Re: The London Whale / Volcker : Mon May 14, 2012 1:00 pm  

Diavolo Rosso wrote:

Assuming the trade the FT have outlined is accurate (and it's highly likely it is) then JP are hedging the risk they have against the top 125 US corporates. So I don't know - do you think (look it up) they might be trying to offset any potential losses on loans they have made to top US corporates? Loans which allow those corporates to invest and create jobs?

I am consistently astonished at your ignorance. It's all there for you.

It sounds like a big game of pass the parcel.

Re: The London Whale / Volcker : Mon May 14, 2012 1:01 pm  

Big Graeme wrote:

It sounds like a big game of pass the parcel.

Not again surely?

They wouldn't do that again would they?

Re: The London Whale / Volcker : Tue May 15, 2012 3:26 am  

The problem here isn't primarily the regulators - clearly in this case yet again its internal risk management which is the primary issue. No external regulatory scheme could ever be as good as decent internal systems.

This guy's role was supposedly to hedge the positions taken out by traders within the bank - exactly the thing which should help prevent major losses due to a trading position. Basically the bank lends money to companies, and takes out hedges to partially offset the risk associated with those loans. The sole aim of this should be to minimise exposure in the event of an asset price/loan portfolio collapse.

Clearly in this case the roles of risk and trading have been blurred to the extent that this idiot was able to take a massive position in the name of 'risk management', and the bank's genuine risk managers (they don't have the capability to enter trades themselves - that's the whole point) were nowhere to be seen.

Yet again, if you read the articles about this case, it seems that senior management within a bank have been seduced by someone making big profits from trading, and allowed them to enter positions which they never should have gone near.

A simple solution for this particular issue would be to completely decouple the money people like this earn from the results of their investments. Serious alarm bells ought to be ringing when someone who is there to supposedly protect the bank can earn big money from taking significant positions themselves. That's just pure idiocy.

Re: The London Whale / Volcker : Fri May 18, 2012 10:58 am  

Looks like the losses could be considerably more than expected Also looks like JP Morgan have been deliberately downplaying the scale of the potential loss too.

Looks like the losses could be considerably more than expected Also looks like JP Morgan have been deliberately downplaying the scale of the potential loss too.

[DaveO]

Re: The London Whale / Volcker : Fri May 18, 2012 11:55 am  

BrisbaneRhino wrote:

A simple solution for this particular issue would be to completely decouple the money people like this earn from the results of their investments.

I agree. I would have no problem if these people got paid very high basic salaries with bonuses banned. I am convinced it is the bonus culture that drives these people to take greater risks. The fact the banks encourage that by coming up with bonus pay structures that give such massive rewards is bonkers.

The bonus culture is just wrong IMO. A lot of US companies (not just banks) pay their staff a relatively small basic wage and "the rest" as a bonus and it is seen as a way of saving money because if the company doesn't perform they don't have to pay the wage. The trouble is the higher you get and the bigger the bonuses you can earn the more you will do to get that bonus. Cut a few corners? Why not! A bonus today won't be clawed back if the proverbial hits the fan down the line as a result of you cutting corners now.

It's just like commission based salesmen in IT. For years where I worked they were salaried. It took a long time to sell the systems we produced so the salesmen where salaried, paid well and so had a vested interest in making a good sale - not promising stuff that could not be delivered to pick up commission (which is what happened when we got taken over and the new management switched to commission based sales).

To be honest I am surprised anyone is shocked these things happen given there is every incentive to take the risks.

Re: The London Whale / Volcker : Fri May 18, 2012 12:00 pm  

Hedge funds are the biggest con going - ask yourself this question "Which investor has made a fortune from investing in a hedge fund"? Now ask yourself "Which hedge fund manager have made a fortune from others investing in Hedge funds"?

The odds are stacked all one way - typical the fees are split in two ways a flat fee for AUM say 2% and an incentive fee typically 20% to reward performance.

So you have 1m to invest in a hedge fund and year one it makes 10% your position at the end of the year is

Seed Capital 1,000,000
10% gain 100,000
AUM fee (20,000)
Incentive (20,000)
Net 1,060,000

Year two it loses the gains it made in year one

Capital 1,060,000
Loss (100,000)
AUM fee (21,200)
Net 938,800

You have lost 61,200 but the hedge fund has made that for the priviledge of losing you the money!!

Re: The London Whale / Volcker : Fri May 18, 2012 12:20 pm  

McLaren_Field wrote:

Some people don't have any choice.

I stopped giving the t0ssers my money to "invest" (read, gamble) when NatWest wrote to me with an end of year statement telling me they were "pleased to enclose your annual statement".

They had LOST 20% of the value of my pension pot in one year, and they were "pleased" to tell me that - I'd hate to open a statement and find that they were sorry to tell me something.

Having said that NatWest have finally seen the light and come to understand what I told them many years ago - that they are fookin useless at gambling on the stock market and they have sold all of their pension and investment business to Aviva - who then went and lost some more of my money last year, I'll be glad when they've spent all of my money and they stop sending me those fookin annoying letters.

I got a statement from one of my ISAs the other day: over £5k in it – and £10 interest over a year. They've had over five grand of my money for a year and I get just £10. What the hell is the point?

The riskier ISA lost loads and has barely recovered – that was the 'safe' one.

How on earth is anyone supposed to save sensibly for the future?

Oh yes: you're supposed to become a financial wiz (gambler) and spend all the time when you're not working or shopping (to help the economy) on seeking out and understanding the 'best' deals and schemes around.

Re: The London Whale / Volcker : Fri May 18, 2012 12:49 pm  

Mintball wrote:

I got a statement from one of my ISAs the other day: over £5k in it – and £10 interest over a year. They've had over five grand of my money for a year and I get just £10. What the hell is the point?

The riskier ISA lost loads and has barely recovered – that was the 'safe' one.

How on earth is anyone supposed to save sensibly for the future?

Oh yes: you're supposed to become a financial wiz (gambler) and spend all the time when you're not working or shopping (to help the economy) on seeking out and understanding the 'best' deals and schemes around.

I had exactly the same around 1999/2000, took out two £5k ISA's on the promise (ok, salesmans promise) that in five years they would be worth at least double, after all, he could show me that in the previous five years they had trebled in value - it took five years for them to regain the value that they lost in the first two years, when I finally cashed them in I had a couple of hundred pounds profit to show and I consider myself lucky that I didn't need that money within those five years or I would have lost a boatload.

I have no doubt at all that the salesman got paid though, and the fund managers, etc, etc...

They will never see any of my money again, in fact my greatest dream is to win trillions on the lottery and then when I turn up at Camelots office and they introduce me to their "financial advisors" from Coutts I will ask for all the bankers to be removed from the room and then for a wheelbarrow to take my winnings home in - in hard cash.

Re: The London Whale / Volcker : Fri May 18, 2012 1:04 pm  

McLaren_Field wrote:

I had exactly the same around 1999/2000, took out two £5k ISA's on the promise (ok, salesmans promise) that in five years they would be worth at least double, after all, he could show me that in the previous five years they had trebled in value - it took five years for them to regain the value that they lost in the first two years, when I finally cashed them in I had a couple of hundred pounds profit to show and I consider myself lucky that I didn't need that money within those five years or I would have lost a boatload.

I have no doubt at all that the salesman got paid though, and the fund managers, etc, etc...

They will never see any of my money again, in fact my greatest dream is to win trillions on the lottery and then when I turn up at Camelots office and they introduce me to their "financial advisors" from Coutts I will ask for all the bankers to be removed from the room and then for a wheelbarrow to take my winnings home in - in hard cash.

Re: The London Whale / Volcker : Fri May 18, 2012 1:28 pm  

Except, any amount of cash apart from trivial sums is no longer acceptable, nobody will take it off you, for fear of being labelled a money launderer. You'd have it in yer barrow - but couldn't spend it!