JPM Derivatives Monster

It is also an interesting development that all of the major derivatives players(the ones who have the greatest counter-party risk for all the OTC derivatives markets they make) all tanked on about 5-6x average volume on July 24th, just one day prior to this massive(is this the Lundy bottom rally)...I know the media tried to attribute this to the ENE fiasco, but I think it goes further than this...After all BAC had little to do with this ENE fiasco, as far as the media reports, and yet it has tanked from around 77 into the mid-50's as well...
 
Originally posted by ertrader
LTCM will seem like a high school science project when JPM comes crashing down...... I could have sworn i saw a Picture of Meriweather in JPMs lobby...could have been my imagination.
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very very chillingly close er.... now that you mention it... they don't have meriweather's picture in the lobby at jpm but guess what? robert merton (one of ltcm partners) was a "senior advisor" there from 1999 until 2001.
 
LTCM's investments included bets on Danish mortgage bonds, takeover stocks and junk bonds. Meriwether's losses were magnified because the wagers were made using borrowed money -- as much as $50 for each $1 of the firm's cash.

``We believed that diversity meant safety,'' Meriwether told the Journal. ``Although high leverage doesn't necessarily mean too much risk, we did have too much leverage,'' he said. ``The possibility of losing that much money was not part of our mind- set.''
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<font size =1>Mon, 21 Aug 2000, 9:05am EDT
Meriwether Apologizes for LTCM Collapse, Cites Flaws (Update2)
By Richard Blackden

Greenwich, Connecticut, Aug. 21 (Bloomberg) ...</font>

http://209.41.120.60:8085/~CafeChat/guests
 
RE: JPMorganChase/Derivatives Monster
Originally posted by bone
I can tell you that by Valentine's day of this year, they had cornered the cash market two-year German treasury note (the Schatz), which, of course, ended being an unbelievably great play.

Not only did the short-end of the yield curve explode upward at a faster rate than the longer-term issues, but they have squeezed two successive rolls in the futures with about 500,000 contracts open interest per roll, and the Euro appreciated by about 12% verus the dollar since JPM started accumulating the position.
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Interesting today the "asset allocation" shift from Schatz to Dax, considering the above "rumor" that JPM has the Schatz cornered. Of particular interest is the fact the the Euro has sold off in tandem with the Bunds (look at the intraday charts), since the currency has been inversely correlated to european bonds in the last couple weeks. One could (wildly) speculate that a possible reason for the asset allocation shift today is that JPM is being forced to liquidate their Schatz position and buy dollars to because of a liquidity problem. Hmmm.
 
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