I heard I guy on TV who said this event is minor stuff. It's not really that much money. This is basically what hedging is -- win some, lose some. He said there was no law breaking. He said existing regulations were followed.
He said he was at a loss as to why the media was making a big deal out of this event. He said that he would advise people to buy JP Morgan, because it is a strong company and right now the stock is down for no good reason.
I'm pretty cynical -- and, yes, I do think the world is about to end. BUT I had the sense that the guy was right about this particular event.
The key, I think, is that the media is pushing Obama's agenda. Due to this MASSIVE crisis, the US government may just HAVE to seize further control of the economy.
Uh huh.
i get nervous when too many people agree with me...
Admittedly, this stuff is way over my head, but my instincts tell me that if Morgan had made a $2B profit on this, they’d be screaming just as loudly for more regulation, which makes me dubious about the value of it.
They hedge this stuff @100:1. Based on he pricing on Friday alone, they had another 1-1/2 billion loss on Friday. The ONLY thing can do is hold until maturity and hope the trade goes the right way.
This could be very bad for the market.
The person, persons who created the hedge strategy will be asked to leave or let go with a sweet severance package.
They will lay off an additional 10% of their support staff of which 10% will be front office, 15% will be back office, and 75% will be IT.
In IT for every 10 people they lay off, they will bring in 2 domestic consultants (probably H1’s) and will spend half their savings on outsourcing.
The Outsourcers will provide approximately 15 people for that money.
Net/Net in IT they will end up with 17 people off their payroll for every 10 they cut, save a little money from their budget, and get a less expensive system of software designed to monitor their trading for this kind of risk.
Problem is either the software or their risk model will be flawed and they will lose $4 billion next time around. Then the cycle will begin again. It's like the song that never ends and is most likely what got them here in the first place.