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JPMorgan's (JPM) trading loss could reach $9B, say people briefed on the situation, with red ink...
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Thursday, June 28, 2012, 3:34 AM ETJPMorgan's (JPM) trading loss could reach $9B, say people briefed on the situation, with red ink piling up as JPM moves faster than expected to exit its money-losing positions. Jamie Dimon was way off when he warned in May that the initial $2B loss could double in coming quarters. JPM will disclose more details in its July 13 earnings report.
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This news story has 28 comments:
Soooo smart
All cons are, aren't they
Frankly, I hope they crucify JPM.
Now, let's find out who was on the winning side of the transactions
????
I agree, after all that has happened to our nation, the economy, all the lost jobs, the cuts in pay, IRAs getting smashed, the lost years, global recession...and JPM and Dimon show that they have learned nothing...still willing to make enormous bets where if they lose, the rest of society pays...
Why go with that headline when can you print the 9 billion figure....
Page 113 1st qtr 10q....6.5 billion in profits in mortgage backed securities....1.5 billion in profits in municipal securites
Why try to defend someone who had just knowingly witheld information in a Congressional hearing. The law says - up to 10 years. And, rightfully so.
Why are YOU choosing 1 opinion over another.
The nature of falling knives is that it WILL be worst that the pessimistic numbers of that range.
Hate to play the Told'ya game but this is what I was saying on May 12th, as the thing was supposed to be $2Bn (my SA comment of the time):
"the company says that it will "not do something stupid" (like selling its positions below intrinsic value)". That's the scariest part: I used to run a trading desk. That was the typical argument used by traders to plead in favor of keeping the crappy trade on the books and not unwind it. That's usually a recipe for disaster: the "intrinsic value" is in the eye of the beholder, it can be anything.
These guys got caught with their pants down and try to talk themselves out of the mess. It will be interesting to find out the "intrinsic value" at which they sell their position. Good luck with that, JPM stockholders.
Can we still expect a huge manipulated drop in the price of silver?
http://bit.ly/M8j4rk
Or can we really stick it to them by buying physical silver and holding it?
Cause it isn't $2b, is it.
JPM could take on $8 Billion of losses and that is only 2 quarters of income loss. Jamie is also known for writing off bad loans and other investments early and then bringing back gains on the books later. We don't know from this article if the losses are being offset by gains on the offsetting positions but why bother with balance when one has a chance to write about incendiary topics.
Every bank has a lot of risk right now because rates are very low. When they go up all banks are going to have losses unless they find ways to offset those positions. And the smallest will likely have the biggest losses. Banking is not risk free at any size.
What happens when its more? Or if JPM loses money in another part of its business? How about if the next loss conincides with another major market event?
Amazing you are ok with this. Especially considering it's all being done with an implicit government guarantee and backstopped by the taxpayer.
Let's encourage it, shall we?
I'll tell you this. If I went home and told my wife I took some risky trades and lost half a year's income due to mismanaging them, and told her 'don't worry, I'll make it up later' that wouldn't fly very well.
Everything else is hyperventilating. The real losses in the banking sector are going to come when rates rise and banks with no hedges get killed. Passive banking is not risk free. And there are banks right now that likely have greater losses than JPM on a % basis of capital. And hedging allows banks to take on loans they might otherwise walk away from if they only can take net long position. That helps drive the economy.
Every loan the bank makes has a risk profile and it changes as the economy changes, the industry changes and as government makes fiscal and monetary changes. The goal of the bank is to maximize returns with reasonable risks. Managing risk is not to just let the loan and deposits sit with no hedging but rather looking at various scenarios that need to be hedged. Overall net risk is key not any one position in isolation. The government has made that more challenging for quite a well by driving interest rates so low the yield curve is a mess and they have artificially compressed returns.
To step back for a moment the risk is really system wide not just JPM. In fact JPM has more tools to deal with risk than do smaller banks. As we seen in the 2008 meltdown it was smaller banks that failed much more than large banks. If all banks could lose just 1/2 of a year's income from balance sheet exposure that would be the sign of an extremely healthy banking sector. People are just crazy about this because they cannot understand numbers in the billions. If I redo the numbers and say that a $2 million asset bank lost $4,000 does anyone care? That is the same ratio as JPM.
The implicit guarantee is not felt by shareholders and they own the company. That is only for deposits. Banks don't own the deposits those are liabilities. The government has shut down a lot of banks in the past 4 years and transferred the deposits. Bad investments go against shareholders and owners equity and then the government looks to sell the rest or recapitalize it and make it an ongoing concern and recoup their investment.
Biggest losses we have thus far on the taxpayer dime is Fannie and Freddie but that gets no press. Hard to figure.
Of course Romney will have to repay JPM by not going through with any type of meaningful regulation.
Barky and Mittens now have something to chew on.