The "World's Largest Prop Trading Desk" Just Went Bust

A month ago we warned that JPM's CIO office is nothing short of the world's largest prop trading desk. Not only were we right, but what just transpired is just shy of our worst possible prediction. At the end of the day, the real question is why did JPM put in so much money at risk in a prop trade because we can dispense with the bullshit that his was a hedge, right? Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least "net" is not "gross" and we know, just know, that the SEC will get involved and make sure something like this never happens again.

JPM Crashing After It Convenes Emergency Call To Advise Of "Significant Mark-To-Market" Losses In Bruno Iksil/CIO Group

Out of nowehere, JPM announced 40 minutes ago that it would hold an unscheduled 5pm call to coincide with the release of its 10-Q. Rumors were swirling as to why. The reason is as follows:

• JPMORGAN SAYS CIO UNIT HAS SIGNIFICANT MARK-TO-MARKET LOSSES - "Fortress balance sheet" at least until Bruno Iskil gets done with it.
• JPMORGAN SAYS LOSSES ARE IN SYNTHETIC CREDIT PORTFOLIO - but, but, net is NEVER, EVER Gross.
• JPM WOULD NEED $971M ADDED COLLATERAL IF RATINGS CUT ONE-NOTCH
• JPM WOULD NEED $1.7B ADDED COLLATERAL IF RATINGS CUT 2 NOTCHES - how about three notches?
• JPMORGAN: MAY HOLD SOME SYNTHETIC CREDIT POSITIONS LONG TERM - "Level 3 CDS FTW"
• "As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion"

As a reminder, the CIO unit is where Bruno Iksil was making $200 billion-sized bets. Basically JPM has suffered massive losses at its CIO group most likely due to its IG/HY positions held by Iksil.

ALERT: J.P. Morgan Reveals ‘London Whale’-Size Losses

5:00 pm CST: J.P. Morgan Chase & Co., the nation’s largest bank, is about to host an unusual conference call.
from wsj.com:
The bank sent out a notice at 4:30 that it would be holding a call at 5 p.m. but included no details about what it was going to be about. A person familiar with the matter says the call will include CEO Jamie Dimon and discuss the bank’s quarterly filing, which as of 4:30 p.m. had not been made public.
Standard & Poor’s Rating Service just downgraded the bank’s retail servicing unit, which might give a clue.
The bank’s shares are down 3% after hours to $39.60.
Deal Journal will live blog the call, in case anything truly interesting comes up.
Read More @ wsj.com

BREAKING: JP Morgan Surprise Press Conference Reports New $2 BILLION in Losses

[Ed. Note: This just in from Bix Weir who tells us: Wow! Here's an excerpt from the "2012 Timeline on the Road to RootaA" article: "Watch for the CDS losers to set up some "rogue traders" to take the hit for massive losses." This is a very big HIT as it confirms that the take down of the Banking Cabal began in March with the Greek semi-default. Just wait for June when Greece plans on WALKING AWAY from their debts and destroying the entire CDS market!]
from advantages.us:

The bank will likely report a $800 mln Q2 loss. Like others a ratings downgrade would require them to immediately pony up $1.5 bln in additional capital for a two notch downgrade. The number for Bank of America is $6 bln
$2 bln credit loss was booked in synthetic Index positions but balanced by a $1 bln gain in credit exposures. The bank is going back to the Old Var model after the new strategy was found to be poorly executed and monitored. Jamie Dimon admits that is sloppiness and error of judgment and assures everyone that this does not concern any clients. The bank is willing to bear volatiliy at a cost of $1 bln in the coming months
“We will.. fix it and move on.”
Most of the $2 bln in synthetic hedge losses have landed up after Q1 results and “any individuals found to be responsible after these positions were discovered will be dealt with”
Read More @ advantages.us

Could This Be The Start Of "The Big One?"

Dave in Denver at The Golden Truth - 10 minutes ago

I wondered why the SPX futures crapped out right after the market closed. JP Morgan disclosed that it has lost $2 billion on synthetic credit derivative bets in its Chief Investment Office division. Not sure why JPM had to wait until the market closed. Surely they knew about this before the market closed. LINK Rest assured that the true magnitude of losses is several multiples of this "mark to fantasy" disclosure. Also note that the Chief Investment Office is the division in which JPM conducts its precious metals trading/manipulation activities. I have to believe, given that W... more » 

 

Sharkboy Hits the Dock as JPM Takes 'Significant Loss' in Infamous CIO Derivatives Book - Bank Shares 'Hammered'

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Gold Daily and Silver Weekly Charts

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SP 500 and NDX Futures Daily Charts

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Max Keiser Interviews Chris Whalen on the Banks, And Accounting at Wells Fargo

Bruno Iksil Is Dunzo

The last time a French trader delivered a bomb this big (Jerome Kerviel), the Fed cut the discount rate by 75 bps. As for this particular Frenchman, his best epitaph is his Bloomberg profile page. Recall:

"Chuck is french ; champion of 'kick it', walking over water and humble.. yes"

You can now add "fired." Oh, and it is all Egan Jones' fault of course, who downgraded JPM on April 13, while all the other rating agencies were posturing for the highest possible bribe to keep their mouths shut.

How The Fed Quietly Bought 1,150 S&P Points

With the need for exponentially larger expansions of the central bank balance sheets - and most importantly, the rate of expansion (flow) not just the size (stock) - we thought it useful to see just how the Fed's actions had impacted the S&P 500. From the lows in March 2009, 1150 S&P points have been 'created-or-saved' thanks to central bank largesse. That is a cost of $2 million for every S&P 500 point since the Fed started to expands its balance sheet by $2.3 trillion. Money-well-spent, we are sure you'll agree. In the meantime, it is the printing-endgames that we care about and the horrible sense of deja vu that the following chart inspires should at minimum see investors scaling back (which it appears the sensible retail investor is) - despite the imploring of every long-only asset manager.

RANsquawk US Market Wrap – 10/05/12

Submitted by RANSquawk Video on 05/10/2012 - 16:30

Market Barely Breaks Streak Of 6 Consecutive Declines , As "Buy AM, Sell PM" Trading Turns Chronic

Equity markets did not disappoint today in their automaton pattern today with the 4th day in a row of buy the morning dip and sell the afternoon rip. Gold was stable (as was the USD) and the S&P 500 rotated back to their reality at the close. Treasuries were notable underperformers today. The Dow just inched into the green, breaking its 6-day losing streak.

NYSE Short Interest Rises To 2012 Highs

On the surface, the fact that NYSE short interest was just reported today to have risen to 13.1 billion shares as of April 30 could be troubling for the bears, as this just happens to be the highest short interest number of 2012. Indeed, an increase in short interest into a centrally-planned market is always disturbing, as it opens up stocks to the kinds of baseless short covering melt ups that simply have some HFT algo going on a stop hunt as their source, that we have seen in the past several weeks. Naturally, it would be far easier to be short a market in which Ben Bernanke managed to eradicate all other bears, especially when considering that a year ago the Short Interest as of April 30 was virtually identical.

Visualizing The Saturation Of Hopium

As the S&P 500 oscillates in a 20pt range this week between its 50DMA and the 4/23-4 Bernanke Hope lows, it is becoming increasingly clear that the breadth of the hopium-infused float-all-boats new-normal reality is seriously fading.

In Case You Really Have To Flee The Authorities…

When most people think of Brazil, it’s the incredible beaches that come to mind. Or the crazy parties of Carnival. Or the spectacular vistas and great weather. Or how indescribably gorgeous (and welcoming) the locals are. But here’s a little known fact, and it’s something that sets Brazil apart from most other places: Brazil’s constitution prohibits the extradition of Brazilian citizens to other countries. This is a rare gem in the world… I’ll explain.  



 

Protecting Your Assets from an Out-of-Control Government, Part I

by Terry Coxon, DailyReckoning.com:
By keeping all your assets in the country where you live, you commit, ahead of time, to ratify whatever policy your home government might adopt, no matter how objectionable, unreasonable or pernicious that policy happens to be. If the next new mandate is “Register today to get a nail pounded into your head,” you’re already signed up.
Americans, by and large, run all their affairs within the confines of the US. The US economy is so large and so varied that it’s easy to assume that everything you want to do with your wealth can be done without crossing any borders. And people in the US, like people anywhere, live with the habits and attitudes developed over generations. They’re only human. In the case of Americans, those habits grew out of long experience with a government that was small and that generally practiced the rare virtue of following its own laws. In a happy exception to mankind’s experience with rulers, there was little to fear from it.
Read More @ DailyReckoning.com

A MESSAGE FROM RON PAUL: “I continue to fight for as long as YOU are behind me.”

“Let me assure you, our team knows how to fight back and protect liberty.” – Dr. Ron Paul
by PSNy2kUK :

 

Third Act of Greek Drama: 90 Seconds With Art

CNBC:

Q.E.3 IS COMING! Stock Market MAP Analysis Part 4

By Marc Horn, The Market Oracle:
In Parts 1 thru 3 we established that the principles of MAP Waves is nothing new and I claim no credit for it. It is actually the first step and foundation of all EW theory which rarely is referred to, and even more rarely used by many of the experts around us.
So let us revisit the basic basic EW practical lesson 1 – what lines to draw and what information we can derive from them to establish with probable potential pivots target areas which meet EW wave validation criteria.
I will only present 1 pivot scale (Dark Blue). RETROSPECTIVELY THIS IS EASY but hopefully we will end up with reasonable target areas at the end, with probabilities of possible outcomes so that it is possible to set trading and bail out parameters in order to control our PANIC behavior and do risk reward assessments!
Read More @ TheMarketOracle.co.uk

Stocks to Crater 27%, Bonds to Rally & Gold to Remain Firm

from KingWorldNews:
Today a top analyst at Citibank told King World News that global stock markets are set to plunge 27%. Fitzpatrick, a 28 year veteran and top analyst at Citibank, which has $1.3 trillion in assets, also said the panic will move global bond markets to extreme levels, but gold will remain firm. Here is what Fitzpatrick had to say: “Our bias, both in the shorter-term and in the medium-term is we will have more losses on the S&P. The setup is very similar to what we saw when we came off the peak last year. We formed a similar type of head and shoulders pattern and the initial down-move (at that time) took us to the 200 day moving average.”
Tom Fitzpatrick continues @ KingWorldNews.com

India gem, jewellery export dips to $2.6 billion in April

from Bullion Street:
NEW DELHI: World’s largest polished diamond exporter India’s gems and jeweleries shipment contracted by 25.7 per cent to $2.6 billion in April.
According to country’s Commerce Secretary Rahul Khullar, India’s exports grew by 3.2 per cent to $24.5 billion during the month, while imports rose 3.8 per cent, leading to the lowest trade deficit that the country has logged in a year.
Imports during the first month of the current fiscal added up to $37.9 billion, leaving a trade a deficit of $13.4 billion. India attributed widening trade deficit to rising prices of crude oil, exchange rate fluctuation and import of gold.
Read More @ BullionStreet.com

Fair and Balanced

from TF Metals Report:

I stumbled across this video today and thought it could serve as a basis for an interesting discussion.
Note that this presentation was made by a lady named Caroline, who is a self-described “federal government employee” and “member of the American Federation of Government Employees”. Also note that, as I type this, it has a total of 80 views. (I hope that she has enabled Adsense as she is about to get a few hits!)
The first seven minutes or so are facts that we can all agree upon. The deficit is there and to cut it would require some significant changes to the federal structure. Then, at around the 7:00 mark, Caroline proposes her remedies. This is the crux of the matter and be sure to hear her out before you respond… (continued)

Read More @ TF Metals Report.com



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