Until this point virtually every pundit and financial journalist and blogger has opined on JPM, its prop trading operation (as first exposed by Zero Hedge), and its massive loss which due to its pair trade nature has potentially unlimited upside, but likely will top out at $5 billion (as also first explained by Zero Hedge over a week ago and subsequently by the WSJ). The one person who has kept silent so far was the man whose entire philosophy predicted just this epic flare out, by revolving around the assumption that humans operate under the illusion that they understand rare events: they don't (for more details read his books The Black Swan and Fooled by Randomness which by now have been read by all traders in the world, but apparently not those formerly in charge of JPM's CIO unit). Courtesy of this BBC Newsnight interview, he breaks his silence and shares his opinion, which as one may expect are far from laudatory: "JPM has 10-15 times the risk of a regular hedge fund... They should not be using my to play in something that is way too dangerous and too complicated for them... What I want [for JPM] is the following - skin in the game. People when they make money should get the upside, should get the upside; and people should be harmed when they have the downside. Hedge funds have that."
Taleb also touches on something we have been arguing for since 2009, namely that if banks are to expect bail outs whenever they blow up, they should be treated as utilities, with full caps on comp, net income, and earnings. To wit: "Banks are utilities. I don't understand why we've been bailing out banks since 1983 - they are utilities. They are de facto civil servants."
Finally Taleb loses it by comparing Wall Street to the mafia: "I am not an idealist. I am someone who doesn't want to be paying the $14 million dollars for this lady Ina Drew, which is more than John Gotti the mafioso got." Well, neither does anyone else. But, sadly, even Nassim now realizes that it is the financial mafia who owns this country and calls all the shots.
Ironically, and we are surprised Taleb does not understand this, the only thing that can lead to change is if we have 1000 Ina Drews putting on mega fat tail trades they don't understand, all of which eventually blow up in the bank's prop trading faces, leading to the final Wall Street collapse. Only this time we have a feeling that if the Wall Street controlled Congress and Senate do bailout their financial lobby friends with another under the table $28 trillion rescue operation, the results will be far more bloody and lethal for everyone involved than back in 2008, when former Goldmanite Hank Paulson was waving his coopted three page term sheet in front of the sheep in Congress, simply to save the firm he used to run.