The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, May 11, 2012

JP Morgan loses $2bn from prop trading

So much for the Volcker rule...From CBA:

JPMorgan revealed in its 10‑Q that it lost about US$2b tied to synthetic credit securities after positions taken by its Chief Investment Office were riskier than expected. “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 Firm is currently repositioning CIO's synthetic credit portfolio, which it is doing in conjunction with its assessment of the Firm's overall credit exposure. As this repositioning is being effected in a manner designed to maximize economic value, CIO may hold certain of its current synthetic credit positions for the longer term”.

Dimon called the mistakes egregious on the conference call and acknowledged that the errors are especially embarrassing in light of his public criticism of the so‑called Volcker rule to ban proprietary trading by big banks. “It plays right into the hands of a bunch of pundits out there, but that is life”. That’s the risk when you run more VaR at HQ than in the IB.