JP Morgan’s “Unicorn Hedge” Fairy Tale Harpoons the London Whale!

From Whale Tails to Unicorn Fairytales, this week has ended with a bigger splash then anyone could have expected. The London Whale has officially capsized JP Morgan’s balance sheet with a reportedly 2 billion dollar trading loss. Jamie Dimon, the firm’s CEO, admitted “egregious mistakes” were made and that he and his colleagues were “stupid.” Fair enough, but why were these mistakes made, and was this trade a legitimate hedge as Jamie Dimon claims, or more of a “unicorn hedge” as our guest Heidi N. Moore called it?

Why was this trade put on through the company’s CIO, and why was it done so on a portfolio level? That’s an awfully broad way to hedge risk on the titanic. What happens with this ship finally tries to make it back to port? JP Morgan now has tremendous exposure on its balance sheet that, if it were to try and unwind, may not find too many friendly buyers. 

Comments

  1. Doc, I am always surprised by the amount of info I find on this site.  I want to thank you for the amount of time you dedicate to the community!

  2. Interesting ad spot on Silver Doctor site  Another yellow metal ad—this time its Caterpillar.  Love it.  As a former Teamster, Local 542, and old gear jammer, Cat’s the name

  3. What does The Unicorn, JPMorgan, London Whale, Jamie Dimon and 2 Billion Dollars have in Common? They All Disappear!!!

    Lmao Sorry but I laugh at my own jokes. Lmao

    I love that show.

  4. “It had really strong Corporate Bonds like Fannie Mae and Freddie Mac, WaMu…”

    Those are really strong Corporations? Okay, I guess these derivatives are from back in the day. Is the unwinding finally about to begin? And it seems like Fannie/Freddie are wanting more taxpayer never-ending bailout money every other time I turn around. Oh the humanity!

    “It’s a really twisted way of getting there.”

    Is there a Government bailout and backstopped by The Fed Wall Street Bank that isn’t twisted? Lol.

    Crash JPMorgan! He needs to comment on this one. :smile:

  5. Die Morgue Die!! Hahahahaha!!

  6. Just in case anyone is unaware, although I imagine most on here are…

    Back in the days of the Financial Crisis, JPMorgan claimed that it didn’t need a bailout. BS. You can see from the partial audit of The Fed, which it was forced to release at the behest of Americans via the FOIA(Freedom of Information Act) that they went to the Fed’s discount window for enormous amounts resulting in a JPM backdoor bailout.

    “When the $700 billion bank bailout authorized by Congress wasn’t going
    to be anywhere near enough to save banks like Goldman Sachs, JP Morgan,
    Citigroup and Bank of America, Ben Bernanke and the FED opened up the
    nation’s discount borrowing window – to the tune of $7.77 trillion
    dollars.”

    “Another example is JP Morgan Chase’s CEO Jamie Dimon. On March 26, 2010,
    he reassured his shareholders that JP Morgan didn’t need a bailout and
    only participated in the program in the beginning, “at the request of
    the Federal Reserve to help motivate others to use the system.” In
    reality, JP Morgan was still taking advantage of the emergency program
    and owed the US government $48 billion dollars more than a year after
    the program began.”

  7. These guys just proved they don’t think.  This is the tip of the ice berg if all their “investments” were thought out like this.  Fast times ahead for dimon and the morgue.  Why doesn’t dimon do the proper banker thing and resign with a hundred and fifty million payout before it gets serious.  

  8. Let’s face it.  Lehman went under in 2008, and the Fed forced JP Morgan to take over their short positions.  The money was funneled into JP Morgan and the price of silver dropped from $21 to $8 almost overnight.  All of the different Lehman short positions that JP Morgan was forced into, along with their own, is tanking the company.  The Fed guaranteed them they’d support them in 2008, but with the election around the corner, they can’t outright bail them out without massive public repercussions.  I have a feeling a bailout will happen, but only undercover.

  9. So we might actually get to see silver and gold skyrocket over night once this derivatives bubble bursts!!

  10. Hedge an entire portfolio? I guess that’s the proverbial “Betting the Farm” on a few beans.

    Spot on One Tin Soldier. Com ‘on CTFC. Will you investigate and if you do will it take 5-10 years so the people will forget about it?

  11. HAY EVERYBODY JPM LOSSES ARE BEING REPORTED WORLD WIDE IN ALL NEWS SORCES!

    I EVEN READ CURENT LOSES IN THE  17 BILLION DO TO STOCK LOSS IN THE COMPANY. INVESTOR ARE LOSSING FAITH IN THE COMPANY!!!

    NEW YORK (Reuters) – More volatility could be in store for stocks next week as investors grapple with less certainty about the economic outlook and a new blow to the financial sector afterJPMorgan Chase‘s trading loss.

    Europe is expected to keep investors jumpy as well, with inconclusive results from the recent Greek election and the country’s future appearing more worrisome.

    The economic picture appears cloudy these days, with some data showing a more positive trend and other reports showing the opposite. An index of consumer sentiment rose to its highest in a more than four years, but last week’s jobs report showed another monthly decline in hiring.

    Next week brings minutes from the last Federal Reserve meeting, which investors will look to for more guidance on whether the central bank plans to give additional help to the economy.

    Stocks closed lower for a second straight week on Friday after a week of choppy trading. Strategists say that’s likely to be the case again in days to come.

    “Expect more volatility. We’re still seeing this natural risk aversion. We expect any source of bad news to trigger a sell-off, but we’re still not in a red-alert area,” said Omar Aguilar, chief investment officer of equities for Charles Schwab in San Francisco.

    “The good economy in the U.S. is leading the way, with the Federal Reserve being very accommodating.”

    Citigroup’s chief U.S. equity strategist, Tobias Levkovich, said the market has likely begun a pullback, and that the Standard & Poor’s 500 index <.SPX> could fall 5 percent to 7 percent from its April 2nd intraday high of 1,422.

    “We’re going to probably spend several months in kind of choppy trading,” he said.

    News that JPMorgan Chase & Co , the largest U.S. bank by assets, lost billions of dollar on bad trades raised fresh worries that the financial sector was not on the mend. The KBW bank index <.BKX> fell 1.2 percent for the day.

    There’s likely to be more focus on the company next week. After the close of trading, Fitch Ratings cutJPMorgan‘s credit rating one notch and cited the bank’s $2 billion trading loss, and Standard & Poor’s revised its outlook of JPMorgan to negative.

    The S&P financial index <.GSPF> has lost ground since rallying 21.5 percent in the first quarter. The index is still up 13.6 percent since the start of the year.

    MESSAGE FROM THE FED

    Wall Street will scrutinize the minutes from the FOMC‘s late April meeting, which the Fed will release on Wednesday at around 2 p.m. Eastern time.

    At that April 24-25 meeting, the FOMC repeated its expectation that interest rates would not rise until late 2014 at the earliest, and it took no action on monetary policy.

    But Federal Reserve Chairman Ben Bernanke spurred stock market gains when he told reporters on April 25 that “we remain entirely prepared to take additional balance-sheet actions as necessary to achieve our objectives. Those tools remained very much on the table and we would not hesitate to use them, should the economy require that additional support.”

    More focus may be on the Fed and economic data next week, with the first-quarter U.S. earnings period nearly done. Ninety percent of S&P 500 companies have already reported results.

    Major retailers set to report earnings next week include Home Depot , a Dow component, and JC Penney Co. , both on Tuesday, followed by Limited Brands , parent of Victoria’s Secret, and discount chain Target Corp on Wednesday. Wal-Mart Stores, Inc , the world’s largest retailer and a Dow component, is set to report earnings on Thursday before the opening bell.

    The week’s mostly closely watched economic indicators will include the U.S. Consumer Price Index and retail sales, both for April, on Tuesday, followed by April housing starts and April, industrial output and capacity utilization, all on Wednesday.

    In Europe, problems with the Greek elections raised the risk of it exiting the euro zone.

    “I think earnings and valuations are still very compelling. Unfortunately, what we’re looking at on earnings and valuations is going to be overshadowed by the fact that we’ve got these global issues we’re dealing with: Greece and France and their elections, and debt issues and the possible breakup of the euro,” said Evan Nowack, managing director at HighTower’s Leventhal Group in Bethesda, Maryland.

    BEARISH PATTERN

    Technical charts indicate bearishness ahead.

    “My ‘bigger picture’ view is that in the near or intermediate term, further downside is favored,” said Chris Burba, short-term market technician at Standard & Poor’s in New York.

    S&P 500 charts are showing a “head-and-shoulders top,” he said, noting that demand earlier this month was not strong enough to push the benchmark index above its April high.

    He sees support just below 1,300, while resistance could come at 1,415 for the S&P 500.

    “The outlook stays bearish unless you get above 1,415,” Burba said.

  12. Guys if you haven’t read this story writing by TERI BUHL… Man! JPM in big, big troubles. I just put an order for 32 oz of silver. Monday will be ??????? in the financial market

    TERI BUHL

    http://www.teribuhl.com/2012/05/12/sec-tells-jp-morgan-enforcement-action-coming-over-bears-mortgage-backed-securities-violations/

  13. Articles across the mainstream are touting the need for new financial regulations, and gold and silver are both showing weakness.

    This could be the bottom for silver,  as J.P Morgan might have to, due to increased publicity, take a lesser role in the manipulation of silver. Although the announcement of the huge trading losses is more likely market manipulation – a song and dance – than surprising losses, there will be much more scrutiny on J.P. Morgan Chase forcing their hand to play a lesser role in financial manipulation, leaving the task to cousin/bed-fellow banks such as H.S.B.C.

    The talk of trading losses will likely lead to increased talk of stricter “regulations,” which is a euphemism for more government-force on the behalf of the top donors to the powers-that-be, as well as pressure for more inflationary policies so that the keystone banks and transnational’s can sit on as much cash reserves as they see fit and more bailouts to inoculate the public against the confiscation of the glob.

    READ MOREhttp://silvervigilante.com/j-p-morgan-malinvests-free-federal-reserve-money-market-crash-bailout-printing-incoming/

  14. I’m very sorry for Greece!

    Greece Slow Motion Economic Collapse in Progress

    What may be lost in the noise that is the mainstream press is the
    fact that Greece has not been in a recession or even a depression,
    Greece has been in a state of slow motion economic collapse on the scale
    of past economic collapses such as that of Argentina but so far without
    the ability to default, devalue and inflate.

    As the below graph illustrates that following the financial crisis of
    2008, Greece had been following a similar economic trend trajectory to
    that of most western economies including that of the UK, US and Germany,
    however the real crisis began in late 2009 when the economic recovery
    from the pit of the Great Recession of 2008-2009 evaporated and the
    Greek economy began a slow motion collapse that has so far seen Greek
    GDP in real terms contract by 16% since the 2008 peak, with no end in
    sight Unlike the V shape of the more regular debt default economic
    collapses such as that of Argentina’s of 2001 and more recently Iceland.

  15. URGENT UPDATE!!!!!!!!!!! Three JP Morgan employees have left their jobs (fired I’m sure) in connection with the JP mess. Dimon says it will get worse but “don’t worry, we will still make a profit this quarter”. fox News at 5:08 P.M.

    DOC and Bull, something is not right here. 102 coins?????? I don’t think so. Recheck please.

  16. 427, If we had a PM standard, we wouldn’t need all the regulation ’cause you can’t spend what you don’t have. LOL. Even funnier, one of the guys resigning is named Achilles.

  17. Yep three scapegoats fired today should have been Dimon and his cronies. Guess their trying to cover up now but it won’t do them any good. Keep stacking folks funs about to begin. See link

    Lol 2oz sure you’ve not been double clicking. Lol

    http://online.wsj.com/article/SB10001424052702304192704577402500885560924.html 

  18. I was really hoping the wicked witch of JP (Blythe) was on the list. Bummer.

  19. 2oz they would still f**k with the numbers in the banking system. Kinda like !!!COMEX!!!

    What we need more than a monetary standard, Is a human standard to restore some honor. No Not Honor Among Thieves… 
  20. Ain’t it the truth though 427. I guess no matter who would be in Blythe’s position, they would still be the wicked witch/warlock of……..well, you know the rest. No honor among thieves. A powerful statement that rings true always.

  21. Dimon can’t get rid of Blythe she’s under his desk keeping his blood pressure down. If it go’s to his head he might get an aneurysm.

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