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So How Are JPM's Prop "Counterparties" Faring?
We already know that JPM has lost billions on its prop trade, and as suggested earlier (and as the FT picked up subsequently), JPM's prop desk (not to mention its actual standalone hedge fund, $29 billion Highbridge, which nobody has oddly enough discussed in the mainstream press yet) is so large that unwinding the full trade, as well as all other positions held by the CIO, would be unwieldy, allowing us to mock "the fun of negative convexity - especially when you ARE the market and there is no-one to unwind the actual tranches to." The FT then phrased it as follows: "I can’t see how they could unwind these positions because no one can replace them in terms of size. It’s a bit of the same problem they face with the derivatives trade," said a credit trader at a rival bank. "They pretty much are the market." Which actually is funny, because if the media were to actually read a paper or two on how the market works, and puts two and two together, it just may figure out that the biggest beneficial counterparty for JPM is none other than the Fed, using the conduits of the Tri-Party repo system. But that is for Long-Term Capital MorganTM and its new CIO head Matt "LTCM" Zames to worry about. In the meantime, a question nobody has asked is how have the purported JPM counterparties, the most public of which are BlueMountain and BlueCrest who leaked the trade to the press in the first place, and are allegedly on the other side of the IG9 blow up doing. Well, according to the latest HSBC hedge fund update looking at the week ended May 11, not that hot.
Now one thing we know is that when it comes to reporting one's results to an aggregator: when you have a profit you never under-represent it. And in this special case, since the funds are likely eager to recruit more like-minded hedge funds to their side of the trade, the best way to do it is by showing profits.
Which, for the early part of May, when the bulk of the JPM losses took place, are oddly missing for the two biggest players across from JPM...
So: where are the profits really going?
And is there much more here than the "access journalism" press has been let on to know?
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evil speculators!
:)
Well we all know Jamie Dimon is "the best risk manager" .
according the Kenyan president he's the smartest banker we got
but let us not mock just negative convexity. let us mock jamie as well: http://poemshape.wordpress.com/2009/04/01/shelleys-sonnet-ozymandias/
or http://www.online-literature.com/shelley_percy/672/
How many hedgies bought Apple after earnings near $600 ....if Apple keeps dropping, some other big name will be in trouble soon. How many ways can you spell "Margin Calls"?
my guess is dimon has lost 20 billiion.
On what basis? Just curious...
Oh y'know... just guessin'
Maybe, happens a lot out here. Still curious though...
No place for them to unwind there positions too. I think because of this we will see QE3 or some type of intervention before Sunday night/Monday morning.
and blythe was sure she was earning brownie points with the knockdowns in the p.m. department.
that or she made her bonus makng $ to fund margin calls by cashing in sold calls. interesting the london whale floated to the top at the same time the fed couldn't find anyone to ride the maiden lane.
Wow!..Nikkei down 200.
Wake me when it is 200
TBTF blows up a trade. Do they neeed to unwind? Is there some room for negotiation? Maybe Ben can just make it all go away
"TBTF blows up a trade."
THOUSANDS of checks to cut; or alternatively, several big ones to brokers in EUR?
I wonder if there's any connection with this blow up and Dimon's unusually vocal complaints to Bernanke about Frank/Dodd at that press conference on 6-6-11? It seemed really odd at the time that Dimon would air his bitching at that venue.
nice of the FT to credit you
QE money bitches!!
Maybe they are long some allocation of stocks/bonds and this trade is their hedge against systematic risk? EL OH EL.
I'll take Vaporized for the win please, Tyler.
What is "where did it all go?"
Corzine worked hard to earn the moniker, damn you. He didn't need a second volley unlike our third Vice President.
So, you'll take "Corzined" for the win, dear sir.
Heard on ZH, circa 1804.
"Weehawken, Bitchez!"
Can you imagine the Pay-Per-View possibilities of a Geithner-Biden duel?
Where's the Beef?
whats the difference between "losing" funds like MF global and "losing" money like JPM?
The former shouldn't be legal (yes, I believe in regulation to a certain extent) the latter should be the risk of doing business (I also believe hedge funds should be allowed to blow themselves up).
What the f*ck are they unwinding into? Equities? Nope, they would be cutting positions to cover holes.
Write-downs baby...
And we haven't yet seen a major spike in risk aversion, persistent selling but looking for that absolute fear trade.
JNK
Probably called in the guy from LTCM to see if there was any possible remedy before calling the next meeting at the FED to let them know that ice-nine has re-entered the system.
JPM: Heads they win, Tails you lose
Don't bet against the Fed...
I'll take "Hedging a Hedge" for one thousand Alex
Just stick it all into the mattress. From now on there's no reason why a TBTF bank should take any risks. And if anything goes wrong just send the bill c/o Ben APO Guantanamo
Fed will set up an SPV and absorb the losses of this and every other shitty CIO trade.
Ben the bankers pooper scooper will be round in a jiffy
Ben the bankers pooper scooper will be round in a jiffy
But why? Ben's a rock star! He never pays for lunch! Mean, like, and after all, the TV set been saying the economy is recovering - everything is up, and that the apparent capitulation by always heroic money center HFT mills [and enjoyably obviously predictable] bull chumming uptick stuffings may offer a good opportunity for individual traders to reenter the market. Right ... like there will will be lines around the block clamoring for entry into Schwab strip mall kiosks all over the country - any minute now - yep real soon .. you wait you miss the big score - just watch the Cramer teeter todder shtick ... you're getting sleepy .. when the count hits three you be a born again true believer!
Don't cha' see: When there ain't no buyers nowhere - the problem is not the risk associated with the unconverted paper held by "Street" gang, the problem is buyer perceptions.
Forget reality. The problem is perception!
Saw weekend gold nose dive - knew something was up. Then saw gold and market indexes traveling the same down path - double dog knew something was up - Germans are pestering their D-Bunder to repatriate off shored German gold under watch and key in US, France and UK. The 2.3 Billion JPM headline is being offed by some as ruse, a false flag, a diversion to hide an alleged wad of recent JPM naked short offers. Don't know `bout the underly. Easy to speculate the totally artificial down turn of last weekend's o/n Gold tick may have had something to do with alleged naked Morgue shorts. Easy to speculate why: 340 tonnes of offshored German gold. What if some of the offshored German gold was loaned out? The custodians would need to get it back. In a time where demand is high, the best way to lower the cost of (re)acquiring the needed German gold would be to do what the Street gang always do: Write a bunch of naked shorts!
Didn't Chanos do that to Lehmans?
JP Morgan is fubared. They (and they are not alone) are so deep into it only the Fed can save them (at the expense of taxpayers).
I say let the big banks fail. All of them. They fubared all of society and should go down. Whatever hell breaks loose as a result will be better than the hell of propping them up so that rich bankers can collect more bonuses at taxpayers expense. I would rather a cataclysm that a slow erosion of Main Street that kills us all and benefits a few banksters.
Wait for it, wait for it... The moral hazard is about to bloom!
Thanks in advance Uncle Ben!
I have to admit I have no idea what is going on anymore, on the bright side I'd make a good candidate for a job at JPM, the Fed or the NY Fed as I'm uterly clueless.
edit: all I can make of it is their position is so big that as the market moves and they begin to adjust their hedge that their sheer size moves the market and they have to conversely re-hedge (ie start out buying move the market up turn around and start shorting). So they're just in a loop now. Do I have this anything close to what's going on?
I have no idea if you are right. I thought JPM positions were so large that nobody has the resources to buy them. Or in other words, that if they start to unwind them, there is no market for them and the price craters. But I maybe wrong.
Think you're right there, they became the whole market in whatever they're doing.
Haven't they always been?
New FT Alphaville story on JPM's CIO. Ouch.
Looks like they are in European mortgages, nothing to see here...
the final battle between blue mountain and the last of the cds prop desks?
or are there more....
"access journalism"
how 'bout abscess journalism?
Jamie one more question (and thanks for the excellent wh'orederves the other night)...
Fake slewie.
Wonder if the Fed is taking the position as collateral for some LTRO. Love the fact that all of this crap traded through the UK office but the good old Fed comes to the rescue because you can never leave one of your own behind. No conflict of interest or illegal foreign activity going on here. Bet it in the UK and get insurance from the US.
THE OTHER SIDE OF THE TRADE IS NOT BLUECREST OR BLUEMOUNTAIN BUT.......
THE PUBLIC RELEASE WILL BE MADE END OF MAY OR FIRST WEEK OF JUNE..GOOD LUCK EVERYONE
Maybe the counterparties are those mysterious Chinese groups on whose behalf JPM is allegedly shorting silver.
The bankers who have pushed themselves into positions of world authority, disallowing Europeans to vote on economic issues and disallowing Americans’ representative grassroots political parties, are on the dark side and past side of history. This is not the future; the future is not monarchies, oligarchies and banker dictators such as Jamie Dimon and Lloyd Blankfein.
The international bankers’ economic system, their Keynesian world plan, will not work; it will fail and fail big. And the longer it goes on, the faster it goes down. Making good people work and forfeit their livelihoods and resources for the exclusive use of a criminal banking oligarchy directly flags the forward progress of civilization.
These people, the financial elites who are imposing their political will on the world's markets through the power of the Federal Reserve System, are willing to destroy America and all of Europe in a one-time fast grab for all western civilization’s wealth and resources. Society in the past has had its cheaters and grabbers, but never has a vested interest achieved the no-appeal-power the Fed cartel holds over governments, wealth, natural resources, and the manpower of the world. It is this stranglehold by Fed central planners on free enterprise that has choked the vital life out of the world’s well being, creating the adverse conditions, the JPMs et al., that are producing mass unemployment and near starvation in parts of the world.
And, now, as the whole shebang fails and the central planners can no longer revive it via more central planning, the people exercising the power have learned that if they don’t grab all they can NOW, competing crooks will take it from them. The current situation can be likened to a group of burglars fighting over the stolen money. The people of America, finally awakening, did not expect the Fed players would actually destroy the country to satisfy their avarice. Fortunately, the economy is stronger than the Fed and takes no prisoners.
Heloooo to our huckelberry.
This is got Lehman written all over it.
So, does a JPM failure result in a new currency yet?
Is this the plan?
Watch out for a fast one being pulled here, something stinks.
I agree with your last part. See my post below. (not sure about the Lehman part)
My hunch is that JPMs "loss" is a stimulus package in disguise.
I really don't see a lot of scrambling going on. So far the reactions have seemed tame to me.
Or...
Shit has hit the fan hard and now they're scrambling to clean up the walls before company comes over.
Blue Mountain loves........................
Well, if I wanted to rob a bank
I'd do it from the inside
or if I wanted to wash a few dollars
I'd use a washing machine
and if I were inside of a washing machine
with all those dollars
I'd go outside and tell the world
That the machine didn't work and I lost
everything
And then I'd fire all of my friends stupid om
Thanks for the ft link. Interesting that JPM loaded up on the same toxic mortgages in the UK that caused Moody's to downgrade Santander UK. Wonder how many of those the Fed now owns.
Bluecrest and BlueMountain hedged that trade with Oprah Winfrey Financials, but I wasn't suppose to tell anyone.
For clarification, does this article imply the FED is benefiting from the other side of the non hedge, hedge gone bust, is that even possible?
If they are the market and have the capacity to do this... think what these #oksukers are capable of doing to silver and gold...
Any chance the slide in Silver is due to JPM prop trade related margin calls?
Of course.
Prices (even of gold and silver) always slide in the first phase of a crisis as those exposed liquidate in order to cover.
The strong hands and old heads stay out of the market deliberately too, in order to deepen the dip that they will buy back into later.
Typically takes 1-4 weeks for that dip to mature then bounce.
The question of who the counterparty is on these JPM losses crossed my mind immediately. Seems to me we need to know, especially if the taxpayer is going to bail out the bank. I have a sneaking suspicion that the losses are calculated and the money is really going into somebody's pockets. That is to say, this is a fraud. At the very least it is one hell of a tax deduction they should not be allowed to keep.
@laosuwan
Bingo!
There IS NO OTHER SIDE!!!
When this blows it will make Moby Dick look like a pimple on a duck's ass.
Who or what will be left----too big for the CB's let alone the individual banks and ten years at hard labor with no pay for the 99%.
This is a just a great joke and meanwhile---------------------------------------
Well, meanwhile-----------------------------------------
It is just big for an ignorant oldman to fit in this tiny brain WOW!!!! om
Is there any possibility PIMCO could be a part of this?
Just looking for someone who could deal in bonds in the size required.
Article from the FT stating Bill Gross is using CDS in the Total Return Fund.
http://www.ft.com/cms/s/0/06fa5636-9f63-11e1-a455-00144feabdc0.html?ftca...
"The mutual fund by comparison is so large that Mr Gross has to use derivatives such as swap contracts to express an investment view. This gives broad exposure to an index, but does not allow an investor to add value by cherry picking individual bonds."
Then again, John Paulson was playing in mortgage bonds back in January. He could be a counterparty too.
Is this is what is known as "burying the corpse"?
I heard that term used when the Brothers Hunt tried to corner the silver market by becoming the market. The rules got changed on them, though.
One of the only people to tell us what is going on and sort out the mess is Bruno.
I wonder if Bruno is getting nervous about, you know, stuff and people... maybe personal safety...
Moore Leads Hedge Funds Betting On JPMorgan Before Losses
Soros, Singh
Billionaire George Soros’s New York-based investment firm, Soros Fund Management LLC, bought 606,400 JPMorgan shares in the quarter, according to a filing yesterday.
in full
http://www.bloomberg.com/news/2012-05-16/moore-leads-hedge-funds-betting-on-jpmorgan-before-losses.html
SORO'S :) now we know why the FBI got involved so quickly
I smell QE3 coming. Fed is going to bail out JPM
Silver will pop big if the crooks at JPM have to try to unwind THAT monster quickly... and they are probably selling their gold like mad... I would hate to have MY gold at a JPM run warehouse... or anything in the SLV and GLD... which are soon to blow sky high too... it is all paper... tha...tha...that's all, FOLKS!!
Breaking... Dimon approved the disastrous trade...
http://www.businessinsider.com/wsj-jamie-dimon-jpmorgan-trade-losses-5-b...
So now we're up to $5b.
azusgm,
Yes, so far. And let us not forget that the "desk" in London was (according to a reliable source) mangling.... excuse me, "managing" 360 BILLION of unlent DEPOSITOR funds. If true that is almost beyond belief. This is how depositor money is being deployed? AND IT IS LRGAL? If you bank with Chase, where should you be tomorrow morning? Not a trick question.
Let me guess, the money never existed to begin with, it just existed on paper in the form of a derivative, and now the paper is not worth as much. And even more importantly, there is no one but myself (JPM) to pay me for it, because I am the market. What a fucking absurd joke.
Somebody let Tyler see this:
What Tyler never picked up on is that when it gets hard to trade credit index those models tell traders to instead trade major equity indexes, currencies, commodities as a proxy. So I think JPM has been buying S&P wherever and whenever they couldn't sell IG9. Hence with every 35 bps fall in market there was usually a bid and obviously they’d be selling some on small rallies. Hence the realized vol was getting crushed.
Now that game is completely over, there is no more vol crushing JPM stabilizer bid/offer. In fact JPM is short gamma if anything. Say hello to high vol regime from now on.
That would require faith in the current system and FASB and all the circuit breakers to be removed.
The founders of Morgan and Chase are long dead. Jamie Dimon is just a hired manager.
He is doing exactly what hired managers do. Accumulate and maximize income/benefits for himself, which is often best accomplished by hollowing-out the company. Any losses are someone else's money.
It is the ultimate of corporate games after the founders depart. Peak corporation.
What do you expect?
A long time ago, when as tradesman I first got into Nuc Power Plant field, a mentor pointed to the 2 containment domes and asked " Do you know what's inside them? I hesitated. He continued, "They're full of money, and our job is to empty them".
JPM you f*cked with my silver, so I am enjoying your problems.
May they continue.
"They pretty much are the market."
Yep, therein lies the paradox. The more you win the more likely you will eventually lose. Eventually you can only play (er trade) with yourself. And therein lies the fact that every time Blythe Masters or another one of JPM’s brass goes to the CFTC and argues how position limits are so wrong for the big banks and the world economy in general, they are lying to us and to themselves at the same time.
We're going to need a bigger whale. Wait, that won't work.
Hey all you brilliant kids out there attending the nation's best private liberal arts colleges, serve your country and go into investigative journalism. We need more Tyler Durdens and Matt Tabbis. A lot more.
get over it or get real
htt://abacus-financialviews.blogspot.com.au/2012/05/all-wrong-on-jp-morgan.html