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The "World's Largest Prop Trading Desk" Just Went Bust

Tyler Durden's picture




 

A month ago we warned that JPM's CIO office is nothing short of the world's largest prop trading desk. Not only were we right, but what just transpired is just shy of our worst possible prediction. At the end of the day, the real question is why did JPM put in so much money at risk in a prop trade because we can dispense with the bullshit that his was a hedge, right? Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least "net" is not "gross" and we know, just know, that the SEC will get involved and make sure something like this never happens again.

As for what we said before, we will just repost the whole thing as we were, once again, right.

From April13: Why JPM's "Chief Investment Office" Is The World's Largest Prop Trading Desk: Fact And Fiction

For the fiction, we go to JPM's conference call transcript where we had the following disclosures.

  • "I did want to talk about the topics in the news around CIO and just take a step back and remind our investors about that activity and performance. We have more liabilities, $1.1 trillion of deposits than we have loans, approximately $720 billion. And we take that differential and we invest it, and that portfolio today is approximately $360 billion. We invest those dollars in high grade, low-risk securities. We have got about $175 billion worth of mortgage securities, we have got government agency securities, high-grade credit and covered bonds, securitized products, municipals, marketable CDs. The vast majority of those are government or government-backed and very high grade in nature. We invest those in order to hedge the interest rate risk of the firm as a function of that liability and asset mismatch."
  • "We hedge basis risk, we hedge convexity risk, foreign exchange risk is managed through CIO, and MSR risk. We also do it to generate NII, which we do with that portfolio. The result of all of that is we also need to manage the stress loss associated with that portfolio, and so we have put on positions to manage for a significant stress event in Credit. We have had that position on for many years and the activities that have been reported in the paper are basically part of managing that stress loss position, which we moderate and change over time depending upon our views as to what the risks are for stress loss from credit. And I would add that all those positions are fully transparent to the regulators. They review them, have access to them at any point in time, get the information on those positions on a regular and recurring basis as part of our normalized reporting. All of those positions are put on pursuant to the risk management at the firm-wide level. They are done to keep the Company effectively balanced from a risk standpoint.... " Of course, when you own the regulators, it is not much of an issue... And would it be the same regulators who we have now confirmed don't understand the first thing about markets?
  • "The last comment that I would make is that based on, we believe, the spirit of the legislation as well as our reading of the legislation and consistent with this long-term investment philosophy we have in CIO we believe all of this is consistent with what we believe the ultimate outcome will be related to Volcker."

For the facts, we go to Bloomberg again, which was the first to break the Bruno Iksil story, and which exposes without shadow of a doubt why the Chief Investment Office is nothing but the world's largest prop desk. But hey, just as Goldman named it frontrunning service the "Asmymetric Service Initiative" thereby magically not making it a frontrunning service, naming the world's largest prop desk the "Chief Investment Office" makes it no longer be the world's largest prop desk.

Here are the highlights. First on the CIO group:

  • Achilles Macris, hired in 2006 as the CIO’s top executive in London, led an expansion into corporate and mortgage-debt investments with a mandate to generate profits for the New York- based bank, three of the former employees said.
  • Some of Macris’s bets are now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets, the former executives said, based on knowledge gleaned from people inside the bank and dealers at other firms.
  • The CIO’s growing size and market power have made it an increasingly important customer to Wall Street’s trading desks and a market influence watched by hedge funds and other investors, the former employees said. Iksil’s positions in credit-derivatives have become so large that some market participants dubbed him “Voldemort,” after the villain of the Harry Potter series who’s so powerful he can’t be called by name.
  • What Bernanke is to the Treasury market, Iksil is to the derivatives market,” Bonnie Baha, head of the global developed credit group at DoubleLine Capital LP in Los Angeles, where she helps oversee $32 billion, said in a telephone interview.
  • Macris’s team amassed a portfolio of as much as $200 billion, booking a profit of $5 billion in 2010 alone -- equal to more than a quarter of JPMorgan’s net income that year, one former senior executive said.

And far more importantly on the background of the guy behind it all. It kinda, sorta sounds like he is a... gasp.... prop trading kinda guy

  • It’s Macris, not Iksil, who was behind the strategy that led to an unprecedented build-up of credit risk in JPMorgan’s chief investment office, three former employees of the bank said. While they expressed doubt Iksil can unwind his positions without causing a dislocation in the markets he trades, they also said JPMorgan probably can afford to hold the assets until they mature and so won’t be forced to sell them.
  • In 2011, corporate revenue of $3.3 billion included $1.6 billion of securities gains and produced $411 million of net income, the bank said in an annual filing on Feb. 29. By comparison, JPMorgan’s investment bank reported $26.3 billion in revenue and $6.8 billion of net income in 2011.
  • Since 2007, the value of securities held in JPMorgan’s chief investment office and treasury has more than tripled to surpass $350 billion from $76.5 billion, according to company filings.
  • Profit, not risk management, guided the purchases, according to the former employees. One of the employees, who previously held a senior executive position at the bank, said Dimon even ordered some of the trades himself.
  • Dimon pushed the unit to seek bigger profits by buying higher-yielding assets, including structured credit, equities and derivatives, and ramping up speculation, according to two former employees.
  • In London, Macris expanded his team, adding expertise in credit and fixed-income trading. A Greek citizen, Macris previously was co-head of capital markets at Dresdner Kleinwort Wasserstein before joining JPMorgan in 2006. In that role he helped oversee a unit that made proprietary trades, or bets with Dresdner’s own money, according to two people who worked with him at the time.
  • Before joining Dresdner, Macris oversaw currency trading at Bankers Trust, now part of Deutsche Bank AG. Macris was an idea- generating machine who was blunt and didn’t suffer fools, said Duncan Hennes, who worked with him at Bankers Trust.
  • At JPMorgan, Macris hired Evan Kalimtgis, a former head of credit portfolio strategy at Dresdner, to help with risk management, according to one former employee.
  • In 2007 Javier Martin-Artajo, who had been Dresdner’s head of credit-derivatives trading, joined JPMorgan in London. George Polychronopoulos, who worked at hedge fund Endeavour Capital LLP, also joined the London office in 2009.
  • Martin-Artajo, Polychronopoulos and Kalimtgis didn’t return calls and e-mails seeking comment.
  • While Macris had a mandate to make money from the beginning, he didn’t start putting on big bets until after the credit crisis in 2008. Two of the former executives said the following year he bought AAA-rated pieces of collateralized debt obligations. As competitors dumped securities and prices slumped, Macris’s group at JPMorgan emerged as the biggest buyer in some markets, said one former executive at the bank who was familiar with the trades at the times.
  • In one example, a New York-based CIO trader named Jonathan Horowitz bought about $1.1 billion of AAA-rated portions of collateralized loan obligations for about 80 cents on the dollar in November and December 2008, people familiar with the matter said at the time. Horowitz declined to comment.

Finally, the most damning evidence that JPM's World's Biggest Prop DeskTM, elsewhere known as the CIO, has to be dismantled lest it suffer the fate of all other massive prop desks, which promptly blew up in the days after the Lehman failure, is the following:

  • One public sign that the chief investment office does more than hedge: Its trading risk is on par with that of JPMorgan’s investment bank.
  • JPMorgan’s annual report for 2011 shows that the CIO stood to lose as much as $57 million on most days of the year. That compares with $58 million for the investment bank, which includes Wall Street’s biggest stock- and bond-trading units.
  • Another sign: The relationship between the CIO and the investment bank’s sales and trading desks is strained, two former employees said. Employees in the CIO get a smaller share of their trading profits than those in the investment bank, giving Dimon a cost-management incentive to direct more trading through the CIO, one former executive said.

Hence: JPMs "Chief Investment Office" = World's largest prop trading desk. But hey, just repeat "Assymetric Service Initative" ... "Assymetric Service Initative"  ... "Assymetric Service Initative" three times ... and it becomes truth.

 

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Thu, 05/10/2012 - 18:03 | 2414982 Sequitur
Sequitur's picture

Heh.

Thu, 05/10/2012 - 17:56 | 2414948 buzzsaw99
buzzsaw99's picture

Some of Macris’s bets are now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets, the former executives said...

 

That's what the fed is there for, to socialize &/or hide the losses.

Thu, 05/10/2012 - 18:05 | 2415000 Elwood P Suggins
Elwood P Suggins's picture

Macris is Greek so he has to be great at finance.

Thu, 05/10/2012 - 18:22 | 2415089 Quintus
Quintus's picture

In fairness, Jamie Dimon is Greek too, so Macris is at all times properly supervised by someone really, really great at finance.

Fri, 05/11/2012 - 02:06 | 2416363 RECISION
RECISION's picture

Macris, a Greek citizen

You can't make this shit up can you...

... is Bankrupt a greek word... just wondering...

Thu, 05/10/2012 - 17:56 | 2414950 Moneyswirth
Moneyswirth's picture

This is kinda like when the Bear Stearns hedge fund went down in 2007. 

Thu, 05/10/2012 - 21:21 | 2415799 Hulk
Hulk's picture

 

2008...

Thu, 05/10/2012 - 17:56 | 2414952 Cast Iron Skillet
Cast Iron Skillet's picture

Die, JPM, Die!!!!

Thu, 05/10/2012 - 18:44 | 2415185 I Am The Unknow...
I Am The Unknown Comic's picture

Although it may be too early to start singing "Ding Dong The Witch Is Dead" I see no reason why I shouldn't tune up my guitar tonight...I've often fantasized about serenading Blythe with it on the day she eventually finds herself unemployed

Thu, 05/10/2012 - 18:51 | 2415219 HelluvaEngineer
HelluvaEngineer's picture

German for "The JPM, the" <sideshowbob />

Thu, 05/10/2012 - 17:57 | 2414956 q99x2
q99x2's picture

Prop goes the weasel.

Thu, 05/10/2012 - 17:58 | 2414957 Al Huxley
Al Huxley's picture

So now we'll find out exactly how much silver and gold JPM has, as it comes crashing onto the market, and the term 'Corzined' is replaced by '"Daimon'd" and/or "Master'd".  Or maybe 4 - 20 billion isn't a big deal?

Thu, 05/10/2012 - 17:57 | 2414958 max2205
max2205's picture

'and to all the buy side sell side analysts, well sorry I couldnt tell you about this 3 days ago when we met'.

Jamie's going in the river for sure

Thu, 05/10/2012 - 18:46 | 2415197 eatthebanksters
eatthebanksters's picture

Corzine arranged it all...payback!

Thu, 05/10/2012 - 20:53 | 2415710 xela2200
xela2200's picture

Corzine was part of it. The Oli North as you will

Thu, 05/10/2012 - 19:53 | 2415470 newengland
newengland's picture

max...

Eventually, but he can buy  a bit more time by doing a Corzine...lying low, never seen in public. No honour among thieves. Probably partly explains why the New York Police Federation received its biggest ever donation from....JP Morgan. Nothing like paying for a little more protection when your 'friends' hate you...so calculates JP Morgue.

Thu, 05/10/2012 - 17:59 | 2414962 monopoly
monopoly's picture

And what did dear sweet Ben say just this morning. I quote.....


THE FED Archives | Email alerts

May 10, 2012, 9:42 a.m. EDT

Banks are healing, Bernanke say

Thu, 05/10/2012 - 18:01 | 2414963 FinalCollapse
FinalCollapse's picture

Have they at JPM heard about VAR (Value At Risk) concept? Or is it Wild West and Jim Diamond scenario?

 

http://www.youtube.com/watch?v=Tzwl5dkHoIk

 

Thu, 05/10/2012 - 17:58 | 2414967 Sutton
Sutton's picture

"Ben, I need a handout-NOW!"

CNBC- Jamie Dimon is such a genius

Jamie, the money you stole from from us at MFG is now gone-times 20 maybe!

hahahahahaha

Thu, 05/10/2012 - 18:00 | 2414972 strangeglove
strangeglove's picture

This wont affect my SNAP card will it?

Thu, 05/10/2012 - 19:46 | 2415456 XitSam
XitSam's picture

And it's gone.

Thu, 05/10/2012 - 18:01 | 2414974 hustler etiquette
hustler etiquette's picture

hmmm. interesting.  i was there earlier this week seeking employment.  in 10 minutes i sat with 3 arseholes.  May each of them find solace in donkey d***

Thu, 05/10/2012 - 18:02 | 2414978 blunderdog
blunderdog's picture

Ooh ooh!  On a THURSDAY!?!?  Fuckin' SWEET!

Thu, 05/10/2012 - 18:03 | 2414981 lolmao500
lolmao500's picture

These scum need to go to prison.

Jamie Dimon CEO of JP Morgan Chase Threatens Life of Jon Corzine of MF Global

http://jhaines6.wordpress.com/2012/03/26/jon-corzine-threatened-with-dea...

Basically give us your money from segregated accounts or die...

MF’s Corzine Ordered Funds Moved to JP Morgan, Memo Says

http://www.bloomberg.com/news/2012-03-23/mf-global-s-corzine-ordered-fun...

Dimon is a fucking mob boss.

Thu, 05/10/2012 - 19:43 | 2415453 newengland
newengland's picture

lol...

That's why I call them gangsta bankstas ;-)

Thu, 05/10/2012 - 18:30 | 2414985 barroter
barroter's picture

When does JP Morgan BEG for public, non-private, TAX dollars? Or dump their very private losses onto the public?

 

Thu, 05/10/2012 - 18:05 | 2414988 topshelfstuff
topshelfstuff's picture

the winning end of the losing trades might be found in the Personal Accounts, not the Corp accounts

think Corzine for example...who had the Winning Side of that Investment "Bet" that a dummy wouldn't have made

what's more important for krooks, personal profit or corporate profit

Thu, 05/10/2012 - 18:05 | 2414990 trampstamp
trampstamp's picture

Please Dr. Bernanke... no more QE!!!

Thu, 05/10/2012 - 18:04 | 2414991 YesWeKahn
YesWeKahn's picture

Bernanke, the mother fucker, encouraged too big to fail. He should go to jail first.

Thu, 05/10/2012 - 18:06 | 2414996 qussl3
qussl3's picture

I would be withdrawing my physical from JPM vaults about now.

Thu, 05/10/2012 - 18:09 | 2415017 Al Huxley
Al Huxley's picture

To late, it's long gone.

Thu, 05/10/2012 - 18:20 | 2415081 GetZeeGold
GetZeeGold's picture

 

 

Hypothecated straight into hell.

 

Thu, 05/10/2012 - 18:34 | 2415144 Bastiat
Bastiat's picture

But all the SLV bullion is there . . . right?

Thu, 05/10/2012 - 19:53 | 2415480 XitSam
XitSam's picture

 

vaporised (verb) Convert or be converted into vapor.

 

Thu, 05/10/2012 - 18:09 | 2415024 sessinpo
sessinpo's picture

Assuming it's still there and not tungsten

Thu, 05/10/2012 - 18:22 | 2415094 sawman
sawman's picture

Only thing is you and a few thousand others would be fighting over the same gold bar. If you could find a gold bar of course.

Thu, 05/10/2012 - 18:06 | 2415002 Sequitur
Sequitur's picture

If gold falls as a result of the impending down day tomorrow, I am buying again. A lot.

Thu, 05/10/2012 - 20:59 | 2415724 xela2200
xela2200's picture

You might. It takes the market a couple of days to react. Also, new code might need to be added to those Algos.

Thu, 05/10/2012 - 18:07 | 2415004 YesWeKahn
YesWeKahn's picture

2008 all over again, this time the interest rate isn't at 5%.

Thu, 05/10/2012 - 18:33 | 2415139 lolmao500
lolmao500's picture

They'll just run 3 trillion $ deficits this time. Hell yields on treasuries are at all time lows!

May 2013 : FED Balance Sheet : 7 trillion.

(You know they can do it)

Thu, 05/10/2012 - 20:50 | 2415704 Withdrawn Sanction
Withdrawn Sanction's picture

They'll just run 3 trillion $ deficits this time.

Stocks vs. flows, bitchez.

It took $16 trillion last time to staunch the bleeding (plus another $10T in CB swap facilities), resulting in FRS balance sheet growth from $900B to $2+Trillion.   If a similar proportionality holds this time, your $7T estimate implies a flow-through of something like $70T to $105T.  Recognize too that risks are far more concentrated and larger now than they were in 2008.  These jerks actually doubled down in the meantime.)  

So if your estimate's even remotely right, then NO, they can NOT do it.  At least not without destroying the banks, the system, and themselves.  ....not to say that they wont try, just that they wont succeed.  

Thu, 05/10/2012 - 22:49 | 2416082 lolmao500
lolmao500's picture

Never said it would succeed. It might succeed for a while... but ultimately it won't... just like the 2000 bubble or the house bubble or the Soviet economy... and I just pulled 7 trillion out of my ass. I don't know what the real number would be...

Thu, 05/10/2012 - 18:07 | 2415007 Problem Is
Problem Is's picture

And now another episode of:

Taxpayers: Bailout My Bonus

Starring Jamie Dimon and Co-Starring Bruno Iksil...

Thu, 05/10/2012 - 18:07 | 2415008 Nader_Nazemi
Nader_Nazemi's picture

Finally I am a member of ZeroHedge !!! 

Yes !!! 

Thu, 05/10/2012 - 18:15 | 2415049 Floordawg
Floordawg's picture

Welcome! Now your name and relevant tracking information has been added to the DHS "watch list" database, congratulations!

Enjoy your stay at the FEMA camp!

Thu, 05/10/2012 - 20:21 | 2415566 Buckaroo Banzai
Buckaroo Banzai's picture

I call top bunk!

Fri, 05/11/2012 - 06:57 | 2416538 lakecity55
lakecity55's picture

Server is in Switzerland.

At the very least, proxy yourself and spoof the MAC.

Fri, 05/11/2012 - 11:00 | 2417406 Papasmurf
Papasmurf's picture

Server is in Fort Meade

Thu, 05/10/2012 - 18:15 | 2415058 Dingleberry
Dingleberry's picture

Welcome......bitchez!!

Thu, 05/10/2012 - 18:23 | 2415099 midgetrannyporn
midgetrannyporn's picture

Welcome to the jungle.

Thu, 05/10/2012 - 18:32 | 2415133 resurger
resurger's picture

Welcome

Thu, 05/10/2012 - 18:42 | 2415178 BLACK_DOG
BLACK_DOG's picture

You’ll learn more in one day from these guys on ZH than 10 years of MSNCNBC&FUX.

Thu, 05/10/2012 - 23:24 | 2416156 Dr. Kananga
Dr. Kananga's picture

Amen.

Thu, 05/10/2012 - 19:04 | 2415291 Dr. Engali
Dr. Engali's picture

Welcome to fight club.

Thu, 05/10/2012 - 21:28 | 2415832 tekhneek
tekhneek's picture

Give Tyler $20 and say thanks for all the wisdom he's about to dump down your cranium in the next 6-12 months.

Oh yeah and like the Doc said -- welcome to fight club.

Thu, 05/10/2012 - 18:09 | 2415016 CryingBear
CryingBear's picture

I REALLY DONT GET IT. WHATS SO BAD ABOUT THIS?

Thu, 05/10/2012 - 18:36 | 2415159 disabledvet
disabledvet's picture

Surprise!

Thu, 05/10/2012 - 18:37 | 2415163 10044
10044's picture

our taxes will go towards covering those losses.

Thu, 05/10/2012 - 18:11 | 2415027 nbsharma
nbsharma's picture

Great work, ZH. What is interesting is that Dimon admitted that they first started looking at this after WSJ reported. Talk about internal controls at the world's most resilient bank.

Thu, 05/10/2012 - 21:01 | 2415738 xela2200
xela2200's picture

More likely they got caught, so they had to come clean. PMs have been disfunctional for the last 8 months.

Thu, 05/10/2012 - 18:11 | 2415028 razorthin
razorthin's picture

2 billion, 1 trillion  I still say why the fukk we only down a blip on the futures.  Tell me this is "isolated" and "contained".  It's a cockroach.

Thu, 05/10/2012 - 18:15 | 2415046 Al Huxley
Al Huxley's picture

Pretty sure JPM owns the FED, therefore, a couple billion in losses isn't really a big deal.  Surprised they even felt the need to discuss it (emergency after hours call - how dramatic).

Thu, 05/10/2012 - 19:00 | 2415276 xtop23
xtop23's picture

I would be VERY surprised if this loss totals only a couple of billion.

This is going to be much worse than they're letting on.

Thu, 05/10/2012 - 21:00 | 2415736 Dr.Engineer
Dr.Engineer's picture

They are lying about the amount.  It has to be much more.  This has got to be a bait and switch.  Everyone, look for what is under the other bowl.  What can it be?

Fri, 05/11/2012 - 02:27 | 2416375 THX 1178
THX 1178's picture

JP Morgan was (probably) present during the Federal Reserv Act's charter at Jekyll Island. I'd say his friends and progeny still hold influence over the organization.

Thu, 05/10/2012 - 18:12 | 2415033 midgetrannyporn
midgetrannyporn's picture

Do you hear that? Choppers. Big ones.

Thu, 05/10/2012 - 18:13 | 2415035 falak pema
falak pema's picture

I prefer Jayne Mansfield's or MM's bust to JPM bust.

Thu, 05/10/2012 - 18:36 | 2415153 Bobportlandor
Bobportlandor's picture

Don't expect her giving head, cause she lost it.

Thu, 05/10/2012 - 18:13 | 2415041 The Alarmist
The Alarmist's picture

What's $20B among friends? No worries, Jamie, We the People got your back. Don't forget to collect your $20m bonus as you pass Go.

Thu, 05/10/2012 - 18:15 | 2415056 Venerability
Venerability's picture

Wouldn't it be terrific if JPM had been trading on behalf of Charlie Munger?

After all, the Civilized have to stick together. 

Thu, 05/10/2012 - 18:35 | 2415147 I Am The Unknow...
I Am The Unknown Comic's picture

Isn't this the right time for Charlie Muncher to come out and tell Is-kill to "suck it up"????

Thu, 05/10/2012 - 18:16 | 2415051 Blagio
Blagio's picture

Queue up the PPT! Tomorrow's gonna be a busy day.

Thu, 05/10/2012 - 18:34 | 2415140 NotApplicable
NotApplicable's picture

Dunno. Could be a banking holiday in the cards passed off as a "technical glitch preventing markets from functioning."

Besides, the Bernank only needs fifteen minutes anyway...

Thu, 05/10/2012 - 22:43 | 2416069 Tijuana Donkey Show
Tijuana Donkey Show's picture

That would be a tough job in these times. I would rather pick oranges in California.

Thu, 05/10/2012 - 18:16 | 2415054 jeff314
jeff314's picture

Dick Bove was wrong again...

Thu, 05/10/2012 - 18:20 | 2415076 bdc63
bdc63's picture

Bove is NEVER wrong ... he's just "early" ... or "late" ... or something ...

Thu, 05/10/2012 - 18:27 | 2415106 beaker
beaker's picture

you think?

Thu, 05/10/2012 - 18:19 | 2415055 machineh
machineh's picture

CIO usually means 'Chief Information Officer.'

If that's the acronym of JPM's prop trading desk, then who runs their computer systems?

Thu, 05/10/2012 - 18:27 | 2415109 NotApplicable
NotApplicable's picture

Skynet administers itself.

Thu, 05/10/2012 - 18:32 | 2415132 newworldorder
newworldorder's picture

Thats for the computer jokies. In the "investment" world CIO means Chief Investment Officer.

Thu, 05/10/2012 - 18:46 | 2415194 falak pema
falak pema's picture

chief indebtment orifice? Some whale!

Thu, 05/10/2012 - 18:19 | 2415067 tony bonn
tony bonn's picture

i would love to see these psycopathic frat boys put out of business and into jail....

Thu, 05/10/2012 - 18:20 | 2415073 junkyardjack
junkyardjack's picture

What a heroic move. JPM sacrificed itself for QE3.  They better get a medal of honor or something for this, brings a tear to my eye...

Thu, 05/10/2012 - 18:23 | 2415090 chump666
chump666's picture

chill.  the fed does qe3 now it will look a wall street bailout, obama will have ows set up camp in his a-hole

Thu, 05/10/2012 - 18:27 | 2415105 sampo
sampo's picture

It was nicely built tho. With the Iksil stories last month and all.

Thu, 05/10/2012 - 18:29 | 2415120 NotApplicable
NotApplicable's picture

Now they will have to save teh economiez for teh childrens.

Or some similar flavor of derp.

Thu, 05/10/2012 - 19:18 | 2415355 chump666
chump666's picture

Yeah, I mean, Wall Street is probably about to detonate it's greed/leverage/derivative time-bomb any day.  So this may have been brewing for a while.  They are shadowy f*ckers.  Last time, 2008, these idiots took it right to the brink, released news to the public that Lehman and every corner of Wall Street was stuffed.  11th hr.  Then the bailouts, print jobs, stupid congress acting fools, tarp etc etc etc

Could be the same ploy.  Last min panic, then throw it at the Fed and goverment  Still the Fed does a bailout to justify greed and America still sinks into the abyss.  Won't be good...

Suffice to say a Lehman event has been triggered on top of the EZ madness and China crash looming

Thu, 05/10/2012 - 19:39 | 2415438 chump666
chump666's picture

My goodness this is going to be messy:

6:09 (Dow Jones) When did JPMorgan realize it had a troubled synthetic credit portfolio on its hands? Just four weeks ago, its CEO and CFO scoffed at reports that a trader nicknamed the "London Whale" was taking outsized bets, saying on an April 13 call they were "very comfortable" with the positions in the portfolios managed by the chief investment office. The comments came after a WSJ report that the trader developed a massive position in credit default swaps in corporate bonds that hedge funds were trading against. On a mea culpa call Thursday, JPM's CEO said small losses came in the first quarter and snowballed in the second. Asked on the call if, in retrospect, there were any signs they should have picked up on, the CEO said "Trading losses ... there was some stuff in the newspaper and a bunch of other stuff."

 

Thu, 05/10/2012 - 18:26 | 2415111 stocktivity
stocktivity's picture

Tyler the MAN said this a month ago -

It’s Macris, not Iksil, who was behind the strategy that led to an unprecedented build-up of credit risk in JPMorgan’s chief investment office, three former employees of the bank said. While they expressed doubt Iksil can unwind his positions without causing a dislocation in the markets he trades, they also said JPMorgan probably can afford to hold the assets until they mature and so won’t be forced to sell them.

Now who in the world believes the losses are only going to be $2 Billion.

Thu, 05/10/2012 - 18:29 | 2415124 NotApplicable
NotApplicable's picture

Before or after their bailout?

Thu, 05/10/2012 - 18:31 | 2415126 stocktivity
stocktivity's picture

How will Bob Pisani on CNBC spin this as apositive tomorrow?

Thu, 05/10/2012 - 18:30 | 2415131 NotApplicable
NotApplicable's picture

"The important thing to remember here is..."

Thu, 05/10/2012 - 18:21 | 2415084 chump666
chump666's picture

lol

i love chaos.  

Thu, 05/10/2012 - 18:27 | 2415107 QQQBall
QQQBall's picture

The unwind should be interesting... Lets see who isn't wearing trunks?  I berkshire takes it is the ass & Charlie is forced to buy needle and thread.

 

I gotta get up in the middle of the night again and goose the Spoos

 

Signed, TPPT

Thu, 05/10/2012 - 18:26 | 2415112 beaker
beaker's picture

Maybe this was behind the big break in gold this week?

Thu, 05/10/2012 - 18:50 | 2415218 qussl3
qussl3's picture

That would imply JPM was long gold.

Doesnt seem likely.

Thu, 05/10/2012 - 21:08 | 2415757 xela2200
xela2200's picture

No, it implies they were covering their shorts, and they might be long NOW.

Thu, 05/10/2012 - 18:27 | 2415116 XRAYD
XRAYD's picture

Now Jamie will demand less regulation and blame Obama for "uncertainty" even louder than before!

 

 

Thu, 05/10/2012 - 18:38 | 2415161 falak pema
falak pema's picture

more whales on the horizon? Let alone the shoal of sharks which is just so business as usual.

Thu, 05/10/2012 - 18:30 | 2415123 Urban Roman
Urban Roman's picture

aackphthpt

Thu, 05/10/2012 - 18:31 | 2415127 NotApplicable
NotApplicable's picture

Pubic hair?

Thu, 05/10/2012 - 18:34 | 2415152 falak pema
falak pema's picture

not in JPM, they are all clean shaven, security measures and Louis Vuitton-christian dior aesthetics. This is  a top class hooker show.

Thu, 05/10/2012 - 18:29 | 2415125 Let The Wurlitz...
Let The Wurlitzer Play's picture

Its a good thing Chase has a "fortress" balance sheet. 

Thu, 05/10/2012 - 21:10 | 2415763 xela2200
xela2200's picture

Wells Fargo on the other hand reecks.

Thu, 05/10/2012 - 22:49 | 2416089 Tijuana Donkey Show
Tijuana Donkey Show's picture

Yes, sofa fortress. Jamie Dimon is king of the fort he made with Ben's couch, and his balance sheet and profits are as real as the fort. It's even better at juice and cookie time, when Con-gress comes around with some bailout punch, and some more cushions for the fort. Just remember it's fun to be king of the fort until Dad comes home drunk and pissed (Hint:Dad is the 99%) and beats the shit out of you. 

Thu, 05/10/2012 - 18:35 | 2415146 Cursive
Cursive's picture

This would be a great time for JPM to start "hedging" with purchases of it's CDS so Jamie can show a MtM gain next month.

Thu, 05/10/2012 - 18:35 | 2415150 Bastiat
Bastiat's picture

Now we need a $10 pop in silver.

Thu, 05/10/2012 - 19:47 | 2415460 xela2200
xela2200's picture

Today is a bad day to be JPM. First the Shanghai exchange started trading silver contract to reign in manipulation   "volatility" and now this. A $10 pop in silver would be SO sweet at this point. Kick them when they are down, so they know how it feels. Alas, Silver prices is the first thing I checked after reading the news to no avail.

Thu, 05/10/2012 - 21:35 | 2415852 tekhneek
tekhneek's picture

If only this was a loss from their commodities desk, looks like it wasn't. I wouldn't be surprised to see silver hit $27 tomorrow or lower and +1% on the S&P. This kind of stupid wacky shit has happened before and somehow the fundamentals/action you'd assume never happens (this is when you buy). Sometimes I think it's easy to forget that markets are in fact manipulated and in in some cases across the board they are manipulated from low interest rates, to the kind of shit Bruno was doing.

I'm still hoping it rips JPM a new asshole though and forces them to liquidate some of their farther out shorts, that would make it rise but then everyone would buy (this is not when you buy) and they'd come in and pile drive it once more with their free monopoly money.

Thu, 05/10/2012 - 18:35 | 2415155 bugs_
bugs_'s picture

nobody thought too big to fail would fail like that

(again)

Thu, 05/10/2012 - 18:39 | 2415162 Convolved Man
Convolved Man's picture

Is this incident connected to the inexplicable $1.24 billion "fat-finger" gold trade about a week ago?

Thu, 05/10/2012 - 21:12 | 2415770 xela2200
xela2200's picture

For sure.

Thu, 05/10/2012 - 18:45 | 2415168 Plumplechook
Plumplechook's picture

Dimon was SO right to criticize Obama for attempting to impose new regulations to control the risk taking of invesment banks.    These guys are investment geniuses who need to be left alone to do God's work.

Thu, 05/10/2012 - 22:56 | 2416103 Tijuana Donkey Show
Tijuana Donkey Show's picture

They are doing God's work, he wants them to fail. The banks follow a darker, more evil guy, a guy who Jamie Dimon wanted as a mentor. 

Thu, 05/10/2012 - 18:40 | 2415173 Mark123
Mark123's picture

Obama's advisors tonight:

Option 1 - QE3

Option 2 - OK Israel to bomb Iran

Option 3 - False flag terrorist event (we have several ready to go Mr president)

Option 4 - All of the above

Thu, 05/10/2012 - 18:46 | 2415196 bdc63
bdc63's picture

maybe this is the hope and change he was talking about ...

Thu, 05/10/2012 - 19:02 | 2415290 Tenshin Headache
Tenshin Headache's picture

1 out of 2 ain't bad.

Thu, 05/10/2012 - 21:37 | 2415866 tekhneek
tekhneek's picture

Looks like you're close Mark:

U.S. Concerned Netanyahu, Mofaz May Attack Iran

http://www.israelnationalnews.com/News/News.aspx/155690#.T6xtKb9vMn0

Thu, 05/10/2012 - 23:15 | 2416138 Jena
Jena's picture

Too bad.  Obama's busy with George Clooney and the Hollywood crowd.  He'll get back to you.

Thu, 05/10/2012 - 18:41 | 2415174 fuu
fuu's picture

What crisis?

Thu, 05/10/2012 - 18:47 | 2415198 franzpick
franzpick's picture

JPM about to lose a 38 handle, down 2.74, minus 7%.  Silver bouncing twice off of 29.

Thu, 05/10/2012 - 18:56 | 2415254 bdc63
bdc63's picture

7% is nothing ... should be down 15%-20% on this news. 

Thu, 05/10/2012 - 19:49 | 2415465 xela2200
xela2200's picture

Wait until the open tomorrow.

Thu, 05/10/2012 - 20:27 | 2415613 franzpick
franzpick's picture

I'm waiting for the day it doesn't open, when Mr. Market finally starts to speak up and disburse the oligarchy/media fog of BS: JPM last 37.98.  Silver dropping also: 28.98.

Thu, 05/10/2012 - 20:43 | 2415677 valley chick
valley chick's picture

but..but...fox business has their talking heads on saying it is an isolated incident and just a head fake. 

Thu, 05/10/2012 - 18:49 | 2415208 Waterfallsparkles
Waterfallsparkles's picture

Does anyone think this has to do with MF Globl?  The so called missing Money.

Thu, 05/10/2012 - 19:09 | 2415284 bdc63
bdc63's picture

Possibly.

Jamie claims they "just found out about this" ... what if that's a lie, and they have known about it for a LONG time ... what if that payment JPM demanded from MF at the 11th hour was because Jamie knew about these losses and taking additional losses from MF Global's collapse would have put them under - and probably taken the entire financial system with it.  Fuck, if that senerio is true, the whole thing could have even been coordinated with the FEDs blessing.

 

Thu, 05/10/2012 - 19:49 | 2415466 xela2200
xela2200's picture

Well they did it with somebody's blessing that is for sure.

Thu, 05/10/2012 - 18:49 | 2415211 Dr. Engali
Dr. Engali's picture

I wonder how many billions will be Corzined in this mess.

Thu, 05/10/2012 - 18:51 | 2415225 Harvey Lee Oswald
Harvey Lee Oswald's picture

Tyler,

First of all, great call. You have a near monopoly on insightful financial news about these manipulated markets.

Second, can you explain how it is possible for the vix to flash crash like it did at close today?

Thu, 05/10/2012 - 19:01 | 2415274 Plumplechook
Plumplechook's picture

This is it. It's over.  Brings to mind Jeremy Irons in 'Margin Call' :

http://www.youtube.com/watch?v=xOO1NY6ctYU

 http://www.youtube.com/watch?v=L5gZrgGXOco&feature=related

 

 

Thu, 05/10/2012 - 19:05 | 2415300 Herbert Philbrick
Herbert Philbrick's picture

Let's see now...  Jamie Dimon.  Jamie Dimon.  Oh, yeah.  Isn't he the guy that was bitching about regulation a few months back?   It makes me sick the way the financial press makes this guy into such a rock star.  What a fucking hypocrite...not that that's unusual on Wall Street.  

Thu, 05/10/2012 - 19:06 | 2415308 luna_man
luna_man's picture

 

 

I'm surprised, that so many here are surprised!!...

One more time..."MY MAIN MAN", Sleeps with One Eye Open, An Ear To the Wind, Nostril Sniffing the Air...AT ALL TIMES!!!

 

Doubt, "MY MAIN MAN" NOT!!

Thu, 05/10/2012 - 19:15 | 2415350 Fix It Again Timmy
Fix It Again Timmy's picture

JPM CIO Office: see what happens when you don't log out and the cleaning lady is dusting your keyboard....

http://www.youtube.com/watch?v=-22tna7KHzI

 

Thu, 05/10/2012 - 19:22 | 2415372 xela2200
xela2200's picture

" if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done."

So if no QE they go bust? S&P downgrade US debt they go bust?

Thu, 05/10/2012 - 19:24 | 2415374 colonial
colonial's picture

on a related note...Goldman Sachs had only one day last quarter where they didn't make money.  It begs the question, What happened on that one day?  Also interesting that Jim Grant is making the rounds, (first Bloomberg and CNBS today,) talking about how the Fed cannot possibly control all the games are being played in light of ZIRP.  The risks are impossible to gauge against zero.  If so, how many other bad trades are out there?  

Thu, 05/10/2012 - 19:22 | 2415375 newengland
newengland's picture

JP Morgue.

Mind you, if anyone can raise money from a corpse, it's them. It'll be interesting to see who made money from this between the time it was known by Dimon et al, and the time it was admitted.

Thu, 05/10/2012 - 19:24 | 2415376 Frastric
Frastric's picture

Could this be a sign of the derivatives bubble finally bursting? Like to see Bernanke print his way out of that hell!

Thu, 05/10/2012 - 19:51 | 2415472 Racer
Racer's picture

No chance Chairsatan running out of printables, he  has lots of toilet roll paper

Thu, 05/10/2012 - 19:34 | 2415407 The game
The game's picture

How true it is... If you don't know history your bound to repeat it!         And Here We Go Again.                                                                  The American people in gereral are so a sleep, apathetic and complacent. They have a very short memory. Just how the Fed wants them. I talk with alot of people about many subject covered here on Zerohedge and they look at me like I am from another planet. They have a rude awakening coming!

Thu, 05/10/2012 - 23:33 | 2416164 breakyoself
breakyoself's picture

As long as Apple is offering them upgrades to the upgrades put out 3 months ago, all is good in the world.

Thu, 05/10/2012 - 19:38 | 2415427 xela2200
xela2200's picture

"now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets"

Kind of like that Silver Short position.


Thu, 05/10/2012 - 19:40 | 2415442 newengland
newengland's picture

That might go some way to explaining the recent panic sales in gold and silver by an agent who cared nothing of price or profit, but simply needed to drive down the paper prices.

Dimon goes Bart Simpson: eat my shorts ;-)

Thu, 05/10/2012 - 19:53 | 2415479 xela2200
xela2200's picture

It sure feels like a flush. Also, I would say that they have lined all the sheep ready for a kill on the upside and not only in the commodity market. They could ride the QE wagon to end the year in the green. I wonder if that is what Diamond talks about when He mentions that they can make the losses this year.

Thu, 05/10/2012 - 19:39 | 2415439 The game
The game's picture

Any predictions for tomorrows PM market?

Thu, 05/10/2012 - 19:50 | 2415471 alfred b.
alfred b.'s picture

 

  ,,,no need to wait for tomorrow now that we finally have a Shanghai Silver Futures exch....right?

 

Thu, 05/10/2012 - 19:55 | 2415486 xela2200
xela2200's picture

Do you a have link to get quotes?

Thu, 05/10/2012 - 20:00 | 2415506 The game
The game's picture

To Alfred B.

Do you think Shanghai Silver Futures exch will be able to take real control of silver manipulation?

Do NOT follow this link or you will be banned from the site!