Silver as an investment

ZeroHedge: Ahead Of Tomorrow’s Dimon Hearing, Presenting JP Morgan’s 93.5% Historical Winning Trade Perfection

Be prepared for the next great transfer of wealth. Buy physical silver and storable food.


We are just about 16 hours away from Jamie Dimon’s sworn testimony before the Senate Banking Committee, which even has the theatrical name: “A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?” Will anyone learn anything? Of course not: Jamie Dimon has been well-schooled in not disclosing critical trading information, and will certainly use the “proprietary position” and “more shareholder losses” excuse for any directed question asking how big the JPM CIO loss has become. Because while the hearing could have been productive, if indeed its purpose was to seek to prevent future massive losses of scale such as the suffered by the JPM prop trading unit and its hundreds of billions in CDS notional position, the last thing anyone will care about tomorrow is market efficiency and actual regulation. First and foremost: grandstanding and posturing, in the case of the politicians, and not disclosing anything, without saying too many “I don’t recall”s in the case of Dimon. Which is why we have little hope to get anything out of tomorrow’s formulaic 2 hours of largely meaningless droning. That said, considering we have already covered the topic of the JPM loss from a mechanistic standpoint more than any other media outlet, there is one more chart we would like to share with readers.

The reason for this chart was predicated by a small note in the latest WSJ article on who knew what and when (which came out at just the same time as the Bloomberg piece – as if the JPM CIO leaks can’t decide who to dump information to so does it to both BBG and the WSJ), in which it is said that in “2010, another bad trade caught the attention of a senior finance executive who notified top J.P. Morgan executives. Joseph Bonocore, then chief financial officer of the CIO, became concerned when London-based traders lost about $300 million in a few days on a foreign exchange-options trade, without any offsetting gains to balance out the losses.

We decided to go back to the firm’s 2010 filings and see what it had disclosed about its losses based on trading days reporting.

Here is what JPM reported publicly:

  • Q1 2010: zero days with any trading losses; 64 profitable trading days
  • Q2 2010: 8 trading loss days; 57 profitable days; of which the worst were 2 losses between $100-$120 MM
  • Q3 2010: zero days with any trading losses; 66 profitable trading days
  • Q4 2010: 5 trading loss days; 61 profitable days; of which worst was 1 loss day between $80-$100MM

Most importantly, in JPM’s own words: “During 2010, losses were sustained on 13 days, none of which exceeded the VaR measure.” Recall that this is the fudged VaR, which upon the discovery of the Iksil trade, had to be massively adjusted upward having been found to be completely meaningless and to exclude all CIO positions.

We wonder: was the CIO responsible for all of these losses, and more importantly, is the abovementioned loss captured in any of the JPM public reports? And if not, why not? More importantly, can someone explain how it is possible that a firm that over the past 9 quarters has disclosed a total of 41 days on which it has lost money trading, and 546 days on which it was profitable, or a 93.5% win rate of the total 587 days in the past 2 years and 1 quarter

All this is shown in the chart below:

To borrow a phrase from Taleb: was JPM’s now mega-loss merely the non-scalable outlier event that occurs when a firm has an artificially impossible winning ratio, and uses complexity to mask the fact that it is in fact merely accumluating losses which have to be booked eventually?

Does being successful nearly all the time explicitly imply there is a time bomb in your books just waiting to be detonated? If JPM is any indication, the answer is a resounding yes.

 

* * *

Below is the breakdown of the past 9 quarters of JPM trading days from the company’s own filings:

Q1 2010: Zero trading loss days: “The following histogram illustrates the daily market risk-related gains and losses for IB, CIO and Consumer Lending positions for the first three months of 2010. The chart shows that the Firm posted market risk-related gains on all 64 days in this period, with 9 days exceeding $180 million. There were no losses sustained during the three months ended March 31, 2010.”

Daily IB & Other Market Risk-Related Gains (95% Confidence Level VaR) Three Months Ended March 31, 2010.

 

(BAR CHART) 

Q2 2010: 8 Trading Days Losses of which 2 Days with losses between $100 and $150 MM. “The following histogram illustrates the daily market risk-related gains and losses for IB, CIO and Mortgage Banking positions for the first six months of 2010. The chart shows that the Firm posted market risk-related gains on 121 out of 129 days in this period, with 10 days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the 95% confidence level VaR exceeded the actual loss on each of those days. Losses were sustained on eight days during the six months ended June 30, 2010, none of which exceeded the VaR measure.”

(GAINS LOSS GRAPHIC) 

Q3 2010: Zero Trading Day Losses: “The chart shows that the Firm posted market risk—related gains on 187 out of 195 days in this period, with 12 days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the 95% confidence-level VaR exceeded the actual loss on each of those days. During the nine months ended September 30, 2010, losses were sustained on eight days, all within the second quarter of 2010, none of which exceeded the VaR measure.”

 

(BAR GRAPH)

Q4 2010: 5 Trading Day Losses. “The following histogram illustrates the daily market risk–related gains and losses for IB, CIO and Mortgage Banking positions for 2010. The chart shows that the Firm posted market risk–related gains on 248 out of 261 days in this period, with 12 days exceeding $210 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the 95% confidence-level VaR exceeded the actual loss on each of those days. During 2010, losses were sustained on 13 days, none of which exceeded the VaR measure.”

(GRAPH)

 

Q1 2011: Zero Trading Day Losses: “The following histogram illustrates the daily market risk—related gains and losses for IB, CIO and Mortgage Banking positions for the first three months of 2011. The chart shows that the Firm posted market risk—related gains on each of the 64 days in this period, with seven days exceeding $160 million.”

(PERFORMANCE GRAPH)

Q2 2011: 2 Trading Day Losses: between $80-$100MM;  “The chart shows that the Firm posted market risk-related gains on 127 of the 129 days in this period, with four days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days. Losses were sustained on two days during the six months ended June 30, 2011, none of which exceeded the VaR measure.”

Q3 2011: 16 Trading Day Losses., 5 Days over $200MM “The chart shows that the Firm posted market risk related gains on 177 of the 195 days in this period, with five days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days. Losses were sustained on 18 days during the nine months ended September 30, 2011, of which three days exceeded the VaR measure.”

Q4 2011: 9 Trading Day Losses: “The chart shows that the Firm posted market risk related gains on 233 of the 260 days in this period, with seven days exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days.”

 

Q1 2012: 1 Trading Day Loss:  “The chart shows that the Firm posted market risk-related gains on 64 of the 65 days in this period, with one day exceeding $200 million. The inset graph looks at those days on which the Firm experienced losses and depicts the amount by which the VaR exceeded the actual loss on each of those days.”

via zerohedge