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JPMorgan's (JPM) losses from its disastrous trades could reach $5B or more, the WSJ reports, as...

JPMorgan's (JPM) losses from its disastrous trades could reach $5B or more, the WSJ reports, as the bank struggles to unwind its positions. Major problems include increasing worries about Greece and the the EU economy. Meanwhile, the CFTC becomes the latest government agency to open a probe into the debacle, the NYT reports.
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Comments (28)
  • Eighthman
    , contributor
    Comments (218) | Send Message
     
    2 billion.......3.... 4...... 5 do I hear 6? Can I get a 6?
    20 May 2012, 07:22 AM Reply Like
  • white rose
    , contributor
    Comments (2) | Send Message
     
    I'm betting on the "or more"
    20 May 2012, 12:12 PM Reply Like
  • Rupert Nicholson
    , contributor
    Comments (340) | Send Message
     
    If anyone is interested, here's my article on the biggest banks nominal derivative exposure http://seekingalpha.co...
    20 May 2012, 03:24 PM Reply Like
  • redwoodhouse
    , contributor
    Comments (8) | Send Message
     
    It looks like JPM took the client money from MF Global and do not want to return it so it is just deserts they lose a lot more on the other side
    20 May 2012, 09:02 AM Reply Like
  • deercreekvols
    , contributor
    Comments (5774) | Send Message
     
    Time for Mr. Dimon to talk to the shareholders and tell them how everything is fine. Perhaps he can fire a few more people and create another smoke screen for a couple of days until the loss hits $6B.

     

    The wonderful thing about this mess is that, althought JPM told of the loss ($2B at the time), they never admitted that they were still holding the derivatives and having trouble selling them! Meanwhile the loss mounts as JPM still can't peddle them off.

     

    Where is Jon Corzine and why isn't the media looking as closely at MF Global as they are at JPM? Mr. Corzine and his band of thieves took investor money, to the tune of $2B, and made it vanish. This wasn't a poor bet on derivatives, this was theft.

     

    Anyone in Congree listening? Does anyone in Congress care?

     

    Where is Jon Corzine?

     

    Have a great Sunday Everyone.
    20 May 2012, 09:31 AM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    Bruno Iksil's IG9-10 short leg of a trade WAS NOT a hedge, it was a pure speculative bet. JP Morgan can't unwind it that easily, because it is a mega-giga 200-250 bln dollars trade, and it keeps moving against JP Morgan. And think how large is the derivative market, and about all the positions taken there, which could easily cause massive margin calls within a nanosecond.

     

    We already have a message from credit markets: $JNK, $HYG and $EMB are collapsing versus nominal Treasuries ($IEF, $TLT), in such a precipitous way that we can say credit event is underway. If no rapid and massive spread narrowing, well then... Brace for impact.
    20 May 2012, 10:17 AM Reply Like
  • tawse57
    , contributor
    Comments (761) | Send Message
     
    For those of us not as clever as you in this regard, what do you mean by a credit event?

     

    Are you talking about something on a par with 2008 and Lehmans or something, dare I say it, worse?

     

    Thank you.
    20 May 2012, 02:01 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    Tr2708, Bingo... go collect the SA prize.. As JPM shares trade under 30 and the losses grow were going to see real trouble..

     

    If the traders unify an attack the other side we might see another Lehman and add in Greece...Woah !

     

    As you say the US 10 yr at record lows rates and the Bund too......It is screaming .. not just telling ! DL
    20 May 2012, 03:36 PM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    Yes, Credit event is another Lehman-class event. Credit markets now assume that one is around the corner (whether is that a possible margin call hitting JP Morgan which would spread like a wildfire through US financial system, or something else), but I repeat: credit markets now see Credit event in the US, Europe and Emerging Markets underway.

     

    For proof see charts of $JNK/$IEF, $PCY/$IEF, $EMB/$TLT. Junk Debt is collapsing, as well as Sovereign Debt and Emerging Markets Debt, and all that relative to US Nominal Treasuries ($IEF, $TLT), so Credit spreads are blowing out like mad in the last 7 days.

     

    We have maybe 48 hours that these spreads start to narrow rapidly and massively. If not, Bond market is sending a Crash message.
    20 May 2012, 04:32 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9966) | Send Message
     
    Don't know that one should go that far as to a crash message. But clearly the level of risk and concern is increasing daily now.
    20 May 2012, 05:16 PM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    Believe me, this is a crash message. If not reversed very soon, crash will happen. Bond markets are sending the unique message, don't underestimate it. I am not, nor overestimate it.
    20 May 2012, 05:22 PM Reply Like
  • pmiller100
    , contributor
    Comments (359) | Send Message
     
    Trader, if you would, walk me through the mechanics of this. Why does a big spread between junk bonds and treasuries signal a credit event?
    20 May 2012, 07:35 PM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    Sure. You are right, it is not absolute value of $JNK and $TLT that indicates something per se, but the spread: if you overlay charts, you can see that the credit spreads are blowing out very precipitously. So, there is one needed ingredient: speed. Second, people are leaving everything else in a Credit markets- junk, sovereign, emerging markets debts, for the safety of US Treasury. That indicates great fear on a level that is consistent with the Credit event. What is the gauge of that fear? Speed of the credit spreads blowout.

     

    Now, I will say it again: it is possible that we avoid it, but ONLY if credit spreads start to narrow, but not slowly, they must narrow very fast. Junk debt has higher capital structure than stocks and its fall filters to stocks with lag.
    20 May 2012, 11:17 PM Reply Like
  • Angel Martin
    , contributor
    Comments (1311) | Send Message
     
    Trader, i can see the divergence in the prices of IEF and JNK, but the movement is less than what we saw last july-aug ?

     

    the slope is about the same...

     

    does it make a difference if i look at the yields rather than the etf prices, since one is the reciprocal of the other ?
    21 May 2012, 12:07 AM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    The movement has been explosive for the last 5 days. Just look at those full red candles. The slope won't tell you much unless you couple it with fundamental issues, like this IG9-10 JPM short trade. Greece is not the bigger part of this, I believe. Credit markets are full of fear, but for other reasons.

     

    Looking at yields instead of prices won't help, but for sure look at UST 10-year and UST 30-year Yields, 1.80 and 3.00 are line in the sands respectively.

     

    Once more: credit event can still be avoided, but those spreads have to narrow fast and substantially.
    21 May 2012, 12:34 AM Reply Like
  • Matthew Davis
    , contributor
    Comments (3909) | Send Message
     
    I told my friend to join gov instead of finance, hope not to see him in the unemployment line.
    21 May 2012, 01:18 AM Reply Like
  • pmiller100
    , contributor
    Comments (359) | Send Message
     
    Thanks Trader. So it's a relative measure of fear - when even bond investors seek lowest risk. I will keep an eye on this over the next couple days.

     

    What is causing the fear? Not that anyone couldn't take their pick right now. Europe continues along its downward slope, seemingly about to see its first economic member drop out and turning attention toward the next weakest. The U.S. debt hasn't gotten any smaller. Actually the one I think might be deceptively under the radar at the moment is Japan. I'm not sure how they will continue to sell bonds at low yields, and they can't really afford to sell higher yield bonds. And top all that off with potential military conflict in the Straits of Hormuz, and you've got a few sleepless nights for everyone watching.
    21 May 2012, 07:51 AM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    Yes, indeed. What is causing the fear? Greece, potential blowup of the Eurozone, Chinese hard landing, and lastly (and I believe most important) - JP Morgan trading loss. This loss was caused by only 45-50 basis points move against JPM position (200-260 bln. dollars position, and what is the mcap of JPM? Calculate the nasty leverage, that is NOT their only speculative position there), and nobody here knows what are the positions of other banks in derivative markets, meaning - if best of the bunch blew it, what is going on with the rest of the bunch? Can that happen tomorrow to MS, GS, or BAC? That causes many sleepless nights around, believe me.
    21 May 2012, 09:23 AM Reply Like
  • minecanary
    , contributor
    Comments (488) | Send Message
     
    Get your SDS shares today. Monday is going to be fun.
    20 May 2012, 11:25 AM Reply Like
  • Oceanstats
    , contributor
    Comments (65) | Send Message
     
    It's the rule of three in economics. Anytime a company/bank reports a net loss, multiply it by three and you'll get the true company loss for that year, quarter, or scandal. It's been amazingly accurate the last 4 years, So it's $6B no question.
    20 May 2012, 12:13 PM Reply Like
  • Josef Friedman
    , contributor
    Comments (44) | Send Message
     
    As De Niro says in Ronin

     

    I never walk into a place I don't know how to walk out of.

     

    or

     

    Whenever there is any doubt, there is no doubt.

     

    Personally, I don't recall any losses going 2,5,6. You guys are optimists.
    20 May 2012, 01:57 PM Reply Like
  • Skull & Bones
    , contributor
    Comments (59) | Send Message
     
    I would not be surprised if JPM already has a good idea of exactly when the EU and the FED will cry UNCLE and PRINT till it hurts and when this happens......as it must to prevent imminent chaos in the Eurozone....the disaster trade will reverse pretty quickly.
    20 May 2012, 03:45 PM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    I urge everyone: forget about Facebook, Apple, and that kind of stuff. Watch $JNK (Junk Debt), EMB (Emerging Markets Debt) and $TLT (US Nominal treasuries in the next few days). If the former ($JNK, $EMB) don't rally substantially and the latter ($TLT) don't fall substantially (so the Credit spreads narrow fast), then we are in a big trouble.
    20 May 2012, 04:43 PM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    And one more thing: if you see $JNK collapsing again or not rallying substantially, sell every possible rip and get out of the way.

     

    Also, have no illusion: if the Bond market is right (usually is), then Stock market will crash from oversold levels (we are now oversold). Just observe.
    20 May 2012, 04:45 PM Reply Like
  • Trader2708
    , contributor
    Comments (214) | Send Message
     
    http://bit.ly/L9wnlB

     

    http://bit.ly/JqgD32

     

    The fall is so precipitous, that the message is clear: Credit event underway. Maybe we can avoid it at the last moment, but ONLY if Credit spreads start to narrow FAST.
    20 May 2012, 05:08 PM Reply Like
  • cfish
    , contributor
    Comments (36) | Send Message
     
    That's not half as scary as the inverted yield curve I saw in 2007.
    20 May 2012, 08:31 PM Reply Like
  • Tack
    , contributor
    Comments (13579) | Send Message
     
    Seems like a little market volatility has brought the crazies out in force.
    20 May 2012, 09:44 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    Well, wonders never stop.. Seems the guy running the department was put there buy good old nepotism and he had a past of being sanctioned. Plus he wasn't experienced in overseeing that department. So, who jumped on the sword ? One of WS's top women ,but, it seems Mr. Dimon is the one who needs to step down. This was pure incompetence and having Mr. Goldman take over this part of JPM with his past of trading in his own account in his last spot with C F... Sorry, the buck stops with the CEO !
    21 May 2012, 06:25 AM Reply Like
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