A Giving Life. A Magical Chalet. The Stuff of Fairytales.


Ok, how could you not see this coming. Shameless self-promotion runs strong in these (alleged) frauds. This October 2008 profile has got to be the most surreal thing we have ever seen, including the revelation that fugitive trader Dennis Bolze had a friend "fake my $100 million lottery winnings."
The origins of the White Shadow's success? Read on:

Dennis, who grew up in Pennsylvania, attended Georgia Tech with plans of becoming an attorney. However, he quickly determined that law wasn't for him, and took a summer job as a runner at the Chicago Mercantile Exchange. One quiet morning on the floor, Dennis doodled. An executive scolded him, but Dennis replied, "In about 15 minutes, the market is going to go crazy; I'm just waiting." Sure enough, the market exploded just as he had predicted. The next day the same executive came to him to ask how he'd foreseen the day's events. Dennis, it turns out, had been studying the trades, reading trade materials, and creating charts to calculate fluctuations in the market. He had also been studying the work of W.D. Gann, a financial advisor/trader in the stock markets during the early 20th century. Made famous for forecasting the Great Crash of 1929 and subsequent depression, his methods are still widely used.

And we thought Marcus DB's capture was going to slow things down around here.
A Giving Life [Cityview]
Earlier:January Is International Fugitive Month


JPMorgan's Voldemort Probably Isn't That Magical

John Carney has hilariously convinced a bunch of people that JPMorgan whale-wizard Bruno Iksil could actually be running a synthetic bank on top of JPMorgan's actual bank. The theory, propounded to him by a mysterious trader and sort of supported by an old PIMCO client note, is that Iksil was tasked with hedging JPMorgan's inflation risk and did so by putting on a trade that was (1) long TIPS (for the inflation) + (2) long [write protection on] CDX (for the yield). Now I will tell you a thing, which is that I hedge my inflation risk by being (1) long TIPS (for the inflation) + (2) long MegaMillions tickets (for the yield),* but nobody calls me Voldemort. Here is Doug Braunstein's theory about Iksil: On a conference call with analysts, Braunstein said the positions are meant to hedge investments the bank makes in “very high grade” securities with excess deposits. (J.P. Morgan has some $1.1 trillion in worldwide deposits.) Braunstein said the CIO positions are meant to offset the risk of a “stress-loss” in that credit portfolio. He added the CIO position is made in line with the bank’s overall risk strategy. What can that mean? Presumably the sensible view to take from this is that this is actually part of a "stress-loss" hedge; the CIO is short (bought protection on) a lot of shorter-dated corporate credit and funds it by being long (selling protection on) a lot of longer-dated (5-year) corporate credit, so as to be relatively DV01-neutral but long jump risk. This has the advantage of (1) actually hedging a stress loss in high-grade short-term corporate securities, (2) fitting in with the relative lack of noise in the CIO portfolio,** (3) being what people have told Bloomberg he was doing, and (4) being what JPMorgan has actually said it's actually done in the CIO during the crisis. So it's probably true no? But it's fun to pretend! If you pretend Carney is right you can have one of two views.*** One is Izabella Kaminska's, which is "sure, I guess this is a hedge, but boy is it a mysterious one." You can buy this if you have - as she does - a pretty postmodernist view of what a hedge is. I do too, mostly.