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The Core Problems With Jpmorgan's Failed Trades


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#1 FCP Bob

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Posted 14 May 2012 - 03:01 AM

For those of you who don't read the business press JP Morgan Chase lost over $2 Billion in derivative trading on their own account recently which is huge news in the financial indurstry.JP Morgan was thought to be the smartest bank and the best at controlling their risk so the question is if this can happen to them what about banks that aren't so smart.This link is a good reuters analysis of what went wrong that can be understood by the average smart person who doesn't have a finance background.Analysis: The core problems with JPMorgan's failed trades
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#2 Pot Odds RAC

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Posted 14 May 2012 - 06:38 AM

Of course they also made almost $19 Billion last year and $5.4 Billion in the First Quarter and have over $2 Trillion in Assets. $2 Billion isn't going to hit them that hard.

#3 hblask

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Posted 14 May 2012 - 05:04 PM

View PostPot Odds RAC, on 14 May 2012 - 06:38 AM, said:

Of course they also made almost $19 Billion last year and $5.4 Billion in the First Quarter and have over $2 Trillion in Assets. $2 Billion isn't going to hit them that hard.
Just hard enough to get a few truckloads of that free government money is my guess.
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#4 Pot Odds RAC

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Posted 14 May 2012 - 05:33 PM

View Posthblask, on 14 May 2012 - 05:04 PM, said:

Just hard enough to get a few truckloads of that free government money is my guess.
You mean that "Free Government Money" that the Feds forced many banks to accept and which banks like Chase paid completely back with interest?That "Free Government Money"?

#5 hblask

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Posted 14 May 2012 - 05:40 PM

View PostPot Odds RAC, on 14 May 2012 - 05:33 PM, said:

You mean that "Free Government Money" that the Feds forced many banks to accept and which banks like Chase paid completely back with interest?That "Free Government Money"?
Yeah, some banks got shoved into that category, but many others were actively lobbying for handouts.
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#6 phlegm

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Posted 14 May 2012 - 06:25 PM

View PostPot Odds RAC, on 14 May 2012 - 06:38 AM, said:

Of course they also made almost $19 Billion last year and $5.4 Billion in the First Quarter and have over $2 Trillion in Assets. $2 Billion isn't going to hit them that hard.
But thats not the point. Hopefully Romney doesnt own any stock there. but you can bet your ass the Obama people are looking into it.
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#7 Balloon guy

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Posted 15 May 2012 - 03:55 PM

View Postphlegm, on 14 May 2012 - 06:25 PM, said:

But thats not the point. Hopefully Romney doesnt own any stock there. but you can bet your ass the Obama people are looking into it.
Why? Obama has 1/10th of his net worth there.
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#8 phlegm

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Posted 16 May 2012 - 07:12 PM

View PostBalloon guy, on 15 May 2012 - 03:55 PM, said:

As usual I msstated things, hopefully Romney didnt benefit by the loss somehow. If chase lost 2billion, doesnt that mean someone else profited 2 billion?
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#9 mrdannyg

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Posted 18 May 2012 - 05:47 AM

View Postphlegm, on 16 May 2012 - 07:12 PM, said:

As usual I msstated things, hopefully Romney didnt benefit by the loss somehow. If chase lost 2billion, doesnt that mean someone else profited 2 billion?
Yes, but in a completely irrelevant way. From what I've read, the trades were mainly OTC with hedge funds, and there's been no suggestion that the hedge funds were overly involved with politicans or may have had advance information. Just a 'simple' case where a trader was making speculative trades without proper oversight to know how much risk he was getting into, and his positions went against him. Something like that.In case it needs clarifying, if Obama has half a million, or Romney had $100 million invested with JP Morgan, it is irrelevant to anything to do with these trades unless they were directly on the other (they weren't). The only political aspect of this situation is if one or both of them try to use it as an example of needing more/less oversight. Nothing direct.
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#10 FCP Bob

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Posted 21 May 2012 - 12:11 AM

Discord at Key JPMorgan Unit Is Faulted in Loss
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#11 strategy

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Posted 22 May 2012 - 02:27 AM

I guarantee there was TONS of oversight on that guy, but as pirrong was quoted saying in some AP articles, hedges don't always work the way they should in the short-term. you simply don't trade potentially headline-making volume without your boss, your boss's boss, and maybe another rank up looking at what you're doing.
QUOTE (ShakeZuma @ Wednesday, November 2nd, 2011, 4:25 AM) <{POST_SNAPBACK}>
seriously though, with that grammar it's really like, I mean it doesn't bother me as much that she gets beat, you know?


#12 mrdannyg

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Posted 22 May 2012 - 07:39 AM

View Poststrategy, on 22 May 2012 - 02:27 AM, said:

I guarantee there was TONS of oversight on that guy, but as pirrong was quoted saying in some AP articles, hedges don't always work the way they should in the short-term. you simply don't trade potentially headline-making volume without your boss, your boss's boss, and maybe another rank up looking at what you're doing.
What? There was tons of oversight...but his bosses didn't know what he was doing?
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#13 brvheart

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Posted 22 May 2012 - 08:13 AM

Isn't that Strat's whole point? The bosses did know.

View PostiZuma, on 20 August 2012 - 11:32 AM, said:

napa I was jesus christing suited, you guys just slipped in before me.

View PostEssay21, on 25 February 2013 - 08:32 PM, said:

.

#14 FCP Bob

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Posted 22 May 2012 - 08:34 AM

I know Strat has watched it since he recommended it to me but the movie Margin Call will be entertaining to anybody who finds this topic interesting.http://www.imdb.com/title/tt1615147/
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#15 JubilantLankyLad

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Posted 22 May 2012 - 05:26 PM

I'll second the reco on Margin Call, it is a surprisingly good movie.
there were no special effects, no special effects.

#16 gobears

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Posted 22 May 2012 - 07:46 PM

Yeah Margin call was excellent - Spacey was great in that movie.Also if you're in sales, you have to know " my loss is your gain"
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#17 strategy

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Posted 23 May 2012 - 02:25 AM

View Postmrdannyg, on 22 May 2012 - 07:39 AM, said:

What? There was tons of oversight...but his bosses didn't know what he was doing?
they knew what he was doing, they just didn't fully grasp the risk in it. it was thought to be hedged. I think the actual dollar loss from the trader will be overshadowed by the profits they'll lose to increased regulatory oversight, etc. etc. people had a field day with this one because of what the CEO had said previously about his risk management skills.
QUOTE (ShakeZuma @ Wednesday, November 2nd, 2011, 4:25 AM) <{POST_SNAPBACK}>
seriously though, with that grammar it's really like, I mean it doesn't bother me as much that she gets beat, you know?


#18 mrdannyg

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Posted 23 May 2012 - 05:46 AM

View Postbrvheart, on 22 May 2012 - 08:13 AM, said:

Isn't that Strat's whole point? The bosses did know.
Yeah, I read it too fast.

View Poststrategy, on 23 May 2012 - 02:25 AM, said:

they knew what he was doing, they just didn't fully grasp the risk in it. it was thought to be hedged.I think the actual dollar loss from the trader will be overshadowed by the profits they'll lose to increased regulatory oversight, etc. etc. people had a field day with this one because of what the CEO had said previously about his risk management skills.
Due to the stock price hit, their market cap is down over $30B since it was announced. I agree that the lost profits due to the potential for increase oversight, etc, is much more potentially harmful, even though it is a HUGE stretch to suggest that the potential for a few billion in trading losses (especially on a hedge, which would additional oversight would likely still allow) is so harmful to uninvolved parties (since involved parties are accepting of the risk) that additional oversight is warranted. Put it this way - additional oversight is very likely to be more harmful to the average American than the volatility caused by banks being allowed to do proprietary trading and similarly risky stuff. Hell, half of what has caused the recent crisises has been supposed hedges or AAA-rated securities (sub-prime, municipal/sovereign bonds, CDS), all of which would still be allowed under any suggested oversight, in fact, additional oversight would increase dependence on things thought to be risk-free. History has shown us that 'risk-free' assets are anything but. By removing the options available to financial institutions, we would be forcing them to overinvest in certain asset types, thereby magnifying shared risk and the potential for contagion.Right?
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#19 InternetExplorer

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Posted 23 May 2012 - 01:44 PM

if your suicidal action would require the FDIC to make your depositors whole, you probably shouldn't be allowed to do much of anything exciting.your point is part of the larger argument against regulation. I don't think there's a clear answer out there.
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