From the latest note of UBS floor guy Art Cashin, some comments about the JPMorgan debacle…
A Dimon In The Rough – Wall Street watering holes turned a little livelier than normal last evening as news of the JPMorgan trading loss spread like wild fire. In today’s age of iPhones, there was a frenzied scramble to get on the conference call. Those who claimed to get through, portrayed Mr. Dimon as seething, and rightly so.
Those not on the phones mumbled questions. If I recall correctly, they ran something like this:
1. Who has the other side of the trade? Is there a big winner or spread among many?
2. If this was a hedge, it was to some degree the opposite of an existing position. So, if the hedge went bad, did the position they were hedging do very well? If not, was it really a hedge? Was it badly structured?
There was also a concern that this was bad for the industry. Mr. Dimon had been the leading spokesman against over-regulation and counterproductive rules. Some saw the hedging loss being seized upon to try to make rules even more onerous.
Late in the evening (at least for me), there was speculation that the bank may have become the dominant force in a handful of products and when they paused, the market moved into the vacuum, going against their existing positions. Lots of speculation but no facts. Nonetheless, a hint of Greek theatre. Let’s hope it works out well.