Seeking Alpha

Jamie Dimon "couldn't breathe" when he saw the actual positions behind the $2B (and growing) CIO...

Jamie Dimon "couldn't breathe" when he saw the actual positions behind the $2B (and growing) CIO loss, according to an inside-baseball account. Dimon's risk-management instincts appear over time to have been dulled by the profits the unit was producing, leaving him unaware the CIO had morphed from a hedging outfit to one making big directional plays.
Comments (35)
  • Great opening for a fictonal book....
    18 May 2012, 09:13 AM Reply Like
  • Right you are: total fiction. Dimon still gets a nice bonus, just not as large as if JPM was more profitable. Life goes on: heads they win, tails (and tales) you lose.
    18 May 2012, 07:49 PM Reply Like
  • Bull pockey...he knew it all.....
    and yes...once upon a time ..in a galaxy far far away.....lol...it does sound like an opening paragraph
    18 May 2012, 09:26 AM Reply Like
  • One account by several insiders had him calling the shots to produce more from the hedgefund..i mean CIO, and now he is shocked about the risk they were taking? BULLSHIT!..Dimon is looking for a fall guy.

     

    Soon he will have to have a chat with his daughter on why he is no longer working
    18 May 2012, 09:30 AM Reply Like
  • In my opinion, you have that exactly right. I'm sure he was pushing for higher returns and the only way to get higher returns is to take on more risk (no matter what you may read on the internet). There is no free lunch.
    18 May 2012, 09:41 AM Reply Like
  • BS of the highest frickin order. If this is even remotely true Dimon and many other senior execs need to be booted for not monitoring.
    18 May 2012, 10:11 AM Reply Like
  • If it's true than TOO BIG TO MANAGE!!!!!
    18 May 2012, 10:35 AM Reply Like
  • Come on you guys. Jamie took the fight to the battle ground. That's his job. And he took a few Kamikaze hits.

     

    In the long run:
    Some time you get the bear and sometimes the bear gets to put the hurt on you.

     

    Like you guys never got your clocks cleaned on a sure thing... I have!
    18 May 2012, 11:25 AM Reply Like
  • That is true, when go for high returns you are going to lose big sometimes.

     

    The question is, should a bank be taking these kind of risks looking for high returns?
    18 May 2012, 12:14 PM Reply Like
  • Jamie will get what he deserves in the end.
    18 May 2012, 12:00 PM Reply Like
  • It's now a $3 billion one and they estimate it may be $4. And that's before the drops this week. Apparently the securities are not be liquidated easily and can't be valued easily either due to a lack of a market for them.
    18 May 2012, 01:46 PM Reply Like
  • Revenue producers get more leeway in every type of company so this is a universal behavior that needs to be guarded against.

     

    If this is loss is only 1 to 2 quarters of net income then Jamie will survive it. Nobody else has a better track record so it is only down from Jamie.

     

    Imagine the scrutiny every manager and trade is getting now.
    18 May 2012, 02:05 PM Reply Like
  • No one gets to be in the position Dimon is in without being a good liar and constantly living in a morally grey area.

     

    He is obviously practicing damage control 101. He should however just keep his mouth shut. Does he really expect us to believe he did not know the risks involved considering he comes from a risk management background? I was behind him all the way until today. He is the epitome of why this country is headed south. His only concern is lining his own pockets as much as possible. There is no way for him to lose. He takes depositor's and investor's monies, leverages them 100x and goes balls to the wall investing. Heads he wins, tails we lose.

     

    And yes, we have all probably gotten our clocks cleaned now and then but don't lie about it to save your butt. Grow a pair and own up to your mistakes. I am sure he is so arrogant and delusional that he truly believes it was not his doing....which is why it will happen again unless he is replaced by someone who has a shred of moral fiber.
    18 May 2012, 02:23 PM Reply Like
  • "it will happen again unless he is replaced by someone who has a shred of moral fiber."

     

    Unfortunately we no longer consider morality an objective measure of the truth of a position. Our sex, drugs and rock and roll generation that is now leading the country has embraced relative morality highlighted by the oft referred to Bill Clinton quote 'the truth is what I say it is'. So Dimon is just exercising his own view of what he sees and we're supposed to accept that without any moral implications.
    18 May 2012, 05:50 PM Reply Like
  • If we are going to convict anyone for anything let's deal in facts. Claims of Jamie driving 100x leverage is just a delusional rant. Along with "being a good liar" and "constantly living in a morally grey area." A lot of emotion but nothing concrete.

     

    Mankind of every generation always has to deal with bad people and identifying facts is what prevents and holds accountable said people and allows a society to improve rather than regress to cave man testosterone led violence.
    18 May 2012, 06:06 PM Reply Like
  • Senior managers of large companies have to be great liars, it is part of the job. Forget the CEO, managers several levels deep also have to be brilliant liars. I work at a company that is comparable in size and scale to Chase and see it all the time. I have also worked at Chase and given what I saw of the culture there have no doubts that Mr Dimon is lying. He probably needs to zip up his big mouth here to prevent further damage.
    19 May 2012, 04:15 AM Reply Like
  • Is 100x leverage really a delusional rant? JP Morgan's trading desk in Manhattan was one of the first houses to create the OTC derivative. The same structured product which has been the cause of many financial disasters. Today it is estimated that the OTC derivative's market could be as large as $700 trillion. Why is it estimated you ask? Because these assets are non-balance sheet items meaning you will not find them on any financial statement, hell not even footnoted.

     

    When Brooksley Born tried to warn Alan Greenspan about the danger of these instruments, she was run out of the CFTC. These instruments will be the death of capitalism as we know it unless we corral these "gunslingers" (i.e. Dimon). Not only is JPMorgan leveraging their own book to unacceptable levels but they are also pushing these instruments so that others can blow themselves up as well.

     

    19 May 2012, 09:48 AM Reply Like
  • If you believe the B/S is leveraged why at 100X? Why not 123X or 78X?

     

    You are guessing but I do appreciate the the concern about anything off the B/S.
    19 May 2012, 12:40 PM Reply Like
  • OK. All are liars. Got it.
    19 May 2012, 12:40 PM Reply Like
  • Who is the Risk Management Officer at JPM?

     

    At least the RMO at MF Global resigned when The Honorable Jon Corzine failed to listen to his warnings. Mr. Corzine threatened to quit if he couldn't have the opportunity to make $2B vanish. The rest is history, unfortunately for Global's investors.

     

    What is the story at JPM that hasn't been told? More details emerge every day and there is little in way of an explaination.

     

    Have a good weekend everyone. Any bets on the final loss for JPM? $2B, $3B, $4B? Anyone? Bueller?
    18 May 2012, 07:44 PM Reply Like
  • its gonna take 5 "cash" billion leveraged 100/1 to cover the losses.
    18 May 2012, 07:48 PM Reply Like
  • Fictions the labor of making a dollar. Whats the value in that?
    19 May 2012, 12:08 AM Reply Like
  • Probably a real ignorant question, but other than "paper losses" why does Jpm have to liquidate its positions ? Why not hold and sell over time when valuations improve?
    19 May 2012, 04:35 AM Reply Like
  • Nice one TG, good call.

     

    Not to mention the $25 BILLION USD loss in Market Cap ($50 BIL USD loss since Feb 2011) nobody wants to discuss. OR.... what the REAL fallout will be from the CDX IG9 transaction.

     

    OR.....Total net derivative exposure of $71 TRILLION USD +, do not get me started. ANYONE defending Dimon, is complicit.

     

    And still we have un-guided missiles on TV running off at the mouth, saying "it's ONLY $2 BIL USD!" and "when did it become a crime to lose money?".

     

    Well good, since it means nothing, we will just have to tell Mr. Dimon, he will no longer be paid, and the Board will also have to forfeit all pay until the $2 BIL USD is recovered, sorry it's now $3 BIL USD and expected to hit $5 BIL USD by next week.

     

    Did you hear him on "Meet the Press"?

     

    Sounded like "Crazy" Guggenheim from Jackie Gleason Show.
    19 May 2012, 04:36 AM Reply Like
  • $71 trillion net exposure. That is nearly 5 times the size of the entire GDP of the United States. You know, I must admit TomasViewPoint is right 100x1 leverage is not correct.

     

    It's more like 1,000x1. My apologies concerning the mathematical error, I will try to get the facts right next time.
    19 May 2012, 10:16 AM Reply Like
  • So how do you quantify leverage if you cannot see the contracts?

     

    Appreciate the concern but what are you looking at since they don't report these contracts?
    19 May 2012, 12:42 PM Reply Like
  • I would have to guess its people running their mouths trying to appear smarter than they are. I know nothing about any of this so I am keeping my mouth shut.
    19 May 2012, 06:59 PM Reply Like
  • Comment of the Month, well spotted.
    20 May 2012, 03:37 PM Reply Like
  • The value is quantified from the call reports, schedule RC-L. According to these reports, JP Morgan has the largest exposure of all the commercial banks and trust companies..

     

    They are not official but the best estimate that can be deriven from this insane world we live in.

     

    I am done enlightening. Do your own homework. If you want to stay naive about what is really going on than do so. I am just trying to open people's eyes about the truth. Just don't go crying during the next banking crisis or start sueing the world. You have been warned. Invest at your own risk.
    21 May 2012, 12:17 PM Reply Like
  • Did the WSJ hint that it's now $5 billion?
    19 May 2012, 07:29 PM Reply Like
  • According to Maria Bartiromo, yes.

     

    Just saw it again on WSJR, AND.... a confirmed loss in Market Cap of $30 BIL USD, since the story broke.

     

    Their balance sheet is smelly, and their cash flow is deep in the red.

     

    Currently carrying $728 BIL USD in debt, according to balance sheet, and a Net Worth of $190 BIL USD.

     

    See: http://bit.ly/KHkbeX

     

    Assets - Liabilities = Net Worth

     

    The are going facedown, after WaMu, kind of deserving, nu?
    20 May 2012, 03:37 PM Reply Like
  • Yeah and let's spread a rumour about Exxon going out of business while we are at it.

     

    If you really know what you were talking about you would not just be talking about JPMC going down but rather the whole sector along with the US economy.
    20 May 2012, 05:39 PM Reply Like
  • I hardly need a lesson in journalistic ethics / responsibilities, thank you.

     

    Containment is a must in any risk assessment, (no longer taught in your era), sadly.

     

    Retreat is also a bitter pill, as your argument now runs for the safety of hiding behind "the whole sector along with the US economy?" Stick to the topic at hand.

     

    JPM has lost $30 BIL USD in Mkt Cap since this story broke.

     

    Here are the financials:

     

    http://bit.ly/KHkbeX

     

    It isn't rocket science (for most), read the facts:

     

    1) Assets - liabilities = Net Worth

     

    2) Look at their Debt, 3.5 X their Net Worth

     

    Debt: $728 BIL USD
    Net Worth: $190 BIL USD

     

    3) Check the negative cash flow, any of this registering?

     

    The dismissal of Mr. Dimon, is now a foregone conclusion.

     

    Pick up the WSJ once in a while and see that the Street is largely in agreement on this.

     

    This happened on his watch, therefore he must be sacrificed to appease the shareholder mob.

     

    In the event of a bank run, they will be finished within hours.

     

    Containment is the ONLY strategy in order for JPM to survive, full stop.

     

    Their "sponsors" in London will announce what I have suggested within days, remember where you heard it first.

     

    Hardly crazy talk.
    21 May 2012, 05:30 AM Reply Like
  • DV

     

    You need a lesson in what is factual and what is presumption and rumour. And you have no idea what era I am from or whether or not I read the WSJ. Or maybe I work for them?

     

    Your simplistic number analysis is also not compelling and along with your debt point makes you look very inexperienced in this sector.

     

    And you don't see the relationship between JPMC and the sector so I can only conclude you are inexperienced and don't know what you are talking about, have an axe to grind or a market position you are trying to protect. And if that is the case why be objective and truly analytical?

     

    I have no positions in JPMC or any bank for that matter by the way.
    21 May 2012, 08:31 AM Reply Like
  • TVP,

     

    1) I hardly need ANY lessons, nor do I need to protect any market positions, but thank you for your concern, it is appreciated.

     

    2) The balance sheet argument was intended for those who are not aware of JPM's "true" problems (although relative, as balance sheets are a mere indicator, at best.), yourself an Economist, I am sure you are aware of that.

     

    3) Indeed, I do see the relationship between JPM Chase and the sector, how can one miss it? Sadly, it is not a defense of what has taken place here, neither does it excuse the fact that the bank's market cap is down $30 BIL USD, in the last ten (10) days. Of course JPM is not the only one, but they are the one, NOW.

     

    Systemic Risk is the key issue here. I am a Macroprudential guy, so of course I have my "risk goggles" on.

     

    In these days of risk mitigation, the last news a major like JPM Chase needs is that they are performing without a safety net. We all know that extraordinary gains are made by taking extraordinary risks, but this is not the time for risk, rather the time for implementation of macroprudential policies to mitigate systemic risk, and it is indeed a "top down" process. That's why it's a kick in the teeth for Shareholders, for Mr, Dimon to claim he didn't know what was going on. The news (pick one) said "he couldn't breath when he found out", it should have said "he couldn't think either when it came to making a risk assessment."

     

    * IF in fact, ANY "risk assessment" had been made to begin with (flipping a coin does not qualify as a "real" risk assessment.)

     

    FACTS AT HAND:

     

    A. I said losses would grow, they have.

     

    B. I also said that the stock would drop off, it has.

     

    C. I will repeat, "Mr. Dimon will be excused from his position as CEO", ....AND....he will be.

     

    He (Dimon) already made that decision for himself, didn't he?

     

    NOTE:
    In-action is an action, just as in-decision is a decision.

     

    We ALL make bad calls sometime, ......it's just his time.

     

    4) No axe to grind. Just letting you know how it STILL works on the Street. Shareholders are not subordinate to the CEO's, it is QUITE the other way around. He is ONLY keeping that chair warm.

     

    Do not underestimate the power structure. Shareholders will get what they "demand", one way......or the other.

     

    5) As Economists, we can surely agree to disagree, two (2) schools of thought in a collision.

     

    Point taken, respect.
    22 May 2012, 05:33 AM Reply Like
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