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Jamie Dimon's Quandary: Now That JPM's Internal Hedge Fund Is Gone, Where Will 25% Of Net Income Come From?
Much has been said about JPM's CIO Loss (which so far has come at a little over $5 billion, just as we calculated in the hours after the original May 10 announcement). And with the so called final number out of the way, investors in JPM have breathed a sigh of relief and are stepping back into the company hopeful that a major wildcard about the firm's future has been removed. The issue, however, is that the CIO loss was never the question: after all JPM could easily sell debt or raise equity to plug liquidity shortfalls. The real issue is that just as we explained months before the loss was even known, the Treasury/CIO department was nothing short of the firm's unbridled hedge fund which could do whatever it chooses, and not be held accountable to anyone at least until its counterparties broke a story of an epic loss to the media. And thus the problem becomes apparent: now that every action of the CIO group is scrutinized under a microscope by everyone from management to auditors to regulators to analysts to fringe blogs, the high flying days of whale trades are forever gone. The question then is just how big was the contribution of the Treasury/CIO group, which until today was buried deep within JPM's Corporate and PE Group and not broken out. Luckily, as today's JPM Earnings Presentation (page 14) shows, CIO is now a distinct line item.
(The CIO group is also for the first time broken out as a separate line item in JPM's Financial Supplement, p. 34)
Thanks to the new breakout, reminiscent of Goldman starting to break out its own Prop Trading group some years ago, we now know exactly just how big the contribution to both revenue, but more importantly, net income was courtesy of JPM's Hedge Fund.
The result is nothing short of stunning.
As can be seen on the chart below, the CIO group accounted for whopping 31.5% of Net Income (adjusted to exclude DVA, Reserve additions or releases and one-time items) in 2009, for a just slightly less ridiculous 19.1% of adjusted Net Income in 2010, and 10% in 2011!
Of course, once Bruno Iksil got caught with his back against the wall, the CIO group blew up, and results in a Net Income loss of $2.1 billion in Q2 2012 as was reported today.
And yes, the bloodletting may be over. But something else that is also over, is CIO being a net contributor of up to 30% of Net Income. In fact, going forward, it is safe to assume that since now the Treasury group will return to its standard role of hedging the firm's other positions, it will likely have a negative contribution to net income. After all, if anything, as a result of the CIO debacle Jamie Dimon has at least learned the definition of hedging, which does not mean accounting for a whopping 30% of total net income in any one year!
And this, more than anything is what JPM would be worried about: because is between 20% and 30% of Net Income is gone on a going forward basis, then Jamie Dimon, and JPM shareholders, will have a major problem in the future: CIO generated roughly $4 billion on average per year (2009 and 2010) in the years it was a properly functioning hedge fund. This "profit center" is now gone forever.
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No freaking Shit, corrupt or not, the underlings are going to fill this void with revenue? How the hell is that going to happen? Stupid Algo.
s
Where Will 25% Of Net Income Come From?
50% more Muppetslamming and Muppetstuffing until the next round of QE.
Bastards will probably take up silver manipulation or some other such evil. /s
Alright, so all of you are saying, they will manipulate markets and cheat. THEY ALREADY DO. They have PROVEN that they are talentless! Their only strategy is martingaling... they are WEAK and STUPID.
Quants? Fucking morons who couldn't win if they tried. I fucking wreck them with my brain given the chance. But this is not the point.
They will have another trading desk, and simply hide it or rename it. They must have another trading desk, or their derivitives trades will tank everything. Then the muppets will get angry, and bankers heads, might roll. That isn't a desirable outcome. Bubble needs to stay alive at least through election, and hopefully for at least another half decade. End of story.
"Where Will 25% Of Net Income Come From?"
Sallie Krawcheck made this point this morning; hosts just glossed right over it.
http://video.cnbc.com/gallery/?video=3000102716&play=1
Fast forward to 5:00
"What does this mean for the normalized earnings for this company...Does that mean the ROE isn't 10 to 12, it's 8?, it's 7? Which gets very close to your cost of capital"
"Where Will 25% Of Net Income Come From?"
It's bloody obvious where it will come from. Clients segregated funds. Duh!!!
Not that anyone cares but I have been sailing on Lake Michigan today in complete and total peace that everything in the world was...well let's just say..."I love it when a plan comes together."
Aw man, sorry to hear about your loss.
Ben is going to inflate their arses out of that hole
I wonder how smoke has been blown up the boards skirts
I worry when I see this kind of economical ignorance. JP Morgan is a Bulge Bracket investment bank with many different revenue models, all of which deliver world class services to clients. Investment banking, private banking, market making, prime services and sell side analysis are but a few of the services provided by JP Morgan. JP Morgan's clientele is impressively prestigious, and ranges from wealthy businessmen, politicians and elite hedge funds to the United States Government and Federal Reserve Bank.
Nice way to start the weekend. LOL +1
By prestigious I assume you mean anal raping pillaging pirates with no moral compass or ability to have empathy. Cock suckers who would kill their own mother and sell her kidney's to keep a lie floating. Control freak ass munchers who have only succeeded through fraud, deceit, lies, and the financial murder of those foolish enough to trust them.
Is that what you meant?
JPM dildo.
Chances are a JPM Dildo is faux silver colored and paper mache.
From the classic movie "Top Secret", here is the JPM Dildo, also known as the Anal Intruder. It will electrify you!
http://tinypic.com/player.php?v=11mf32g&s=3&hid=5&tag=intruder
Don't forget drug lords, various tyrants, illegal immigrants & welfare ECB card holders.
Milliondollar is one of Dimon's illegitimate children, a buck per post isn't bad compared to what the other kids get paid.
MDB, you are absolutely the best! You fit right in with your pals Barry O and Larry S! You know there is one kryptonite dart theat negates Fed QE inflation...is actually guarantees a form of deflation and I can almost affirm with certainty that the growing supply will spill over soon for the likes of yu and your friends...it's copper jacketed lead and it drops anything on impact.
World class robbery service? The poor are robbed from foodstampd by JP Morgan. MF Global customers are robbed by JP Morgan. Big bonuses will follow the biggest trading losers of the CIO and JP Morgan while shareholders suffer the losses.
That's world-class service?
JP Morgan is the mafia and so is the Morgan clientel.
So they do give a flying fuck?
WB7 Sir, May i put in a request for an idea from the other thread. Bernanke's head on the Fonz, thumbing himself up. all hail Bondzi. Tap the machine just right and it starts printing! HEYYYYY
From overdraft fees....you know, the little people
nah, i think its going to be from absolute destroying the silver market with the help of the CTFC, and then buying up all the silver companies they've purposely bankrupted, then.......after replacing the "borrowed" metal at pennies on the dollar.....jacking the silver price to the moon.
Nice to see I am not alone in my fears. Posted same time above.
I can second this, my account with Chase (jp morgan) Mysteriously overdrafted a few days ago! It's time for me to move to a new banking company -_- ... $15 down the drain over what was said to be a .50 overdraft on my account.. .wth
For chrissakes, move your account to a local institution where you can deal with real human beings.
Eitherway, see if you can guess which one the tax payer is:
http://www.youtube.com/watch?v=2BUS2tftTkA&feature=related
it's obvious, the inner spoon... :)
Hmmm.. eliminating free cookie at local branches?
All your free pens are belong to us!!
I guess I'm not getting a free spiderman towel any time soon.
Or eliminating free coke for managers? Nah, not gonna happen.
Take the shortfall from loan loss provisions...no worries...gap filled
Nope. Loan Loss Reserves are now back to December 2008 levels, or just after Lehman failed. At this point releasing any more "losses" is virtually impossible unless the US economy is growing at 4%.
Thanks Tyler, I think I'm going to print that chart out and put it on my refrigerator. My goodness look at the trendline...
"We're going to need a bigger whale!" - Jamie "I'll Rape My Mom for a Naked CDS" Dimon
Yep! What will they think of next!?!?
This is going to be fun to watch as the statutes of limitations (which varies state by state) has begun to run out for them on collection of defaulted consumer credit. The earliest, I think, is Washington DC at 3 years. So for example if somebody in DC hasn't made a credit card payment since Sept 2008, JPM Chase has long ago lost the ability to collect in court. As more people drop off the extended unemployment benefits, default on their credit cards, and more time passes, I look forward to watching nonperforming loans at JPM Chase increase as they struggle to maintain loan loss reserves, especially now with the CIO desk gone. Deleveraging here we come! Unless, of course, Dr. Dick Head, they do indeed come up with a bigger whale. I wonder what it will be....NIRP for all???
Bring on the inflationary collapse. I sometimes call the Cleveland Federal Reserve Bank and ask for the discount window. The call goes like this -
Me - Discount window operations please.
Fed - One moment.
Fed - Hello this is Maggie!
Me - Yeah Hi Maggies. I just shit into a nice two-ply plastic bag and was wondering if the discount window is still open for collateral. I was hoping to securitize this, toss that security into either a pension fund or muni bond, take those funds to buy some negative yield bonds, and keep the profit.
Fed-
Me - hello? hello? You did it for Jamie Dimon.
Fed - Sir, please stop calling.
"I sometimes call the Cleveland Federal Reserve Bank and ask for the discount window."
Genius.
216.579.2000
Beautiful.
that's not the half of it - loan loss reserves are $24 billion - the equity is $130 billion and the second mortgage portfolio (performing?) is over $85 Billion (not yet written down) - if the seconds are performing because they are paying interest only - for each $100,000 at 1% would be roughly $100.00 per month for the average home owner - not hard to do with a job for now - but the collateral "was" underwater 3 years ago by at least 40-50% or more of the portfolio - and probably much higher - then the $100.00 ability to pay per month - controls the wipe out of the equity in substantial part and the operations side of the Bank is the only generator of profits for how long?
Oh ye of little faith!
The level of loan loss reserves is immaterial, as having even one dollar is completely unnecessary for a Certified TBTF. Losses? Those are for the little people. Sure, Dimon faced a hiccup in the London office, but those Limeys don't appreciate how essential immunity from loss is for TBTFs, which is why their economy is in the crapper, by the way. And look who takes the fall for that loss...a trio of foreigners, one of whom is actually a Greek. That says about all that is necessary. A Greek. Nobody's going to shed a tear for that.
Thus, JPM has another pile set aside for rainy days that cannot possibly come, a pile that can be used to smooth earnings for as long as any HFT bot or benchmarked fund manager cares to pay attention. And when those run out? Mergers and acquisitions, baby! Jamie is thinking of buying Dexia, maybe BBVA....and then there's all that flotsam and jetsam in Ireland and Greece. The possibilities are endless.
And at some future debt, when all the fat has been rendered and the bonuses accrued in vested stock, Jamie goes all public service, maybe at Treasury, a move that would allow him to cash out his bonus haul without the irritant of taxes.
When the glass is always half full, the drinks are on the house....or rather, all our houses.
I always say that the true test of expertise is not explaining the past but accurately predicting the future...especially more than once. My hat is off to you for more accurately estimating the true losses. Wel done.
My guess is the CIO function will continue to reside somewhere else within the bank under a different name for that very reason. You never kill the golden goose, you just call it a duck.
My guess is the kids aren't getting a lolly pop at the drive though.
... and no biscuit for Fido
I can pull up to the ATM on a Sunday and my kids start asking me if they can have a lollypop...they're like Pavlov's dog when they see the bank.
Suckers... hmmm...
Ever notice how banks only give out dum-dum suckers to clients?
From me. And you. And from the guy above me. From the guy below me. And below him. And above them. And so on. And so on. And so on.
Fucking criminals.
You're very clever young man, but it's no use, it's muppets, all the way down...
They'll just need to come up with a new internal group and start over while maintaining the original CIO group operating in a conservative fashion.
between 20% and 30% of profits based on fictious marks?
a question that I have is how much of the CIO share and how much of JPM's total income is just a scam? what if (like the BLS and DJ, etc) their numbers are just part of the silver screen of illusion?
what if it is "too imprortant not to be entralled by the Matrix?"
we know the carmakers numbers are cooked.
china's numbers are cooked.
why do we look at the "masters" (my name is masters, blythe masters) as being any different?
To the contrary, as I got closer and closer to association with the City (London/Vatican/etc) I would exhibit heightened "raise eyebrow" (not logical, Captain) stance and BS sniffer on maximum.
so per the question of "where is JPM" (or any TBTF) going to come up with performance?"
same place the dollar comes from.
same place.
I live in this head space you describe. I take it for granted. I wonder why I don't go mad? How are you doing with it?
I do not wish to walk into their "reduced degree of freedom" piece of paper future. So I am trying to find my own. First step is noticing that everything is bullshit. Every last item was created from MIC research, so the vibrancy of this place's experience is non-existent. This is such a weak zone and therefore we are the merest shadow of what we could be. Maybe this is so the "crib" area, but I aspire to something else. Not ready for it yet or I would not be here, but I aspire. /lol/
i recommend wellaware1.com as a paper reality destroyer. It destroys Max and Stacy and by association others.
plus i do not grasp at anything as real. nothing is solid.
it is not madness, it is gladness.
explore the vibrancy within. I recommend meditation. TM is nice.
We are on the same path, my friend. I am trying to reduce my dependency on technology, and do many more things by hand, such as split wood and till soil. One part of my mindset, though, is to have any nagging injuries or minor surgeries tended to now, while I can. If I am laid up for a few days, certainly a little zerohedge couldn't hurt, could it?
I come from a place where a large portion of the population (10-15%) practice TM. Many of the people who practice it exhibit signs of mental illness. I've met a woman who 'Has conversations with aliens." She does not call them "extraterrestrials" she calls them "Otherterrestrials." One of my friend's mother screams in her sleep. Every night. I've heard her. My sister knows a woman who is "allergic to electricity"- yet when she goes to wal-mart she uses the electric scooters. The german government, the vatican, the cult awareness network among other professional organizations have put out warnings about practicing meditation. To quote from an article "a study by Germany's Institute for Youth and Society found that 76% of long-term meditators experience psychological problems. They noted that 26% had nervous breakdowns, 63% experienced serious physical complaints, and 70% reported a worsening ability to concentrate. There have been ten independent studies which have validated the adverse effect of long-term TM practices which provide additional confirmation to these conclusions."
http://www.thehensonhome.org/TranscendentalMeditation.htm
My Step-Father's church did some research at a local mental institution and found that a majority of the people that were imported from other towns came from my hometown.
It isn't madness, but it may lead to it.
Beg to differ.There is a lot of material showing benefits of meditations.Your evidence is anecdotal.
I looked at that site wellaware1.com and I'm not convinced because many of the people he claims to be the same person in different guises look alike, but there is no way to tell if they are identical. In many cases the ressemblance is not so obvious. He also makes the claim that Obama is in fact Osama bin Laden. (Switching the letters b and s--bs) Intriguing, but far from likely. Two possibilities: I may be the one who lacks the discernment to tell if it is the same person in a different guise or he may be overrating his own ability to discern the same thing. Some of his catches, for minor unknown actors working for the Weiss agency do fit his hypothesis, but others--particularly famous people, are problematic. I did like his debunking of the Disclosure Project. This site does make you wonder how extensive the Matrix is.
Leffe blonde :)
same thing was said obout QE... you just rebrand it and call it Operation Twist.Same looting, Same result. BTW thats where the 25 will come from since its the greatest wealth transformation mechanism from the middle class to the wealthy... is there a question?
Gone? Just wait next quarter for the profits from the flow desk, or no, that's too obvious, financial strategies desk, wait, scratch that. Just wait until next quarter's large unexplainable profit center emerges that wasn't there previously.
Easy, VAPORIZATION of customer accounts.
Corzine em....there, done.
I think vaporizatiin contributes to cash flow not to the bottom-line. But I guess It depends on the accounting rules on that particular day.
.....rules? /hahahahahahahahahahahahahahahaha/
Doesn't he have one of those Fed printing presses down in the basement?
Jamie will have to sell his golden toilet he bought from Thaine
"Where will JPM's 25% net income come from?"....as usual, steal it!
good laughs if you read the average VaR line...
Jamie, here is how to solve your quandry. Start here: "I have committed fraud. For this I feel constant and intense guilt. I am very remorseful that my greatest transgressions have been to my fellow man..."
Cheesy, we gotta offer to help with the gun too...
Yes Ms. There will be no shortage of volunteers in that department, I think. No leaky hoses from the tailpipe to the Chrysler for him. Jamie doesn't know the meaning of the word failure.
Funny thing is that I get shaken down for $135 for dark window tinting and lack of front plate in the name of the state serving and protecting, yet JP "Cock gobbler" Dimon takes billions in the name of theft. Welcome to ORwell's threesome of cum guzzling whores. He could never have had an organism of what today's bizarro world is.
http://www.youtube.com/watch?v=IWk1_Tgj-Fo&list=UUK7Q9Kl6xWpDtLIineKSgnw...
And in the the news tonight: In Londons SOHO a silver haired banker was pulling tricks to meet capitial requirements and ensure quarterly earnings ...
25 cents at a time...
Hah! The true 'whale trade': You can sleep with 16 billion pretty women for $0.25 each, or one massively fat ugly woman for $4 billion!
Funny as a bankster in jail!! ++++
They will fill the hole with more, different, better fraud! duh
Daily Humor... HAHAHAHHAHAHHAHAHAHAHHAHAHAHAHAHAHA
JPM's "Code or Conduct"
Our integrity and reputation depend on our ability to do the right thing, even when it’s not the easy thing. The Code of Conduct is a collection of rules and policy statements intended to assist employees and directors in making decisions about their conduct in relation to the firm's business. The Code is based on our fundamental understanding that no one at JPMorgan Chase should ever sacrifice integrity -- or give the impression that they have -- even if they think it would help the firm's business.
source: http://www.jpmorganchase.com/corporate/About-JPMC/code-of-conduct.htm
+100 Excellent!
What if there are NO Profit Centers at all at JP Morgue?
Suppose all the paper work and filings are just for show, to cover an outright gift from the FED each Quarter, they would need to generate some fictitious trades and business activity to give the world the idea that it came from activity, when in fact it was just a "Digital Gift" from the FED.
I'll bite, I have sort of wondered this myself. If this were the case, why would they have to announce bad trades in the first place?
THE BANKS THE FED THE TREASURY,CONGRESS,OBAMA,ROMNEY, THE GOVERNMENT IN KAHOOTS WITH THE BANKS AND ANYONE ELSE WHO PAYS THEM OFF. ALL CROOKS
5 billion loss, no big deal, ARE YOU KIDDING ME!!! JAMIE, YOU ARE GOOD EVEN THOUGH YOUR BAD.
Just steal from segregated commodity accounts.
JPM has lost its magic derivative wand!
How the king of derivative hubris ends up as the emperor's vizir without the power to manipulate; next step the gallows. If you can't deliver you lose your head, my vizir! Thats the rule of power!
Oh, I'm sure they have their next scam all lined up.
Jamie, Blythe, etc don't give a fuck what we say and post about them. the reality is they are incredibly rich, and will probably spend this weekend as they do all the others wining and dining on the best that money can buy. Some of the members of this club own and keep an entire team of polo ponies, have homes filled with masterpieces costing mega millions, fly private, and so on. They think they deserve it, and in no way do they feel threatened that they will pay for it and or lose their lifestyle. I think for that to happen most of them agree they would have to be kill someone and even then only is the person was equally connected and/or they were caught on tape with the smoking gun - although even this they might be able to make vanish
Obviously mr market isn't complaining about a blocking and tackling deficit...at least today. Just as obviously mr market understood the importance of this area as a profit center and priced it in accordingly.
the king needs a new magicien; anybody, everybody has to come reassure the emperor he has his crown, his clothes, his orb and his crown jewels. The empire requires this homage to imperial power. Where are the levers of power, in this eleventh hour?
They have done a stunning job of brainwashing us, I think. The levers of power cannot be readily seen but they are pulled and lifted constantly.
hmmm... the eleventh hour?
something about that number eleven that gives me chills,...
Oh!
SNAP?
So when do they do round two of M&A like in 08-09 so they can "add significant synergies that will go straight to our bottom line"...aka the reality show appearance fees they'll charge once Lloyd B and Jamie D have to share an office.....It's fulll proof!!! Seaside Heights has never been so profitable...why not the banks?!
Never underestimate the power of fraud.
Now their One Equity Partner division which I beleive absorbed some of the CIO folks is out investing in healthcare, a technology that competes with Nuance for speech recogntion and put out over a billion to take it private, deal is not finished yet of course and there's list of attorneys checking it out.
http://ducknetweb.blogspot.com/2012/07/one-equity-partners-part-of-jp-mo...
Unlike Allscripts fiasco a short while back I think they have all their integration code written. It's taking longer these days as it gets more complex out there.
The governemnt...They get to manage all these new welfare EBT Visa cards Our Asshead president just implemented: www.assheadnation.com
The Federal Reserve System and the reservations of Sir Jamie Dimon thy noble gatekeeper: "Socialism is nothing but the capitalism of the lower classes." Quote:Entscheidung (The Hour of Decision,1933) pt.1
now, as an humanistic jamie dimon: "All decent people live beyond their incomes nowadays, and those who aren't respectable live beyond other peoples'. A few gifted individuals manage to do both" Quote- Chronicles of Clovis (1911) 'The Match Maker'
Ps. Sooner, rather than later, the TBTF's will single handedly repeal the [Gramm-Leach-Bliley] "GLB-Financial Service Modernization Act of 1999",... for their own survival. JMO
love the post Tyler
Silver shorts!
So hot!
http://tinyurl.com/7hzposa
How do you delete you comment?
There is no deletion possible.
ZH comments, like herpes, are forever.
Go in and update the text to something meaningless, like JPM's accounting books.
Why has no one made a movie where they show a crazy sorcerer type feeding on live babies with a cadre of mutant assistants bringing in real time news and data where the sorcerer screams things like "short 1 billion ounces of silver.....NOW, before I throw you into down the bottomless pit of doom..." (takes bite out of live baby, not real of course) then continues on running his madman show. I think it would hilariously funny. It would need some seriously gory graphics and some real perversion to be super funny....
More important, what's left that he can cook the numbers and hide the losses to fool investors with?
You mean fool all of us that the system is actually up and working?
uh, the US taxslave?
A Transitory Profit Center in every pot.
you had to ask...
Tom Waits - Rockpalast 1977 05 Pasties And A G String
http://www.youtube.com/watch?v=sPSktrg6GO0
.
more of the same.
This too shall pass
Real power from fake money?
http://shutupnsing.wordpress.com/2012/07/14/the-centralization-of-real-power-using-fake-wealth-self-interest/