Jamie Dimon speaks…but as I’ve asked before…why? What’s the big deal? A Congressional hearing over $2 Billion? This is not even chump change in today’s world. $2 Billion is merely 20% of what JP Morgan already reported for 1st quarter earnings. So…they ONLY earned $8 Billion instead $10 Billion. Think about this for a moment from the standpoint of an investor in precious metals or more to the point the mining shares. Just for laughs, let’s look at Silver last year. Silver dropped, DROPPED in total value roughly 50% in a month or so; does this not qualify for a “Congressional love in”? JP Morgan lost 20% (I know, in reality it’s 10 times this number or more but this is what they’ve ‘fessed up to so far) of their PROFIT; we are not (so far) even talking about a LOSS! So…again, what’s the big deal?
We can speculate that the loss is bigger, we can speculate about the “why’s” of what happened or the “how’s” but still, it shouldn’t even matter. What really should matter are the things that will never ever, ever come up in the questioning. Things such as JP Morgan having “profitable” trading days better than 90% of the time or quarters where they only lose money on 1 or maybe 2 days for the entire quarter! How is this possible? Insider knowledge? The ability to “bully” a market because you are so much larger than that market? I mean really, why aren’t these Congressmen asking questions like “how in the world could have lost even $2, much less $2 Billion?” …And for this ham sandwich loss Jamie Dimon has “apologized”? For WHAT exactly? In a “free market” doesn’t the phrase “you pays your money you takes your chances” mean anything? Because they ARE the all powerful JP Morgan does this make them totally immune from taking a loss? Ever?
The figure of $71 Trillion worth of derivatives has been bandied about for JPM though I seem to remember $95 Trillion before the ISDA “re jiggled” their notional totals. It really doesn’t matter though as both are larger than the total production of all labor and capital on Earth for a single year. Let’s use $71 Trillion, again for laughs. WHO is on the other side of these trades? Anyone know? I don’t. In today’s world of insolvency around every corner, with counterparties on the hook for the other side of the $71 Trillion, what if 1% cannot perform? (1% by the way would be $710 Billion). What if stress in the system caused 5 or 10% of their counterparties to default? THIS is the real story and exactly what Congress should be talking about.
Of course, it would be nice if someone would ask Mr. Dimon about their “majority presence” in the Silver market. You know, questions like “are your massive positions…actually hedges”? Really? “You have control over physical Silver equal to more than a years worth of global supply”? If I were there I would take only 10 seconds of my allotted time and 2 questions…how much ‘physical’ do you own or control and …where is it stored? Mr. Dimon, under oath remember, could only do a precious imitation of Jackie Gleason by stammering “homina, homina, homina” ’til the cows come home!
But wait, I thought this testimony was going to be a waste of time, someone actually had the cajones to ask about the MF Global fiasco! But, like water rolling off a duck’s back, Mr. Dimon said that they are waiting to be told what to do with the money by the courts. He also said that “Big dumb banks” should be allowed to go bankrupt! Ha ha! Yes, and the management fired…and the bonuses clawed back…and the stockholders busted! Really? What about “Too Big to Fail”? What if one these “big dumb banks” just so happens to be one of your counterparties? What if they hold, say, $1 Trillion on the other side of a trade that (since JPM is 90% of the time such a big winner) you are a winner to? Should they still be allowed to fail and stiff your stockholders and ding your bonus? Ahh, I didn’t think so.
But here is the best one of all, and I quote Mr. Dimon, “WE ARE NOT A HEDGE FUND”. Come on Jamie, with a $71 (I heard $95 but who’s counting?) Trillion book? If you want my humble opinion, Mr. Dimon just committed perjury with this statement. They are THE biggest hedge fund on the planet and they’re the biggest player in many of the markets that they “play in”. Oh, OK, let’s forget about this $71 Trillion nonsense and focus on something really important like the whopping $2 Billion loss that this testimony was supposed to be about in the first place!