JP Morgan prop desk - worst results in recent memory

[tomcole]

Heres the fallacy in your argument-

1. Their RAROC is a funny number as all trades are netted at the end of the day, not grossed up. If they were grossed up, their need for capital would be infinite. Their intra-day credit facilities at other traders are not counted either. The netting of trades allows for big positions and any profitability is applied against a much smaller number than the actual capital (or credit used) used. So, the loss figure also understates how much capital was used.

2. The inability of banks to relay operational data to traders, is simply poor management, as any bank can tell me my cash balance at my ATM. Of course, doing this elevates a $40,000 data processing clerk to the level of a 7 figure trader and makes redundant, 6 figure traders, so wont happen.

3. If a bank/trader wants to wholesale Fannie type deals, yet gets stuck on trades, why do they do it? Because its more fun to talk about 10,000 lot trades than to talk to a operations guy about getting timely data on loans.

Its simply poor management all around.

 

[nononsense]

Quote from mogul:

maybe you want to re-read the following portion:

"Absent any improvements in June, we expect our trading results to be worse this quarter than they were in the third quarter last year, which was a terrible quarter," Dimon said during an investor presentation in New York.

In the third quarter of 2004, the bank reported trading earnings of $842 million.

Why don't they fire them quants and other cronies. At least they will stop losing money and they will save a bit on paychecks.

 

[Quiet1]

In the end Investment Banks are like any other business.

What's Dell's repeatable edge? Looks an eminently copyable strategy doesn't it? In the end large organisations with large financial capacity are tough beasts to manage. In order to support the market presence they do over all the markets, geographies and timezones they do is a complex task and that is what they get paid for.

Q1

 

[ratboy88]

Quote from nononsense:

Why don't they fire them quants and other cronies. At least they will stop losing money and they will save a bit on paychecks.

thats what i was wondering....how are those quants doing?

 

[mahram]

thats pretty bad

 

[tomcole]

But if they lose money, why do it?

 

[MichaelJ]

It is not consistent. Some desks are stars one year and bad the next.

But define repeatable edge? How much money you expect to make every day/week/month?

Quote from wilburbear:

MichaelJ:

What's the repeatable edge at the financial institution you work at?

 

[MichaelJ]

I think your point #1 is totally incorrect.

Capital is based on risk. It is not based on the funding requirement. Think of it like the margins needed for futures.

Quote from tomcole:

Heres the fallacy in your argument-

1. Their RAROC is a funny number as all trades are netted at the end of the day, not grossed up. If they were grossed up, their need for capital would be infinite. Their intra-day credit facilities at other traders are not counted either. The netting of trades allows for big positions and any profitability is applied against a much smaller number than the actual capital (or credit used) used. So, the loss figure also understates how much capital was used.

2. The inability of banks to relay operational data to traders, is simply poor management, as any bank can tell me my cash balance at my ATM. Of course, doing this elevates a $40,000 data processing clerk to the level of a 7 figure trader and makes redundant, 6 figure traders, so wont happen.

3. If a bank/trader wants to wholesale Fannie type deals, yet gets stuck on trades, why do they do it? Because its more fun to talk about 10,000 lot trades than to talk to a operations guy about getting timely data on loans.

Its simply poor management all around.

 

[Quiet1]

prop trading is "extra" for them to fill in when normal flow and structured business are struggling.

does every PC dell makes add profit? probably not but they are there waiting, ready and equiped for all the potential profitable opportunities they can think of.

Q1

 

[polee2000]

Quote from sle:

their swaption desk got hammered this year, the head of the desk got sacked and the losses are rumored to be on the order of 200mm. I think all of their FI prop groups did not do too hot, needless to say the correlation desk P&L was a **** mess.

my correlation P&L was a mess too.
you probably know what I shorted. haha