So How Are JPM's Prop "Counterparties" Faring?

Tyler Durden's picture

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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Central Bankster's picture



Well we all know Jamie Dimon is "the best risk manager" .

Global Hunter's picture

according the Kenyan president he's the smartest banker we got

stocktivity's picture

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"?

The trend is your friend's picture

my guess is dimon has lost 20 billiion.

tekhneek's picture

Oh y'know... just guessin'

Harlequin001's picture

Maybe, happens a lot out here. Still curious though...

Buck Johnson's picture

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.

jeff montanye's picture

and blythe was sure she was earning brownie points with the knockdowns in the p.m. department.

Raynja's picture

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.

Caviar Emptor's picture

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

Ident 7777 economy's picture

"TBTF blows up a trade."


THOUSANDS of checks to cut; or alternatively, several big ones to brokers in EUR?




decon's picture

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.

chrisd's picture

nice of the FT to credit you

vincent's picture

QE money bitches!!

Central Bankster's picture

Maybe they are long some allocation of stocks/bonds and this trade is their hedge against systematic risk?  EL OH EL.

Burr's 2nd Shot's picture

I'll take Vaporized for the win please, Tyler.

imbrbing's picture

What is "where did it all go?"

odatruf's picture

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.

Burr's 2nd Shot's picture

Heard on ZH, circa 1804.

"Weehawken, Bitchez!"

Can you imagine the Pay-Per-View possibilities of a Geithner-Biden duel? 

kurt's picture

Where's the Beef?

spooncutter's picture

whats the difference between "losing" funds like MF global and "losing" money like JPM?

Marco's picture

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).

chump666's picture

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. 

q99x2's picture

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.

junkyardjack's picture

JPM:  Heads they win, Tails you lose

Don't bet against the Fed...

piceridu's picture

I'll take "Hedging a Hedge" for one thousand Alex

Caviar Emptor's picture

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

veyron's picture

Fed will set up an SPV and absorb the losses of this and every other shitty CIO trade.  

Zero Govt's picture

Ben the bankers pooper scooper will be round in a jiffy

Cadavre's picture

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?

BalanceOrBust's picture

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.

JohnSilent's picture

Wait for it, wait for it... The moral hazard is about to bloom!

Thanks in advance Uncle Ben!

Global Hunter's picture

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?

Gamma735's picture

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.

Global Hunter's picture

Think you're right there, they became the whole market in whatever they're doing.  

Reese Bobby's picture

New FT Alphaville story on JPM's CIO.  Ouch.


junkyardjack's picture

Looks like they are in European mortgages, nothing to see here...

IMA5U's picture

the final battle between blue mountain and the last of the cds prop desks?


or are there more....



slewie-the-pi-rat's picture

"access journalism"


how 'bout abscess journalism?


Jamie one more question (and thanks for the excellent wh'orederves the other night)...

insanelysane's picture

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.

Ted Baker's picture



mickeyman's picture

Maybe the counterparties are those mysterious Chinese groups on whose behalf JPM is allegedly shorting silver.