Nassim Taleb on Newsnight talking about banking risks.

What Was Not Said During Jamie Dimon’s Media PR Campaign [Zerohedge]

Tyler Durden's picture

Submitted by Tyler Durden o

Today’s Meet The Press PR damage control campaign orchestrated on behalf of Jamie Dimon by the fawning press was just another attempt at redirection, in which a faux contrite Jamie Dimon promises that as a result of being ‘100% wrong’ about his prior “Tempest in a Teapot” description of the Bruno Iksil debacle, he has learned his lesson, and in tried and true American fashion deserves a second chance. The rest was filler. What was not said is that the entire business model of the modern US banking edifice, where due to the Net Interest Margin limitations imposed by ZIRP, is one of prop trading as being a glorified hedge fund is the only way the banks can generate a rate of return above their cost of capital.

  • What was also not said was the glaring lies by Blythe Masters from a month ago who swore up and down to CNBC that JPM does not engage in prop trading: “We have offsetting positions. We have no stake in whether prices rise or decline
  • What was also not said is that contrary to “conventional wisdom” where a few prop traders have been sacked (most likely due to not taking enough risk) prop trading is alive and well across Wall Street, even if it has been largely rebranded as ‘flow trading’ – just as the high freaks are scrambling to come up with a new name for HFT because that will make all the difference.
  • What was also not said, nor discussed, is why anyone would trust or invest in these money center banks when their balance sheets are so opaque, even their apparently clueless CEOs flip-flop within a month on what is really happening, with accounting standards so poor, that nobody can figure out what they are investing in, and why Mark-to-Market is still halted (Aren’t banks finally quote unquote healthy?).
  • Finally, the most important thing not said, was Glass-Steagall, the one law whose overturning allowed the commingling of deposits and hedge fund activity courtesy of Gramm-Leach-Bliley, hilarious called the Financial Services Modernization Act of 1999. If America is to have even a remote hope of returning to normalcy, Glass-Steagall has to be reinstated. Which is why nobody brought it up on MTP: neither the anchor who is accountable to an organization which needs the status quo for advertising revenues, nor the hungry for TV exposure senator, nor the DCF-expert access journalist. Nobody.

Read more

Let’s Talk JPM’s Position Sizes, Coverage Options And “Offsetting Gains” [Cain Thaler @IBC]


I’m almost obligated to get into this affair with Dimon & Co. However, I promise you I’ll save you the self-righteous lectures, which are so well versed and recorded at this point to fill a small history book or ten.

It’s not that I don’t agree with much of what’s being said. Or that I have anything against those of you who are saying it. More that, since you are all so on top of this, I don’t have to be.

Instead, let’s talk about something a little more practical.

Dimon mentioned that they have a $2 billion loss, presumably unrealized, over a 6 week period. We know that the position is composed largely of derivatives. So, we have a timeline, and we have a medium. But we are missing a quantity. That’s unfortunate, as it would be let us know how deep JPM is, and what they need to do or have happen in order to unwind it.

But hey, let’s just guess.

What do we know happened about 6 weeks ago? Well, looking at yields of major bonds, that was about when both Italian and Spanish 10 years reversed hard off their, up until then, descent from the ECB LTRO operation. We also know that buying those bonds, betting on further depressed yields was a VERY popular trade amongst the financier elite. Look at Corzine – who has deep ties to Dimon.

In fact, JPM was clearing Corzine’s trades in the MFGlobal affair, if I recall, so some of this position could even be a legacy. That would be fascinating. But that is WILD speculation on my part, so let’s get back on track…

It seems reasonable to guess that the culprit of this blow up is European debt. It was a popular target. The timeline’s right. So, assuming it is EU debt (specifically Spanish and Italian bonds), what does that tell us?


Read more

Why Blythe Masters is Telling the Truth About Precious Metals Manipulation [silverdoctors]

As by now all of our readers are aware, JP Morgan’s Global Head of Commodities Blythe Mastersyesterday appeared on CNBC for a soft-ball interview giving Ms. Masters the opportunity to deny rumors and allegations that JP Morgan is manipulating the metals markets, particularly silver.

With a smirk on her face, Blythe informed viewers that ‘JP Morgan’s commodities business is not about betting on commodities, it is about assisting clients‘ and ‘we have offsetting positions….(manipulation) is not part of our business model.  It would be wrong and we don’t do it.

While Blythe’s statements’ have already been thoroughly dissected and ridiculed ad nauseum (The Doc included), the fact is that BLYTHE WAS NOT LYING THROUGH HER TEETH AS MANY CLAIM, SHE WAS TELLING THE TRUTH 100%. 

Here’s why:

As our friends at GATA have long alleged, it is highly likely that JP Morgan’s ‘client‘ referred to by Blythe Masters is none other than the Federal Reserve- specifically the NY Fed.

NY Fed Building

Viewed in this light, Blythe’s comments regarding gold and silver manipulation are completely honest (while obviously intentionally misleading, none-the-less they are honest at face value) as it is likely that JP Morgan is maintaining metals positions and trades per the instructions and wishes of their client, the NY Fed.

Recall the rumors in the market that a central bank gave orders to dump 1 million ounces of gold on the market in the span of 2 minutes on February 29th.  Recall that gold and silver were taken down massively and counter-intuitively last fall exactly 5 minutes prior to the Swiss Franc’s devaluation vs. the euro.   Recall that gold and silver are routinely smashed whenever the Federal Reserve Chairman is speaking publicly or the FOMC is meeting.

The Plunge Protection Team’s (NY Fed’s) Brian Sack (who was sacked this week….another story) routinely uses broker-dealers to conduct ‘open market operations’ to fund the Treasury ponzi.  i.e. the NY Fed makes agreements to handsomely reward the primary dealers for taking up treasury auctions with the full knowledge that the NY Fed will buy back the bonds at a premium in approximately a week’s time.  Would Goldman and JP Morgan be buying $1.5 trillion worth of treasuries annually at 2.5% if they had to hold them on their own books for 30 years?  Of course not!

Why should we believe that the NY Fed’s intervention in the commodities sector is any different?  Someone has to execute the trades on behalf of the NY Fed’s commodities intervention.  It makes perfect sense that JP Morgan holds their massive naked short gold and silver positions on behalf of their client, the NY Fed, and not as their own speculative bet.  

If JP Morgan held these positions on their own behalf, the CFTC would likely not be in their 4th year investigating silver manipulation.  The DOJ would be involved
, and let’s just say that Blythe would not be making charity appearances donating millions of dollars to community colleges in Colorado.

Unlike JP Morgan, the Federal reserve would have a variety of motives in suppressing the price of gold and silver, managing the metals markets with an iron fist, and ensuring the metals are smashed upon any significant macro-economic news intuitively harmful to fiat currencies.  

Gold and silver are anathema to central banksters, who make their living by sucking the value out of the population’s currency through inflation and currency devaluation.  The Federal Reserve has every motive to ensure that this process can continue unnoticed by the masses, until the wealth transfer is complete.

Read more

JPM To Pay ‘Wristslap Fine’ in Misuse of Customer Segregated Funds at Lehman Brothers


JPM extended a significant amount of credit to Lehman Brothers prior to their collapse.

In extending the credit, JPM assumed that the customer money that was being held by Lehman Brothers could be freely used by the firm, and therefore was a legitimate part of its valuation. The comparison to MF Global is obvious.

In other words, if MF Global had not failed to meet its margin call and gone bust, they might have been fined $20 million in four or five years, while taking in billions in profit and bonuses. What a deterrent!

Although using customer segregated funds to calculate the value of a company is not nearly as egregious as actually stealing them, it does betray a certain mindset on Wall Street that seems to have prevailed in the last ten years or so.

‘This land is our land, their money is our money.’

Or perhaps there was an outbreak of sloppy book-keeping on Wall Street as the Fed induced credit bubble reached its apogee in the fraudulent securities packaging market. Who could blame them?

The $20 million fine is incidental to JPM and the violations which occurred over four years ago.  And I am sure that as part of settlement, JPM will agree not to do it again, while admitting no guilt.

Perhaps this action by the CFTC is more symbolic than effective. The question I have is what does it really mean?

Read more


Get every new post delivered to your Inbox.

Join 4,933 other followers