Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How JPMorgan and the London Whale Can Sink Your Stocks Portfolio

Companies / Banksters Aug 15, 2013 - 11:28 AM GMT

By: Money_Morning

Companies

Greg Madison writes: In the spring of 2012, JPMorgan Chase & Co.'s (NYSE: JPM) not-so-rogue trader, Bruno Iksil, better known as the London Whale, made a series of derivatives trades on credit default swaps that only appeared to be unauthorized.

In reality, those trades were just one side of JPMorgan betting against the other in a doom struck hedging strategy.


We're talking about trades so big they made waves across a $10 trillion market.

The London Whale lost at least $5.8 billion - perhaps as much as $6.2 billion - on those bets, and it's possible that the losses will head north from there.

As hard as it may be to believe, for his part The London Whale doesn't seem to have done anything illegal. Indeed, Bruno Iksil hasn't been charged with any wrongdoing.

In fact, the Whale is singing like a canary, cooperating fully with U.S. investigators.

JPMorgan's London Whale Snitch

What appears to be happening is that two of Iksil's colleagues, Javier Martin-Artajo and Julien Grout, are being charged on grounds that they conspired to hide the scope of Iksil's losses.

Martin-Artajo was in charge of a team that made highly speculative trades on credit default swaps, and Grout was responsible for recording the daily values of the positions. In a surprising turn, The Whale has supplied investigators with tantalizing email communications which appear to show that he urged restraint and advocated for proper valuation of the instruments he was handling.

So was Bruno Iksil, the London Whale himself, just the wheelman in these proceedings?
Martin-Artajo and Grout are charged with wire fraud and making false filings with the SEC.

Here again we have the mythical "serious charges" that the SEC and Justice Department like to talk about. But Martin-Artajo, Grout, and perhaps Iksil himself all have the misfortune of being expendable.

As we've seen with all the Justice Department's "investigations," it's not the top-ranking Jamie Dimons who end up falling on their swords, but those in the middling ranks.

In fact, the allegations hint at some tremendous pressure being exerted on the little fish, as Martin-Artajo, Grout, and Iksil were urged to "show smaller and smaller" losses. JPMorgan dramatically understated these losses to begin with, and then they rocketed from a few hundred million dollars up to around $6 billion.

Such is the word from on high, and such are the forces that eventually break markets.

More Dangerous Than They Seem

Very often, news of these huge trades netting huge losses seems to us to be abstract. There exists a (mistaken) sense that this happens so very far above our heads that it has no real effect on individual investors.

After news breaks of another big scandal on Wall Street, regulators vow action... bankers deny responsibility... risk to the system...

Then we shrug it off and get back to our lives, albeit with that much less faith in the system.

But the impact of these scandals in reality hit far closer to home...

Whenever Wall Street undergoes these world-scorching periods of Götterdämmerung, wherein impossibly huge sums are lost and hand-wringing goes into overdrive, there is serious fallout for "small" investors; you know, anyone playing with less than a $97 billion bankroll.

One immediate effect would be for anyone who happens to be holding any of the 3.77 billion shares that JPMorgan has outstanding. News of the London Whale's shenanigans sent shares of JPM tumbling, shedding nearly 10% of the share price in hours.

If you haven't hedged your portfolio against that kind of risk, if it's not risk-balanced properly, you're in a bit of trouble there.

That 10% is not an insignificant loss. In fact, it's this very loss that is driving a class-action lawsuit against JPMorgan and such principals as CEO Jamie Dimon, Ina Drew (chief of the trading unit where Iksil made his mega-trades), and Doug Braunstein.

But there's another, more insidious effect that these games have on individual investors. Ina Drew must have been fully aware that her people were taking up positions that were, in essence, counter to investors at the same firm. Javier Martin-Artajo knew the full extent of the Whale's losses.

The markets work best with maximum transparency and when good information prevails. But JPMorgan's actions run counter to this, in effect undermining the integrity of the entire market. In that sense, anyone who had anything in the market was adversely affected by these activities.

JPMorgan was operating on a different level than the rest of us, but that doesn't mean they're not just scam artists at heart. Click here, and make sure no one's got their eye on you for a mark.

Source :http://moneymorning.com/2013/08/14/how-jpmorgan-and-the-london-whale-can-sink-your-portfolio/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in