Bryan Roberts
Guest
didn't these guys get bailed out of bad loans to mexico along with goldman? by the us taxpayers no less!!! didn't they have a huge exposure to LTCM and get bailed out by the fed??? i think they are smarter than we realize.
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JPM Derivatives Monster
- Thread starter DT-waw
- Start date
didn't these guys get bailed out of bad loans to mexico along with goldman? by the us taxpayers no less!!! didn't they have a huge exposure to LTCM and get bailed out by the fed??? i think they are smarter than we realize.
Originally posted by bone
Before everybody buys their puts on JPM, I'm not so sure their exposure is directional in the markets..
GSCO is already buying puts on JPM and putting up derivative positions contrary to JPM's. The downside for them is low, and the potential gains are huge, think about gs buying jpm-chase for cents on the dollar. I wouldn't buy puts right away though, greenscam might lower rates and blow up any highly leveraged position. I'd just ride the volatility after (any) news are out.
Also:
"It's our business to take risk and we manage our risk better than our competitors," says J.P. Morgan spokesman Adam Castellani, who points out the bank won an award last year for its derivatives risk-management practices from the trade publication Risk magazine.
Riiiiiiight..... the same magazine that gave Enron one of their "derivatives house of the year" awards a couple of years ago.
http://www.thestreet.com/_mktw/markets/matthewgoldstein/10035496.html
Bryan Roberts
Guest
Originally posted by chasinfla
Bryan...that thought crossed my mind followed soon by the thought that, if Prechter is right and deflation sets in, it may be a while before rates spike....it's been a while in Japan....a long while...
*****
Interesting link in the article for those of the intellectual bent...(it's probably a waste of time but it looks intriguing) :www.LeMetropoleCafe.com.
i saw this guy from "LeMetro" on C-span a couple of weeks ago...very sharp guy!!!!!!!!!!!
I think the real issue is not the massive notional principal amounts.
These amounts only serve to inflame the debate as they are not themselves evidence of excessive risk.
The issue in my mind is counterparty credit ratings.
These amounts only serve to inflame the debate as they are not themselves evidence of excessive risk.
The issue in my mind is counterparty credit ratings.
"A âbankâ with $712 of derivatives exposure for every $1 in stockholdersâ capital, in my humble
opinion, is no longer a bank but a de-facto hedge fund."
.
There was a lot of de-regulation of the banks about ten years ago. The regulations were thought to be outdated and unnecessary. For instance, you didn't used to be able to buy a mutual fund at a savings bank.
opinion, is no longer a bank but a de-facto hedge fund."
.
There was a lot of de-regulation of the banks about ten years ago. The regulations were thought to be outdated and unnecessary. For instance, you didn't used to be able to buy a mutual fund at a savings bank.
Rigel, the operative word there is 'thought.'
TTP, Credit rating is just why I came back to this thread. I was thinking more of JPM's. Any perceived credit problems there could cause the whole thing to unwind like Enron on crack. However, I think when you're JPM, your credit is about equal to the US Government, owing to the Fed's interest in backing you.
In a way, the ENE thing might have been a forewarning to the powers that be about how falling stock prices can lead to collapses owing to credit risk+leverage, in a sort of 'reflexivity from hell,' as Soros might (or might not) say.
Here's a problem with the JPM thing: It is the main market maker for it own exposure. So how does anyone really know what the value of the instruments is (apart from instrinsic value)? Also, being the main market maker, it has no liquidity. Where's it going to dump its position if it needs to? Perhaps it could hedge, but if a market moves adversely, who's going to take the other side?
I don't want to overuse the Enron analogy, but one key hindreance that the equities market had in valuing ENE shares reasonably (leading to overvaluation) is that Enron was the main market maker for its own risk, and so it could invent the valuations of its inventory. The marketplace was hoodwinked about the real risk. That is a very risky place to be indeed.
As TTP said, counterparty credit risk seems like it would be a Sword of Damacles.
TTP, Credit rating is just why I came back to this thread. I was thinking more of JPM's. Any perceived credit problems there could cause the whole thing to unwind like Enron on crack. However, I think when you're JPM, your credit is about equal to the US Government, owing to the Fed's interest in backing you.
In a way, the ENE thing might have been a forewarning to the powers that be about how falling stock prices can lead to collapses owing to credit risk+leverage, in a sort of 'reflexivity from hell,' as Soros might (or might not) say.
Here's a problem with the JPM thing: It is the main market maker for it own exposure. So how does anyone really know what the value of the instruments is (apart from instrinsic value)? Also, being the main market maker, it has no liquidity. Where's it going to dump its position if it needs to? Perhaps it could hedge, but if a market moves adversely, who's going to take the other side?
I don't want to overuse the Enron analogy, but one key hindreance that the equities market had in valuing ENE shares reasonably (leading to overvaluation) is that Enron was the main market maker for its own risk, and so it could invent the valuations of its inventory. The marketplace was hoodwinked about the real risk. That is a very risky place to be indeed.
As TTP said, counterparty credit risk seems like it would be a Sword of Damacles.