announcement will be made to simply manage peoples perceptions, when the time is right. MOPE.

Thu, 05/17/2012 - 22:45 | 2438275 Dingleberry
Dingleberry's picture

Let it roll, baby, roll....

Thu, 05/17/2012 - 17:39 | 2437468 Theta_Burn
Theta_Burn's picture

Take that, bitches.....

Thu, 05/17/2012 - 17:40 | 2437472 malikai
malikai's picture

LOL. Suck it down, taxpayers.

Thu, 05/17/2012 - 17:40 | 2437477 EscapeKey
EscapeKey's picture

Couldn't have happened to a nicer market manipulator.

I'm sure there are some hapless pension funds, I mean sophisticated investors they can sell these loss-making positions to.

Thu, 05/17/2012 - 17:40 | 2437480 Joe The Plumber
Joe The Plumber's picture

You would think that Obama's publicist bio which ran from 1991 until pulled in 2007 would be of mild interest to the mainstream media. Not a peep on cnn or nytimes about a bio that obama's publicist ran for 16 years touting his birth in kenya

Thu, 05/17/2012 - 17:45 | 2437505 iDealMeat
iDealMeat's picture

I hope the Tylers post it up as a headline too..

Thu, 05/17/2012 - 17:51 | 2437531 john39
john39's picture

something smells odd about this latest distraction...  if this was really out there, how the hell did McCain's snoops miss it during the election?  or Clintons during the primary?   seems like another "look over here" gimmick.

Thu, 05/17/2012 - 17:56 | 2437551 EscapeKey
EscapeKey's picture

Does it really matter which Wall Street controlled puppet is in the White House?

Thu, 05/17/2012 - 18:25 | 2437595 Waffen
Waffen's picture

No, it doesnt. However this, Obama being completely discredited and proven to not even be an American would surely shake a larg percentage of the public out of their normalcy bias induced Zombie trance.

I mean for fucks sake, how much more treacherous can a system be then to put a non citizen in as a president?

Thu, 05/17/2012 - 18:41 | 2437684 Hmm...
Hmm...'s picture


For God's sake, give the birther crap a rest.

Only birthers think anybody is going to care about yet another fabricated piece of "proof" that he's our Kenyan in chief. 

George Romney was born in Mexico. John McCain was born in Panama.  Both men ran with hardly a squawk.  Suddenly it's a breakdown of society, of America as we know it given this "proof"?

The "natural born" provision of the Constitution has NEVER been defined.  NEVER.  The purpose of it was clear, to prevent aristocrats from England from coming over and declaring themselves king here.  but that is obviously not what Obama is doing.  Has he furthered the Muslim agenda one bit?  no.  the Middle Eastern Agenda?  Hardly (ask any Pakistani or Afghan or Iraqi if he's helped their agenda!).

Get over yourself.

Wake me when there is something interesting.  How about this:  I heard he wasn't even born.  No, he was actually hatched out of a meteor that flew out of Osama bin Laden's butt!  Imagine that, Obama discredited as a terrorist butt baby!

There is so much to hate about Obama.  His birthplace hardly registers.

Thu, 05/17/2012 - 18:57 | 2437726 Joe The Plumber
Joe The Plumber's picture

Its definitely not fabricated. There are no denials even from supporter blogs that it is fake. Go look it up yourself

Thu, 05/17/2012 - 20:23 | 2437935 lotsoffun
lotsoffun's picture

it does matter.  it is the LAW.  and they lied about it.  if you don't like the laws, you can work to change them.  but you can't break them going in.  that's called the social contract.  and - if you are above the law - then you are advocating crawling back into the cave.  all these people, obama, dimon, corzine, etc.  they are above the law.  they wrested power from the weak - hey - fuck you, what are you going to do about it?  that is there attitude.

in the schoolyard that is called bullies and by the time you are adolescent - it's called punks and when you become an adult it's called thugs.  and this country is being run by a bunch of bullies and punks, because none of them are adults yet.  or ever will be.

and that's all there is to hate about obama - i mean the fact that he cares about nobody but himself, cares nothing about precedent or law or social responsibility - he plays off as if blacks are owed something (i still don't think he's black either, but he plays that card too) and he's the one that gets to collect the retribution.

played the card well.



Thu, 05/17/2012 - 20:40 | 2437974 WAMO556
WAMO556's picture

For those of us who believe in Constitutional law vs the BS we have now - WHERE OBAMA was born, NOT conceived really does matter. So quit being a shithead and get with the program.

Thu, 05/17/2012 - 21:03 | 2438017 Waffen
Waffen's picture

If Its ok to lie and laws are meaningless then fuck all and give me anarchy.

We can not have a society where laws are enforced willy nilly. If you think it's ok to disregard law then it should be ok for everyone to disregard it.

Thu, 05/17/2012 - 18:21 | 2437638 fuu
fuu's picture

Theatre often has props and stage direction.

Thu, 05/17/2012 - 18:11 | 2437612 Global Hunter
Global Hunter's picture

I saw Dennis Kucinich addressing the Senate today about H.Res 568 in regards to Iran, anybody have any insight into this?  We have JPM, news that Barry was born in Kenya, Schumer saying US citizens can never renounce their citizenship in the last few days.  From where I sit they're going to chose the full retard button now aren't they or am I missing something?

Thu, 05/17/2012 - 18:41 | 2437686 quartshort
quartshort's picture

"full-retard" was 2009.

This is inbred siamese twins attempting to mate.

Thu, 05/17/2012 - 20:22 | 2437933 Clashfan
Clashfan's picture

Links? Please?

Thu, 05/17/2012 - 17:41 | 2437484 Rainman
Rainman's picture

The market maker's nightmare...what can't happen will happen !

Thu, 05/17/2012 - 17:43 | 2437490 Sudden Debt
Sudden Debt's picture

Started shorting it at 36.... YEAH BABY!!!!

Thu, 05/17/2012 - 17:57 | 2437553 EscapeKey
EscapeKey's picture

To stay true to JPM style, don't forget to screw up the hedge!

Thu, 05/17/2012 - 18:40 | 2437682 dasein211
dasein211's picture

Don't get greedy. Lock in profit under 30 quick. Don't get greedy. These fucks will you you blind. In fact they depend on human nature to do it.

Thu, 05/17/2012 - 17:45 | 2437503 Quantitative_Ap...
Quantitative_Appeasing's picture

So now the question is:


When does "Too big to Fail" become "Too big to Bail"  out?



Thu, 05/17/2012 - 17:45 | 2437504 franzpick
franzpick's picture

"My company is so well managed and capitalized that we can lose 25% of our annual profits on just one trade-position anytime we want, and no, I will not take the Kool-Aide breathalizer test".

Thu, 05/17/2012 - 17:54 | 2437541 Seasmoke
Seasmoke's picture

the music has stopped and JPM still hasnt found a chair to sit in !

Thu, 05/17/2012 - 17:54 | 2437543 TonyCoitus
TonyCoitus's picture

Yes, yes, a tail-risk hedge, my thoughts exactly! ;-)

Thu, 05/17/2012 - 19:00 | 2437736 Joe The Plumber
Joe The Plumber's picture

Cough bullshit cough

Caught in the act of illegal proprietary trading

Thu, 05/17/2012 - 20:15 | 2437915 midgetrannyporn
midgetrannyporn's picture

Hedge, fig leaf, same thing.

Thu, 05/17/2012 - 17:58 | 2437559 Doubleguns
Doubleguns's picture

Its JPM so why even care. Unless its for the pure joy in watching it happen. If they run out of money they wont be able to cover the silver shorts and.....done, toast, bankrupt, kaput are words that come to mind.

Thu, 05/17/2012 - 18:14 | 2437622 markar
markar's picture

If 1/10th of 1% of the population would each fork over $30 for an oz of silver, we could be rid of this beast.

Fri, 05/18/2012 - 01:17 | 2438616 Deo vindice
Deo vindice's picture

That would be the .1%.

They probably already have their silver locked up.

Thu, 05/17/2012 - 19:27 | 2437827 Al Huxley
Al Huxley's picture

Yes, well, those short positions are just held on behalf of customers, so they don't have any exposure or interest in that market.  Lucky for them, or things could get interesting fairly quickly.

Thu, 05/17/2012 - 17:58 | 2437560 Stoploss
Stoploss's picture

Do unto others Jaime. Kharma is about to rip you a new asshole.

Thu, 05/17/2012 - 18:01 | 2437573 Mark123
Mark123's picture

What does Jamie care...he has the full support of the Fed Reserve AND the government behind his bets.  Win and he gets accolades, lose he gets bailed out.


Where is my pitchfork?

Thu, 05/17/2012 - 18:46 | 2437701 quartshort
quartshort's picture

Just a guess: JPM Custodian Facility?

Got a paper one for you if you want some leverage...

Fri, 05/18/2012 - 08:33 | 2439081 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

"Where is my pitchfork?"

What most people call a "pitchfork" is really a 5-tines manure fork. More appropriate, no?

Thu, 05/17/2012 - 17:59 | 2437564 Postmortemism
Postmortemism's picture

JPM is nothing more than a zombie company.

Thu, 05/17/2012 - 18:00 | 2437570 drmfh
drmfh's picture

I have no idea what any of this shit means. Tail risk sounds like a worry over the STD status of a hooker.

Thu, 05/17/2012 - 18:17 | 2437628 slackrabbit
slackrabbit's picture

you clearly know more than jp morgan

Thu, 05/17/2012 - 18:06 | 2437591 ArrestBobRubin
ArrestBobRubin's picture

"Dimon is a hood. Everything else is Bullshit".

-JP Morgan

Thu, 05/17/2012 - 18:24 | 2437647 The game
The game's picture

Back to Obummer.. I mean Obama, I may offend some people here but I have to say it. I really think a majority of the liberal voters to to fucking stupid their going to vote for him np matter what!

Thu, 05/17/2012 - 18:39 | 2437678 Joe The Plumber
Joe The Plumber's picture

What does rick santorum imply about conservative voters?

Thu, 05/17/2012 - 20:19 | 2437928 nodhannum
nodhannum's picture

Liberals are what Eric Hoffer referred to as "True Believers" and Vladimir I. Lenin referred to as "Useful Idiots".  Yes, they will vote for the NSAAP...National Socialist Amerikanski Workers Partie...Demo-rats.

Thu, 05/17/2012 - 22:03 | 2438166 Iam_Silverman
Iam_Silverman's picture

"I really think a majority of the liberal voters to to fucking stupid their going to vote for him np matter what!"

So, based on this barely literate statement, you are a liberal?

Too, they're, no.

Thu, 05/17/2012 - 22:20 | 2438211 dwdollar
dwdollar's picture

You offend me. Grow up and understand how easy it is to rig elections.

Thu, 05/17/2012 - 18:30 | 2437656 AC_Doctor
AC_Doctor's picture

Choke on a bag of dicks, Mr. Dimon...

Thu, 05/17/2012 - 18:37 | 2437674 Joe The Plumber
Joe The Plumber's picture

I dont think anyone should take the bait that the trade is unwound just because iksil has left the building

Thu, 05/17/2012 - 19:06 | 2437738 virgilcaine
virgilcaine's picture

Amazing how 'too big too fail' became part of our vocabulary. The question is how did they get "too big to fail" in the first place. Fail and Fail some more for all i care.  All day long on the MSM like parrots.. too big to fail.. too big to fail..

In the real world we are held accountable for our failings and mistakes..

Thu, 05/17/2012 - 19:10 | 2437769 EclecticParrot
EclecticParrot's picture

Too fail to bail.

Thu, 05/17/2012 - 19:11 | 2437773 virgilcaine
virgilcaine's picture

see what I

Thu, 05/17/2012 - 19:16 | 2437788 virgilcaine
virgilcaine's picture

Tyler they are not getting out of that trade. It's going parabolic!

Thu, 05/17/2012 - 19:18 | 2437795 q99x2
q99x2's picture

Don't matter. If it is shit. FED'll buy it. Bad shit. No problem they buy that too.

Thu, 05/17/2012 - 19:23 | 2437808 virgilcaine
virgilcaine's picture

Looking at the chart..Man credit was tighter than a frogs azz back in Oct 11!.. It's going to get bumpy folks.

Thu, 05/17/2012 - 19:47 | 2437860 Atlantis Consigliore
Atlantis Consigliore's picture

long term credit; $ 5 B vs $ 125 B in positions and 1.2 Trillion derivatives wrong way


collapsed the Union Bank of Switzerland;

whats the over and under on this one?  $ 20 Billion with 

capital of 120 Billion...


any body wanna take a ride as they try to undwind an illiquid

$ 100 Billion swap position with no counterparties.????



Thu, 05/17/2012 - 20:26 | 2437944 Clashfan
Clashfan's picture

We can all wish that it will drag down this monstrous entity. In the end, though, they're pulling all of the strings.

Buy physical silver, though. It might not crash JPM (or it might), but it can't hurt.

Time will sweep us sinners by...

Thu, 05/17/2012 - 21:53 | 2438137 samsara
samsara's picture

We talk about JPM and the FED as as an entity, and in many ways each organization will exhibit propeties of an alive thing which will fight for suvival of itself, However we mustn't loose site of the fact that it is just made up of people.

There is some small finite number of individuals making up the top positiions of the major Corporations and Gov. Look at the boards of numerous companies wiith the same names. Like the whole thing about ex Goldman employees.

The Name (JPM, GS FED, GM, ECB, ENRON, COUNTRYWIDE, XYZ, ETC) is just the glove, the people on the boards, (like rockefeller,, on down) is the flesh in the glove.

So when a company goes bust (ENRON, Courntrywide, etc) the majority just go to another board position on one of the other 'Division' of the firm or are taken out of the game. Some times with an accidental suicide or to retire out of the game to watch birds, (aka Paulson) or some corner office somewhere where his schedual is always open and has hot and cold running blonde secretaries.

So , just sayn remember there are two dimensions when we are talking about the companies and the people.

Thu, 05/17/2012 - 22:01 | 2438160 Iam_Silverman
Iam_Silverman's picture

"especially when you ARE the market and there is no-one to unwind the actual tranches to."

No-one?  I'd bet the Federal reserve would open a special window for them (think TALF) in a heartbeat.  After all, just like TARP, there is definite upside for the American taxpayer.  I'm sure they can spin it as a profit center down the road.  Oh, and GM repaid their loan, early, and with interest too.  I wonder why MDB hasn't seized on this idea?  It would make great satire.

Fri, 05/18/2012 - 00:01 | 2438444 jonjon831983
jonjon831983's picture

It's that final grain of sand that begins the cascade.

Straw that breaks the camel's back.


Yea, that sorta thing.

Fri, 05/18/2012 - 00:04 | 2438449 traditionalfunds
traditionalfunds's picture

Does this mean Goldman is going to have a stellar quarter?

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