PMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black - News and Current Events | futures trading

Go Back

> Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events

PMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black
Started:May 22nd, 2012 (05:30 PM) by kbit Views / Replies:228 / 0
Last Reply:May 22nd, 2012 (05:30 PM) Attachments:0

Welcome to

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike

Thread Tools Search this Thread

PMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black

Old May 22nd, 2012, 05:30 PM   #1 (permalink)
Elite Member
Aurora, Il USA
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
kbit's Avatar
Posts: 5,839 since Nov 2010
Thanks: 3,275 given, 3,321 received

PMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black

Jamie Dimon was not on Capitol Hill Tuesday but he and JPMorgan's big loss were center stage at a Senate Banking Committee hearing.

"The company's massive trading loss is a stark reminder of the financial crisis of 2008 and the necessity of Wall Street reform," said Committee Chairman Tim Johnson (D-SD).

The Securities and Exchange Commission is looking into the "appropriateness and completeness" of JPMorgan's "financial reporting and other public disclosures," SEC chairwoman Mary Schapiro told the committee.

Gary Gensler, chairman of the Commodity Futures Trading Commission, said the CFTC is also investigating trades that led to JPMorgan's loss of $2 billion -- and counting. (See: "It's Getting Worse": Why JPMorgan Is Struggling to 'Move On' from Its Bad Trade)

At this point, the debate seems to be over whether or not JPMorgan's losses are a reason to strengthen financial regulations -- "it would be wrong for us not to take this example," Schapiro said.

William Black, an associate professor of economics and law at the University of Missouri-Kansas City and a former senior financial regulator, agrees and goes a step further. "Regulators need to replace Dimon with a manager who is not addicted to exploiting federal subsidies to gamble on financial derivatives," Black writes, echoing views expressed here by MIT's Simon Johnson. (See: JPMorgan Chase's $2B Loss: Why Simon Johnson Says CEO Jamie Dimon Should Resign)

According to Bloomberg, nearly 50% of JPMorgan's chief investment office portfolio is in debt that is not backed by the U.S. government, that's up from just 7.7% at the end of 2007. At $188 billion, JPMorgan's exposure to non-government debt is larger than the combined exposure of its next three-largest competitors.

More importantly, Black notes JPMorgan is betting on "derivatives of derivatives" and is by far the largest player in the market for the CDX Investment Grade 9 and CDX High Yield 11, the derivatives underlying the trade that earned Bruno Michel Iksil the nickname 'the London Whale.'

"They didn't just gamble, this was a wild, crazy insane gamble," says Black, who calls JPMorgan "the world's largest gambling operation in financial derivatives" in his latest blog at New Economic Perspectives.

To be sure, a $2 billion loss is just 0.1% of JPMorgan's assets, as of March 31. JPMorgan has suspended its share buyback program and would appear to have ample resources to cover the losses, even if they were to double or triple or even quadruple.

But that's not the point, according to Black.

"We don't want any federal insured be speculating in financial derivatives. That's just nuts," he says. "It's really disastrous when you're talking about an institution like JPMorgan. It will sooner or later have a really bad year...when it has the really bad year, we will all end up having to bail them out or having another global crisis."

Given its size and outsized bets on credit derivatives, "JPMorgan poses a clear and present danger to the global economy," according to Black.

As you might imagine, Black is a strong proponent of strengthening Dodd-Frank, filling in the loopholes put into the Volker Rule -- thanks to an effort led by Dimon -- and regulating derivatives.

"Many of us seem to have forgotten we blew up the entire financial world by making huge best on financial derivatives," he says. "You would've hoped Congress would learn a lesson, regulators would learn a lesson and banks would learn a lesson...and get out of these things. Instead, JPMorgan has gone dramatically toward increased gambles on financial derivatives."

JPMorgan?s ?Wild, Crazy Insane Gamble? Puts Global Economy at Risk: Bill Black | Daily Ticker - Yahoo! Finance

Reply With Quote

Reply > Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events > PMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

An Afternoon with FIO trader bobwest

Elite only

NinjaTrader 8: Programming Profitable Trading Edges w/Scott Hodson

Elite only

Anthony Drager: Executing on Intermarket Correlations & Order Flow, Part 2

Elite only

Adam Grimes: Five critically important keys to professional trading

Elite only

Machine Learning Concepts w/FIO member NJAMC

Elite only

MarketDelta Cloud Platform: Announcing new mobile features

Dec 1

NinjaTrader 8: Features and Enhancements

Dec 6

Similar Threads
Thread Thread Starter Forum Replies Last Post
Forget Greece, China Biggest Risk to Global Economy: Faber Quick Summary News and Current Events 0 May 18th, 2012 07:00 AM
China Hard Landing Potentially Biggest Risk For Global Economy In 2012 GridKing News and Current Events 0 February 7th, 2012 09:18 AM
CS Global Risk Appetite Signals Risk-Off As Sentiment Stays In 'Panic' Mode Quick Summary News and Current Events 0 December 22nd, 2011 05:40 AM
Bill Gross Declares That The Economy Is Doomed kbit News and Current Events 0 October 15th, 2011 10:36 PM
JPMorgan's Black-Swan Risk commodity market kbit News and Current Events 0 May 12th, 2011 09:31 PM

All times are GMT -4. The time now is 03:27 PM.

Copyright © 2016 by All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts

Page generated 2016-10-25 in 0.09 seconds with 19 queries on phoenix via your IP