Opening Bell: 05.11.12

JPMorgan’s $2 Billion Blunder (WSJ)
The CEO emphasized that the bank remains profitable despite the trading loss. “While we don’t give overall earnings guidance and we are not confirming current analyst estimates, if you did adjust current analyst estimates for the loss, we still earned approximately $4 billion after-tax this quarter give or take,” he said on the call. The bank earned $5.38 billion in the first quarter.

Drew Built 30-Year JPMorgan Career Embracing Risk (Bloomberg)
JPMorgan Chief Investment Officer Ina R. Drew, head of the unit responsible for a $2 billion trading loss, built a 30-year career at the largest U.S. bank by embracing risk and avoiding the spotlight. “With everything she does, she thinks in terms of trading,” said Stephen Murray, head of CCMP Capital Advisors LLC, created from a JPMorgan private-equity unit in 2006. “There are risk-lovers, there are risk-haters, and the best traders will take the risk as long as they get paid for it.” Drew’s operation, which helps manage the bank’s risk, has been transformed under Chief Executive Officer Jamie Dimon to make bigger speculative bets with the firm’s own money, according to five former employees, Bloomberg News reported last month. Some bets were so big JPMorgan probably couldn’t unwind them without roiling markets, the former executives said.

JPMorgan Holding Talks With UK Regulator (WSJ)
JPMorgan has been holding discussions with U.K. regulators about the roughly $2 billion of trading losses incurred by the giant bank’s investment office, according to people familiar with the matter. The talks with the Financial Services Authority don’t represent a formal inquiry by the regulator, one person said, and it isn’t clear whether it will result in any action by the regulatory agency. The FSA has been requesting information from J.P. Morgan about how the trading losses occurred and what steps the bank is taking to avoid such situations in the future, the people said.

Volcker Rule Proponents Say JPMorgan Loss Bolsters Case (Bloomberg)
Senator Carl Levin, the co-author of the so-called Volcker rule and chairman of the Permanent Subcommittee on Investigations, said the New York-based bank’s disclosure yesterday served as a “stark reminder” to regulators drafting the proprietary-trading ban required by the 2010 Dodd-Frank Act. “The enormous loss JPMorgan announced today is just the latest evidence that what banks call ‘hedges’ are often risky bets that so-called ‘too-big-to-fail’ banks have no business making,” Levin, a Michigan Democrat, said in a statement.

Wall Street’s Go-To Guy Trips Up (WSJ)
“I am not sure how many times I can say this: It was bad strategy, executed poorly,” Mr. Dimon said of the losses the company suffered in the past six weeks. The acknowledgment is a rare blow for Mr. Dimon, 56 years old, who has been on the top of the banking heap since joining J.P. Morgan Chase in 2004. He regularly extols J.P. Morgan’s “fortress balance sheet” and has repeatedly lashed out against lawmakers and regulators who have slapped more rules on the banking industry.

Italian man becomes mayor by accident (BBC)
Though he had not given much thought to a political platform before the vote, now he is in office he has said that he will focus on promoting tourism to the area.

EU Signs Of Recovery, Risks Remain (WSJ)
“A recovery is in sight, but the economic situation remains fragile, with still large disparities across member States,” Olli Rehn, Commissioner for Economic and Monetary Affairs said in a statement. “Without further determined action, however, low growth in the European Union could remain.”

Chesapeake Deals Carry $1.4 Billion In Undisclosed Liability (WSJ)
Most of these costs will hit this year and next, at a time when the company needs to raise substantial cash to cover operating expenses and its move into the more lucrative oil business.

Faber Sees ’87-Type Crash If U.S. Stocks Rise Without QE3 (Bloomberg)
“I think the market will have difficulties to move up strongly unless we have a massive QE3,” Faber, who manages $300 million at Marc Faber Ltd., told Betty Liu on Bloomberg Television’s “In the Loop” from Zurich today, referring to a third round of large-scale asset purchases by the Fed. “If it moves and makes a high above 1,422, the second half of the year could witness a crash, like in 1987.”

Third masseur accuses John Travolta of inappropriate behavior (NYP)
Fabian Zanzi, a Chilean-born cruise worker who worked in VIP services, said Travolta offered him $12,000 for the tryst. Zanzi says he refused. Travolta was on the five-day cruise in 2009 without wife Kelly Preston and hit on Zanzi with a cheesy pickup line, the cruise worker said. “He said that I had something on my neck. I thought it was lint,” Zanzi told the Chilean news show “Primer Plano.” “When he got close to me, he took off his white robe and he was naked.”

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Comments (56)

  1. Posted by nelson muntz | May 11, 2012 at 10:09 AM

    Volcker Rule > Dimon Principle

  2. Posted by Guest | May 11, 2012 at 10:14 AM

    So much turmoil and UBS is not to be blamed for any of them?

  3. Posted by investorcluzo | May 11, 2012 at 10:15 AM

    free kweku!
    -a. sharpton

  4. Posted by guest | May 11, 2012 at 10:17 AM

    I would have kept quiet, John.

    -Ping

  5. Posted by Guest | May 11, 2012 at 10:23 AM

    Give it time.

  6. Posted by Guest | May 11, 2012 at 10:24 AM

    Empathy hug, JD?

    - Occupier

  7. Posted by Guest | May 11, 2012 at 10:24 AM

    That's pretty rough, Dimon.

  8. Posted by InlovewithInaDrew | May 11, 2012 at 10:27 AM

    I would like to hear Dick Bove's comments on this.

  9. Posted by The Entire Midwest | May 11, 2012 at 10:27 AM

    We had no idea that Travolta was gay.

  10. Posted by Green Fan | May 11, 2012 at 10:31 AM

    What, no love for the Green Hornet cleaning up at Poker, just 'cos some bank has a littler problem? This is where the real whales were!

    http://www.bloomberg.com/news/2012-05-11/poker-wi

  11. Posted by Mobius | May 11, 2012 at 10:37 AM

    Worst comment in a decade.

    -Fundlach

  12. Posted by Guest | May 11, 2012 at 10:41 AM

    Here's how he felt about it last month
    http://bloom.bg/IbJlPD

  13. Posted by Guest | May 11, 2012 at 10:51 AM

    Oh, Sandy. I didn't mean it!

  14. Posted by Brian M. | May 11, 2012 at 10:54 AM

    Jamie, let's get wasted buddy. My treat, after all you just lost 2 billion. What? No I'm not in the same position, BAC is – well, shit – you buy me a drink then pal, looks like I'm a broke motherfucker.

  15. Posted by guest | May 11, 2012 at 10:55 AM

    CIO office would need capital in order to lose capital

  16. Posted by Hakuna Matata Guy | May 11, 2012 at 10:56 AM

    Travolta, that you?

  17. Posted by Guest | May 11, 2012 at 11:00 AM

    Agreed.

    Barclays sans the word Capital

  18. Posted by Cut Me | May 11, 2012 at 11:03 AM

    See, this was just a simple misunderstanding. I removed my robe for fear of adding more lint to Mr. Zanzi's neck.

  19. Posted by VonSloneker | May 11, 2012 at 11:11 AM

    We have decided to roll Dungeons & Dragons dice to generate risk statistics rather than continue the use of VaR.

    - JPM Risk Managment Quant…errr Dungeonmaster

  20. Posted by Mining quant | May 11, 2012 at 11:17 AM

    Kind of fitting that there's a silver ad on the site today.

  21. Posted by Guest | May 11, 2012 at 11:28 AM

    $12,000??? I'll take what I can get at this point.

    -Bruno Iksil

  22. Posted by Namibian Gas Pro | May 11, 2012 at 11:45 AM

    Blood Dimon!

  23. Posted by Rush | May 11, 2012 at 11:46 AM

    Italian man becomes mayor by accident >> Kenyan man becomes president by accident

  24. Posted by Ex JPM Coal Pro | May 11, 2012 at 11:46 AM

    We might be able to help………

  25. Posted by Double Exclamations | May 11, 2012 at 11:48 AM

    Jamie!! It's not a loss until you take it!! It's a non-cash loss!!

    -Tulsa Trading Genius

  26. Posted by Jerry Jones | May 11, 2012 at 11:52 AM

    Jamie is starting to show his age. Time for a face lift, old sport.

  27. Posted by Haters will hate | May 11, 2012 at 11:53 AM

    Why does the NY Times hate JP Morgan?

  28. Posted by trojan_ | May 11, 2012 at 11:53 AM

    JPM…. sucks

  29. Posted by Hedge | May 11, 2012 at 11:55 AM

    You keep using that word. I do not think it means what you think it means.

  30. Posted by Capsize Capital, LLC | May 11, 2012 at 12:00 PM

    Mr. Iksil, allow me to introduce you to Mssrs. Hunter, Kivisto and McClendon…..

  31. Posted by Arhtur Dunlop | May 11, 2012 at 12:02 PM

    Everybody just needs to settle down. I'll be the first to admit, this trade looks really bad now, but in time you'll see that this was the right trade to make. All we need is to give this strategy enough time to play out, and you'll see that I'm right. And then you'll all be thanking me.

    -Bruno Iksal '12
    -John Meriwether '09
    -Boaz Weinstein '08
    -Brian Hunter September '06
    -Brian Hunter March '06
    -Brian Hunter '03
    -John Meriwether '98
    -Victor Niederhoffer '97

  32. Posted by aGhuest | May 11, 2012 at 12:10 PM

    Seriously? Isn't this guy cribbing 24/7 from DB? Hey, NYTimes– where's the biography and picture in bed of Bess?!

    Joe Weisenthal vs. the 24-Hour News Cycle http://www.nytimes.com/2012/05/13/magazine/joe-we

  33. Posted by Fuckin hell | May 11, 2012 at 12:11 PM

    How bout some love, bro?

    J.P.

  34. Posted by Guest | May 11, 2012 at 12:17 PM

    "Drew, 55, is one of two women who sit on the New York-based firm’s operating committee. Her office oversees about $360 billion, the difference between money from deposits and what the bank extends in loans."

    And she let Moby Dick build up a $100b position exposure in synthetic CDO's? 28% of her capital?

  35. Posted by Guest | May 11, 2012 at 12:19 PM

    I don't believe it. JPM's only saying this because it is jealous of all the publicity and chances to appear before Senators and Congressmen MF Global got when it lost $1.3billion.

  36. Posted by gab | May 11, 2012 at 12:22 PM

    By jove, you have hit directly upon the question that is on everyone's mind today! What insight!

  37. Posted by guest | May 11, 2012 at 12:37 PM

    -Jon Corzine '11

  38. Posted by Yada yada | May 11, 2012 at 12:38 PM

    VaR isn't used in structured credit risk management, so you might as well be playing D&D since it's just as relevant. So many finance poseurs here.

  39. Posted by Guest | May 11, 2012 at 12:40 PM

    Tim Sykes '07

  40. Posted by Guest | May 11, 2012 at 12:41 PM

    Neither did we.

    - UBS MD

  41. Posted by guest | May 11, 2012 at 12:45 PM

    Back to ripping clients faces off in peace.

    -GS'r

  42. Posted by guest | May 11, 2012 at 12:47 PM

    -Jim Cramer (Mon, Tues, Wed, Thurs, Fri)

  43. Posted by Mining quant | May 11, 2012 at 12:52 PM

    It should surprise no one that when societies began to overspecialize in nonproductive and even destructive economic activity, things start to go bad.

  44. Posted by motives | May 11, 2012 at 12:53 PM

    would you prefer shrubbery?

  45. Posted by GeezerOilTrader | May 11, 2012 at 1:05 PM

    Fucking banks are ruining the oil trading business!! Here's some fucking back ground so you young shit heads pay attention: In the old days if we had a fucking "loser" cargo of Es Sider or some VLCC of Ta Ching, that fucking arsenic laden Chinese shit they call "crude oil", we'd sail that motherfucker across the books into the "refining" ledger. We'd let those assholes who call themselves products traders get all fucking busy with their little broker buddies on the phone to try to fucking make that shit into some sort of refined fucking product and sail it around the world looking for a home or until the market for fucked up refined products rallied for some dumbass reason. In so doing, our trading book looked fucking perfect and we never had a "loss" in trading as a result. Those pleated pants products trading prick, mustache wearing assholes…and even the male traders on ther desk as well, …… who'd brag about their glorious fucking days in Singapore ad nauseum and ride a trade into the fucking ground would have to deal with that floating "turd in transit" . Now, as to these fucking dipshit bankers: They ain't got no "financial refinery' to take their dumbass, bullshit trades that those fucking Mensa members on their staff created and said would never fucking fail and boil those trades into "refined bullshit fucking financial trades" that they can hold and later piece out (no, not that fucking "peace out") to other dumbass Mensa-type competing financial fucks from the finest dumbass producing financial centers of higher fucking education that there are globally. And, goddammint, fucking flared pants will make a comeback!

  46. Posted by Ms.Piggy | May 11, 2012 at 1:10 PM

    Now this is what we call the muppet showwwwwwwwwwww…..

  47. Posted by guestosaurus | May 11, 2012 at 1:16 PM

    i bet you have a lot of friends

  48. Posted by PermaGuestII | May 11, 2012 at 1:18 PM

    Well, shit, you better call up JPM and tell them to restate their Q, then.
    http://dealbreaker.com/2012/05/whale-sushi-on-the

  49. Posted by Yada yada | May 11, 2012 at 1:39 PM

    Now you see why D&D is just as good as VaR for synthetic CDO risk.
    On 187 million reported VaR for the entire unit, they managed to lose $2.3 billion+.

  50. Posted by Guest | May 11, 2012 at 1:47 PM

    That Range Rover is so hedge!

  51. Posted by VonSloneker | May 11, 2012 at 2:05 PM

    You get me…now.

    - Poseur

  52. Posted by Bernak | May 11, 2012 at 2:12 PM

    Dimon should visit the White House but, he should lather up with Vasoline beforehand. The visit will go much easier that way. Thanks Turd for all your JPM insights, TF ROCKS! FTW!

  53. Posted by Yada yada | May 11, 2012 at 3:26 PM

    Actually, I don't. VaR just isn't used on Credit Desks, regulator reports notwithstanding. Reality is actually much closer to D&D.

  54. Posted by free market | May 11, 2012 at 3:35 PM

    The redheaded idiot on Blmbrg is annoying me now, grrrrrrrrr

  55. Posted by Puts up his own $ | May 11, 2012 at 4:07 PM

    Only an asshole thinks 2B is a drop in the bucket

  56. Posted by VonSloneker | May 14, 2012 at 12:13 PM

    You seem determined to miss the point. Disengaging.
    http://www.risk.net/risk-magazine/news/2174445/jp