JPMorgan Chase acknowledges $2B trading loss

[Ringel05]

JPMorgan Chase, the largest bank in the United States, said Thursday that it lost $2 billion in the past six weeks in a trading portfolio designed to hedge against risks the company takes with its own money.
The company's stock plunged almost 7 percent in after-hours trading after the loss was announced. Other bank stocks, including Citigroup and Bank of America, suffered heavy losses as well.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," CEO Jamie Dimon told reporters. "There were many errors, sloppiness and bad judgment."

The Associated Press: JPMorgan Chase acknowledges $2B trading loss

 

[Mad Scientist]

Maybe they can get some money from MF Global?

Oh wait, never mind.

 

[EdwardBaiamonte]

JPMorgan Chase, the largest bank in the United States, said Thursday that it lost $2 billion in the past six weeks in a trading portfolio designed to hedge against risks the company takes with its own money.
The company's stock plunged almost 7 percent in after-hours trading after the loss was announced. Other bank stocks, including Citigroup and Bank of America, suffered heavy losses as well.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," CEO Jamie Dimon told reporters. "There were many errors, sloppiness and bad judgment."

The Associated Press: JPMorgan Chase acknowledges $2B trading loss

any reason to post this?? or do you just post random stuff??

 

[itfitzme]

JPMorgan Chase, the largest bank in the United States, said Thursday that it lost $2 billion in the past six weeks in a trading portfolio designed to hedge against risks the company takes with its own money.
The company's stock plunged almost 7 percent in after-hours trading after the loss was announced. Other bank stocks, including Citigroup and Bank of America, suffered heavy losses as well.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," CEO Jamie Dimon told reporters. "There were many errors, sloppiness and bad judgment."

The Associated Press: JPMorgan Chase acknowledges $2B trading loss

The loss came in a portfolio of the complex financial instruments known as derivatives, and in a division of JPMorgan designed to help control its exposure to risk in the financial markets and invest excess money in its corporate treasury.

...

The Wall Street Journal reported last month that JPMorgan had invested heavily in an index of credit-default swaps, insurance-like products that protect against default by bond issuers.

It implies that the losses were in the credit default swaps. Isn't the basic fundamentals of it that credit default swaps are a loss if the associated investment makes money? I understood the idea being like car insurance, which only pays out if your car is in an accident. If you don't have an accident, then the cost of the auto insurance is a loss.

I do get that, by his statement, "The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," CEO Jamie Dimon told reporters. "There were many errors, sloppiness and bad judgment." CEO Jamie Dimon is assessing some loss.

But it raises the question, loss compared to what? Compared to what they expected to not lose had the derivatives been "properly" implemented? I'm cautious about reading too much into investor's claiming "losses" as they have this habit of counting their chickens before they've hatched. Often, a loss to them is that they didn't make as much as they expected.

Credit default swaps cost money, reducing return on the associated investment but mitigating the risk if the investment goes bad. The trick is to get them to cost less then the return of an investment gain and to completely cover the losses if the investment goes bad. A $2 billion loss could be that the credit default swaps reduced the return to much, by costing far more then the return on the investment. Or it could be that the investments went south but the credit default swaps didn't pay out enough to cover the losses.

More importantly, as JPMorgan's loss is someone elses gain, who gained the $2 billion?

Can we buy into this program of selling credit default swaps to JPMorgan?

So far, that seems like the better deal. Sell credit default swaps to JPMorgan for $100 per unit. And then, if their investment goes south, give them $40 back to mitigate there losses. What a deal.

 

[Ringel05]

JPMorgan Chase, the largest bank in the United States, said Thursday that it lost $2 billion in the past six weeks in a trading portfolio designed to hedge against risks the company takes with its own money.
The company's stock plunged almost 7 percent in after-hours trading after the loss was announced. Other bank stocks, including Citigroup and Bank of America, suffered heavy losses as well.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," CEO Jamie Dimon told reporters. "There were many errors, sloppiness and bad judgment."

The Associated Press: JPMorgan Chase acknowledges $2B trading loss

any reason to post this?? or do you just post random stuff??

Like you I just post random bull shit, you're my hero..........



I guess some people need simple things explained........ It's called post a current story and let people discuss it if they so choose. If you have an issue with that then make an appointment with a shrink, I can't help ya.

 

[EdwardBaiamonte]

So far, that seems like the better deal. Sell credit default swaps to JPMorgan for $100 per unit. And then, if their investment goes south, give them $40 back to mitigate there losses. What a deal.

would they pay $100 to possibly get back $40?? Of course not!! You're talking gibberish again.

The real issue is that the entire financial system became vulnerable because we had $1trillion in real estate insured with $100 trillion in credit default swaps. THere was so much leverage that we had no idea who if anyone would be left standing in the event it all had to be unwound.

In any event its way too complicated for you. You need to concentrate on the most basics, i.e., whether you're for freedom or government.