Derivatives: The Unregulated Global Casino for Banks?
Just a reminder of the size of the derivatives market.
9 Biggest Banks’ Derivative Exposure – $228.72 Trillion.
And no, it is not perfectly hedged.
Full infograhics at Demonocracy.
Spanish and Italian bondholders. Guess who is buying and who is selling….
Charts of Spanish and Italian bond holders.
Presented without comments
Courtesy Scott Barber.
JP Morgan Debacle Reveals Fatal Flaw In Federal Reserve Thinking
The JPM news are getting a lot of attention today. Some smart, other less smart comments. A few clever thoughts from Simon Johnson.
Experienced Wall Street executives and traders concede, in private, that Bank of America is not well run and that Citigroup has long been a recipe for disaster. But they always insist that attempts to re-regulate Wall Street are misguided because risk-management has become more sophisticated – everyone, in this view, has become more like Jamie Dimon, head of JP Morgan Chase, with his legendary attention to detail and concern about quantifying the downside.
In the light of JP Morgan’s stunning losses on derivatives, announced yesterday but with the full scope of total potential losses still not yet clear (and not yet determined), Jamie Dimon and his company do not look like any kind of appealing role model. But the real losers in this turn of events are the Board of Governors of the Federal Reserve System and the New York Fed, whose approach to bank capital is now demonstrated to be deeply flawed.
What Could have Happened at JPM
Peter Tchir’s thoughts on the JPM news. Whatever happened or not, the whale has accumulated some rather big positions.
Well for once we don’t have to talk about Spain or Greece.
This is the end of synthetic CDO’s and may well be the end of CDS as an OTC product, but we have time to look at that later. There will be a lot of information and misinformation out there. For now, the key is what is this going to do for the markets. As best as I can tell, they were generally short High Yield risk. They were mostly short tranches, mostly in off the run, and had some curve trades on. Against that, they were generally long IG, mostly tranches, mostly IG9, and had some curve trades on. The positions, if we ever find out exactly what they were, are complex. At some level this disclosure has something to do with mark to model. Gp
Why is nobody writing about the downside break out in gold?
The Gold bugs have been feeling the heat lately. Gold as a safe heaven trade seems rather dead. The big almost parabolic move has attracted many clueless investors, all waiting for Gold to print 2k, minimum. Well, it sure looked so, but with the 1600 level broken to the downside, many are sweating again. The Trader wrote about the big formation in the charts a few weeks ago. Gold is at cross roads here, let’s see if people start puking, or if we will get the last bounce up? Special thanks to one of our readers, Erik, for reminding us about this update.
Gold and Silver charts update below.
‘Egregious Mistakes’
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an “egregious” failure in a unit managing risks, jeopardizing Wall Street banks’ efforts to loosen a federal ban on bets with their own money.
Good luck closing those positions out, especially when all competitors know your positions. This is a big blow to all OTC dealing, and a huge boost to the Volcker rule. Expect the OTC business to slowly dry up going forward. Video below.
Perfectly hedged?
Just a reminder of who is running the commodities space. JPM’s Masters is according to several interviews perfectly hedged. From the Independent earlier this year.
Blythe Masters, the British woman who runs JPMorgan’s commodities division, has steered the department to record turnover exceeding $2.8bn (£1.8bn) in 2011, more than long-time industry leaders Goldman Sachs and Morgan Stanley.
Reuters research shows that Cambridge-educated Ms Masters beat her arch-rival, Isabelle Ealet at Goldman Sachs in London, whose commodities division’s revenues stagnated at $1.6bn. JPMorgan’s performance, a threefold leap in revenues, is a huge bounceback for one of the most powerful women on Wall Street.
In 2010 there had been serious concerns about staff defections and sluggish growth, but Ms Masters, who started at the bank aged 18 as an intern in London, had the firm backing of the chief executive, Jamie Dimon, and investment banking head, Jes Staley. He praised her for being “one tough kid” and stuck with her.
Must see videos below.
News That Matters
All you need to read and some more below.
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