""the firm lost about $2 billion on synthetic credit securities after an “egregious’” failure in its chief investment office, which the bank says focuses on hedging.
The chief investment office has been transformed in recent years under Dimon into a unit that makes bigger and riskier speculative bets with the bank’s money
London-based trader Bruno Iksil had amassed positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market.""
focused on hedging? I’m sure… Alrite Dimon, you’ve been running the place well enough… maybe I’ll let this one slide, this time.
““While we don’t give overall earnings guidance and we are not confirming current analyst estimates, if you did adjust current analyst estimates for the loss , we still earned approximately $4 billion after-tax this quarter give or take,” he said on the call. The bank earned $5.38 billion in the first quarter.”"
Translation: “Please back out the $2Billion we lost by screwing up… Those don’t count!”
Oh yea? Well I bet if instead you accidently made $2B instead of losing $2B, you would probably be telling investors how brilliant and genius you were to have the foresight to make a ton of money.
It’s only a “mistake we need to ignore” when you lose money, right?
Yes, for PR purposes. However, inside the bank a hedging gain or loss should be viewed in absolute terms: it is the magnitude of risk that matters, not the direction. At least, that’s how it works where I work.
Obviously. If you ask me, there’s little blood in the water now. Other banks are going to start to capitalize on JPM losing its elite status in public regard. My gf is at JPM now pitching them…I’m sure people there are fun to be around today.
I hate this about Wall Street. Not just banks, but any company that does this. “Well, if you add back our stock comp, which is a real part of labor expense that we like to try to deny, and you add back our enormous legal expense for the lawsuits we’re a party to as a function of the normal course of our business, and you add back our one-time expansion charges that we incurred to grow our top line, than you can come up with our adjusted pro forma EBITDA number that doesn’t include the interest cost we pay on the debt required to grow our business, or taxes, which are a real cash expense, or the capex we consistently need to invest in our company, as represented by the D&A. Please do all of those things so you don’t reach the conclusion that we don’t actually make any money and have an unsustainable business model and/or capital structure.”
I get a kick out of companies that continually back out stock options exp as a one-time item, even though they’ve been doing it for quarterly for over 3 years in a row…
Yeah this one company I looked at on Monday pays out 5-7% of REVENUE per year as stock comp and actually makes no money if you look at them inclusive of the stock comp. It’s kind of hard to understand how that company can claim to be run for shareholders (though they’re not shy about saying that), especially because they don’t break out the rest of their SG&A in any detail and companies in the industry is known for providing kick backs to physicians under a pay to play model. Classic billion dollar company that makes no money… FAAAANTASTIC. Of course the Street loves it (naturally).