Skip to comments.JPMorgan Is Tanking After Announcement Of Shock Losses Due To 'Egregious Mistakes'
Posted on 05/11/2012 2:23:06 PM PDT by robowombat
Shares of JPMorgan are off over 6% after hours.
The reason? The company has shocked the world by announcing a surprise $2 billion+ trading loss in its synthetic derivatives portfolio. In particular, this paragraph from the company's 10-Q filing is what's causing people to get nervous:
Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO's synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO's AFS securities portfolio. As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value. The company held a conference call starting at 5 PM, where Jamie Dimon insisted that this was a pure trading screwup due to the company's own errors and stupidity and not something fundamental.
Dimon characterized these losses as a result of sloppiness. Linette Lopez and Lisa Du in their liveblog of the call hit on these two points: "We've already changed some policies and procedures as we have gone along."
- Dimon says this has been an egregious mistake, self-inflicted. Violates how he runs the company, this is NOT how he wants to run a business. He's really hammering that this is about an internal blunder, not something more fundamental.
Read more: http://www.businessinsider.com/jpmorgan-is-tanking-after-hours-after-announcement-of-shock-conference-call-and-possible-mark-to-market-losses-2012-5?utm_source=inpost&utm_medium=seealso&utm_term=&utm_content=1&utm_campaign=recirc#ixzz1ubAFGKY7
(Excerpt) Read more at businessinsider.com ...
That word's worth two hundred million dollars a letter, Jamie.
Apparently these were hedging losses. Traders should know the risks of hedging. Hedging is not a panacea.
Mark-to-Market losses are reductions in what the assets are valued at on the company's books. They are not realized(cash) losses. It sounds like they were booking profits based on inaccurate mark-to-market numbers and a trader found out about it and found he could generate big “paper profits” for himself and the company. When they realized they were valuing these assets differently than everyone else they had to write down the value of the assets. Hence, the loss.
It’s small change compared to what Obama lost betting on green companies.
Sloppiness is a deli clerk forgetting to close the walk-in fridge - not a CEO losing two BILLION dollars.
You are describing the best-case scenario. I hope you’re right. The markets appear to be buying it.
I think Jamie Dimon is a straight shooter. Furthermore (or perhaps, ergo), he has been publicly critical of 0. The witch hunt is already beginning. Dimon is NOT one of the Zombies.
“Furthermore (or perhaps, ergo), he has been publicly critical of 0. The witch hunt is already beginning. Dimon is NOT one of the Zombies.”
Dimon has given tremendous amounts of money to Obama. JPMC has a PAC which supports leftists causes.
I don't believe Zero lost a damn thing...
He opposed Dodd Frank which proves that, however liberal he is, he’s not smoking crack.
Thus, this was an eyes-open calculated move, not a mistake. “The shooter craps out.......”
"I have an idea--lets blow a couple billion on a bullshit move and invite even MORE government control! Yeah, that's the ticket!"
Dont forget that Jamie Diamon was huge Obama supporter and bundler and was considered Obama s favorite banker.
The timing of this is suspicious to me, Obama is loosing in the polls on his handling of the economy and this will create an opportunity for Obama to pretend to stand up to those much hated bankers and bash Romney because he wants to repeal Dodd Frank.
Jamie Diamon is considered the best in the business, i dont buy that this was “sloppiness”. And $2 Billion is nothing for JP Morgan.
Trust no one.
Back in the mid 90’s I worked for CSWS, Service company for CSW, a Electric Utility Holding Company.
On the Board of Directors for CSW was a guy who was on the BOD for Enron.
I asked my VP how can that be? He replied that only Enron folks were smart enough to see the big picture.
When you convince folks that you are the expert, that is all you need.
Interlocking Directorates are a big problem.