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JPM Crashing After It Convenes Emergency Call To Advise Of "Significant Mark-To-Market" Losses In Bruno Iksil/CIO Group

Tyler Durden's picture


Out of nowehere, JPM announced 40 minutes ago that it would hold an unscheduled 5pm call to coincide with the release of its 10-Q. Rumors were swirling as to why. The reason is as follows:

  • JPMORGAN SAYS CIO UNIT HAS SIGNIFICANT MARK-TO-MARKET LOSSES - "Fortress balance sheet" at least until Bruno Iskil gets done with it.
  • "As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion"

As a reminder, the CIO unit is where Bruno Iksil was making $200 billion-sized bets. Basically JPM has suffered massive losses at its CIO group most likely due to its IG/HY positions held by Iksil.

In Corporate, within the Corporate/Private Equity segment, net income (excluding Private Equity results and litigation expense) for the second quarter is currently estimated to be a loss of approximately $800 million. (Prior guidance for Corporate quarterly net income (excluding Private Equity results, litigation expense and nonrecurring significant items) was approximately $200 million.) Actual second quarter results could be substantially different from the current estimate and will depend on market levels and portfolio actions related to investments held by the Chief Investment Office (CIO), as well as other activities in Corporate during the remainder of the quarter.


Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO's synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO's AFS securities portfolio. As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value.


The Firm is currently repositioning CIO's synthetic credit portfolio, which it is doing in conjunction with its assessment of the Firm's overall credit exposure. As this repositioning is being effected in a manner designed to maximize economic value, CIO may hold certain of its current synthetic credit positions for the longer term.


Accordingly, net income in Corporate likely will be more volatile in future periods than it has been in the past.


The Firm faces a variety of exposures resulting from repurchase demands and litigation arising out of its various roles as issuer and/or underwriter of mortgage-backed securities (“MBS”) offerings in private-label securitizations. It is possible that these matters will take a number of years to resolve and their ultimate resolution is currently uncertain. Reserves for such matters may need to be increased in the future; however, with the additional litigation reserves taken in the first quarter of 2012, absent any materially adverse developments that could change management’s current views, JPMorgan Chase does not currently anticipate further material additions to its litigation reserves for mortgage-backed securities-related matters over the remainder of the year.

All of this is coming form the just filed 10-Q. The full link is here. 

Call dial in: (866) 541-2724 in the U.S. and Canada; (706) 634-7246 for international.

Stock now down 5% after hours dragging down ES 7 points with it.

Some segments from the 10-Q as we peruse it:

  • A one-notch downgrade in the Firm’s internal risk ratings for its entire wholesale loan portfolio could imply an increase in the Firm’s modeled loss estimates of approximately $2.0 billion.


and just for some clarity on how this occurred. We know the poisitions that Iksil held were in IG9 (more likely to be tranches) but this $2bn loss comes from a tiny 12bps decompression in the index - which means the DV01 must be huge...(as we already knew given the massive rise in net notional that we warned about)...


This is the Investment Grade credit index series 9 - which is the most active tranche-related index and was the index that Iksil had driven massively rich to its fair-value...

Chart: Bloomberg

Your rating: None

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Thu, 05/10/2012 - 17:44 | 2414872 WonderDawg
WonderDawg's picture

I guess you didn't understand the ebonics. POTUS doesn't make any major decisions, he only takes orders. POTUS isn't IN CHARGE of anything that they don't LET him be in charge of. POTUS is a figurehead, a frontman, nothing more. Prosecution isn't even in the vocabulary.

Prosecute. I'm still laughing.

Thu, 05/10/2012 - 17:45 | 2414862 Problem Is
Problem Is's picture

Just Call Bullshit Barry... Randy

Obama Bin Lyin' aka Barry Soetoro, the Useful Idiot Front man, Wall Street puppet, corporate owned douche hole, Teleprompter-n-cheif only has one decision per day...

Which cheeseburger joint for lunch...

Thu, 05/10/2012 - 19:30 | 2415393 johngaltfla
johngaltfla's picture

But, but, but, Obromney will do such a good job prosecuting his old hedge fund buddies.


Er, sorry, even sarcasm like that might be too much for everyone tonight.

Thu, 05/10/2012 - 17:48 | 2414891 LawsofPhysics
LawsofPhysics's picture

Relax, JP-Morgan is short.  They are front-running themselves and all their own shorts will pay big time.  Yes the fraud is now that blatant.

Thu, 05/10/2012 - 17:55 | 2414939 giovanni_f
giovanni_f's picture

I had the same thought. In the good for nothing hearings soon to ensue JPM will come up with a new term, "autohedge", e.g., and that will do the trick.

Thu, 05/10/2012 - 16:53 | 2414608 Burr's 2nd Shot
Burr's 2nd Shot's picture

Never saw it coming...

Thu, 05/10/2012 - 17:13 | 2414708 mayhem_korner
mayhem_korner's picture



Black swan?

Thu, 05/10/2012 - 17:20 | 2414759 Burr's 2nd Shot
Burr's 2nd Shot's picture

More like a narwhal, I think.

Thu, 05/10/2012 - 17:31 | 2414801 SheepDog-One
SheepDog-One's picture

Shit Hawk.

Thu, 05/10/2012 - 16:52 | 2414609 Divided States ...
Divided States of America's picture

But it passed the Bank Stress Test with flying colors? How could this be??

Thu, 05/10/2012 - 17:47 | 2414884 FinalCollapse
FinalCollapse's picture

Just like Dexia and Bankia. Don't you like these names. Like Levitra.

Thu, 05/10/2012 - 17:09 | 2414610 ihedgemyhedges
ihedgemyhedges's picture

Now you know why the market sold off this afternoon...................nothing some Depends wouldn't fix...............

Thu, 05/10/2012 - 16:54 | 2414614 navy62802
navy62802's picture

Uh oh.

Thu, 05/10/2012 - 16:54 | 2414616 bania
bania's picture

Sell silver save JP Morgan!

Thu, 05/10/2012 - 16:55 | 2414627 Transformer
Transformer's picture

Harvey's commentary last night talked about this sort of thing.   Actually it was that imperious wit, Jim Willie, who had the most to say about it.

Thu, 05/10/2012 - 16:57 | 2414633 jamezelle
jamezelle's picture


Thu, 05/10/2012 - 17:24 | 2414770 fuu
fuu's picture

<slow motion golf clap>

Thu, 05/10/2012 - 18:53 | 2415238 xela2200
xela2200's picture

Today we got Shanghai new silver contract and now this. Couldn't have happened to a nicer guy.

Thu, 05/10/2012 - 16:55 | 2414617 hedgeless_horseman
hedgeless_horseman's picture



Dimon has hit into the rough?

Thu, 05/10/2012 - 17:08 | 2414686 kahunabear
kahunabear's picture

So, this may hurt his second coming status?

Thu, 05/10/2012 - 17:15 | 2414728 bdc63
bdc63's picture

Genuflect when you say that ...

Thu, 05/10/2012 - 17:10 | 2414694 mayhem_korner
mayhem_korner's picture



Nice.  "A Dimon in the Rough"

I hope WB7 is ginnin' up sumpin' tasty over dis.

Thu, 05/10/2012 - 16:53 | 2414619 Gringo Viejo
Gringo Viejo's picture

Sell some paper silver for a liquidity injection.

Thu, 05/10/2012 - 17:27 | 2414787 tocointhephrase
tocointhephrase's picture


Thu, 05/10/2012 - 18:53 | 2415242 xela2200
xela2200's picture

Do you mean cover shorts?

Thu, 05/10/2012 - 16:53 | 2414621 Freebird
Freebird's picture

About time.

Thu, 05/10/2012 - 16:55 | 2414622 Canadian Dirtlump
Canadian Dirtlump's picture

couldn't happen to a nicer bunch of satanic mongoloids.

Jamie Dimon will threaten to have people sleeping with the fish (and not the ones in blythe's pants) if anyone does anything untoward before the firm though.

Thu, 05/10/2012 - 17:12 | 2414704 wandstrasse
wandstrasse's picture

fyi, Blythe wears silver shorts...

(credits magpie)

Thu, 05/10/2012 - 17:17 | 2414739 Canadian Dirtlump
Canadian Dirtlump's picture

yes for the antibacterial properties I expect since her ham wallet smells like an open grave.



p.s. that is a good one lmao.

Thu, 05/10/2012 - 17:50 | 2414907 fajensen
fajensen's picture

gawd - all I can think of is an image of bigfoot getting sniped

Thu, 05/10/2012 - 16:55 | 2414625 billybobtx
billybobtx's picture

BULLISH FOR PUTS!!! First of the US Bankster dominoes to crash...

Thu, 05/10/2012 - 16:55 | 2414628 mayhem_korner
mayhem_korner's picture



Cue CNBC Scramble...

We need Dick Bove in here pronto!...

We're workin' on it!  Somebody tee up makeup - and get us a wheelchair, some Ensure, a bib, and a spare bib.


Thu, 05/10/2012 - 17:02 | 2414664 bdc63
bdc63's picture

Wouldn't you just LOVE to know who got the phone call at 3pm and went mega-short JPM into the close ...

Thu, 05/10/2012 - 16:55 | 2414632 Cdad
Cdad's picture

Well well...and with the VIX having f'n flash crashed exactly at the close today...I wonder how f'n mispriced that indicator is now, hmmmm?

Just great.  More manipulations!  More off balance sheet instruments!  More criminal bankers...one in every American household, in fact!  More 6 sigma currency moves!  More misallocation of capital!


Fuck me.

Thu, 05/10/2012 - 17:07 | 2414683 HarryM
HarryM's picture

As I've already stated .. Cops looting the stores in broad daylight in front of the TV cameras and nobody gives a shit.

Thu, 05/10/2012 - 17:18 | 2414696 HarryM
HarryM's picture

This could also be the snowball starting down the mountain

Every crash needs a trigger

Thu, 05/10/2012 - 16:56 | 2414635 Sudden Debt
Sudden Debt's picture

They have 300 million in silver. Sell that and.... Oh... It's a collateral.... And spoken for....

Thu, 05/10/2012 - 17:15 | 2414651 CClarity
CClarity's picture


Thu, 05/10/2012 - 17:48 | 2414894 FinalCollapse
FinalCollapse's picture

Grab money from MF Global! Oh wait...

Thu, 05/10/2012 - 16:58 | 2414638 CClarity
CClarity's picture

Since when does any bank mark to market anymore?  Is Egan Jones threatening to use actual values in ratings decisions?  Fed will just ram through them unless . . . there is an intentional attempt to reduce medicated manipulation of the markets before the great sov. debt resets begin.

If you thought Lehman and '08 was disruptive, just wait til you see 2012 Sov. Debt stick save.

Thu, 05/10/2012 - 16:59 | 2414642 lolmao500
lolmao500's picture

If mark-to-market was enforced, all the big banks in the western world would implode.

Thu, 05/10/2012 - 17:11 | 2414671 mayhem_korner
mayhem_korner's picture



Immediate and absolute collapse.  And all that is is a change in accounting convention as to when reality is recognized.

The world as we know it sits just a few excel keystrokes away from financial obliteration.

Thu, 05/10/2012 - 17:06 | 2414684 bdc63
bdc63's picture


Thu, 05/10/2012 - 19:38 | 2415434 Zero Debt
Zero Debt's picture

Commencing MTM in -1, -2, -3, ...

Thu, 05/10/2012 - 16:59 | 2414644 UncleBubba
UncleBubba's picture

I love how the markets first popped AH on the news of the conference call .  oops.

Thu, 05/10/2012 - 17:00 | 2414650 youALREADYknow
youALREADYknow's picture

Quote from Blythe just one month ago: "We have offsetting positions. We have no stake in whether prices rise or decline. Rather we're running a flat or relatively flat matched book."

The halflife for lies being exposed is going down fast these days.

Thu, 05/10/2012 - 18:29 | 2415119 resurger
resurger's picture

They have a "matched book" in Gold & Silver ....

Next Half of 2012, someone will "light the match"


Physical Bitchez

Thu, 05/10/2012 - 17:00 | 2414652 holdbuysell
holdbuysell's picture
"JPM Crashing After It Convenes Emergency Call To Advise Of "Significant Mark-To-Market" Losses"

I didn't realize there was still such a thing.


Thu, 05/10/2012 - 17:49 | 2414890 Al Huxley
Al Huxley's picture

I didn't think the FED marked-to-market, and I didn't think they could take losses.

Thu, 05/10/2012 - 17:03 | 2414654 Azwethinkweiz
Azwethinkweiz's picture

We've all seen this before...but, let's watch it again.


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