I also say, big deal. When you have billions to hedge, one loser on a porfolio doesn't matter, and it was on about $500 billion of a portfolio so if they can't let 2% go down, they're looking at returns below the stock's weighted average cost of capital, and people should dump the stock, because it's impossible for banks to make higher returns than their WACC's now.
How soon people forget. Dow approaches 14k and the recent past is forgotten. When it first surfaced about Bear Stearns problems back in 2008 or so, a lot of people had the same initial reaction as you. But as we know, it got worse, much worse. Bailouts at a historical levels. Hidden, mysterious, illiquid, esoteric securities that the general public had no clues about, almost bringing down the entire financial industry. Go back further to 1998 and LTC, whose positions were so large (trillions), the Fed had to get involved to bail them out. Another event that many said threatened to cause a widespread meltdown. It's these type of events that eventually ignited the Occupy Wall Street movement. People on Main Street are tired of the unnecessary big bets that some traders are playing just to enrich themselves. If there is one thing that should have been learned from 2008 crisis, it's that banks' perceived financial valuation is completely tied to the trust that clients/public have for them. Didn't CEOs have to sign a declaration attesting to the financial accuracy of their companies? It's goal was to put more of the responsibility on the CEO to be more proactive to prevent potential crisises. If so, the fallout of $2billion debacle could be Dimon. Already, Fitch has downgraded JPM rating.
In addition, I shudder when I remember how quickly Bear and Lehman stock nosedived when their fiscal trust/well-being was decimated. I really hope this doesn't start to snowball. Remember this quote? "$2 a share? Are you f*cking kidding? Our building is worth more than that"
Yes. About 2580 may be where the exit's oversold trigger level is at , otherwise it'll hit a trail stop around 2670. The thing about it is in the short term the market may be breaching to lower lows, but the bull trend will still be entact. We've moved less than 20 cents in QID and QLD the last few days, so the signal hasn't moved either way, and since the market moves from overbought to oversold and oversold to overbought always, when we go this far from overbought to oversold chances are it will go until it has crossed into oversold territory, where I'd hope to cover. The pairs trades and price physics trend following signals are both short, so the position is much larger right now.
Who is getting scammed? You have to assume that maybe JPM made some big mistakes but they are not stupid forever. They had to know that the $2 billion loss news would move the market. Set up before the news. Hit on Friday morning and made back whatever. You know you are going to move the market. What do you do? Something or nothing? Big bet says something.
Add at least $1B profit the first day of FB IPO for Morgan Stanley, JPM and GS. $1B each. You make billions, you lose billions.
=========== Remember LEH ledership ignored the lengthly downtrend in its stock & blamed the short sellers. Sorta like the Citi way; buy@ top/ sell @bottom Or as Mr Dimon/JPM rightly said some years ago; ''you don't pay UP for a house on fire''
It's a $100 billion bet that corporate credit improves. They sold insurance on corporate debt. They are contracts on a thinly traded cds index. The $2 billion loss has occurred over the last month, not including this past week. The index has deteriorated substantially over the last week. Any fears related to Greece or slowdown, etc will result in much bigger losses. Problem is there are several other banks that made the same trade. GS has its own bet long Italian debt. Moody's just downgraded 20 Italian banks. MS is about to get a two notch downgrade. They are in the worst shape. It is a big deal. We don't know BACs skeletons.
Does anyone get the sense this banks are trying to squeeze too much return out of the markets. Are they going to keep making larger and larger stupid bets until they blow up the system. As the markets get more efficient they are going to take bigger risk or accept their bonuses will get smaller.