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Barron's associate editor Mike Santoli analyzes J.P. Morgan's attempt to hedge.
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It's -- mark nice in telling us here associate editor with Barron's -- it's like -- -- Without saying don't take me David -- spelled out let's move on yeah it's it it's going to be bigger deal and that is a non.
Well it's a big deal obviously for JPMorgan I think what the market is trying to figure out is.
You know is this kind of the canary in a call -- from market wide issue or essentially was it just.
I'll bet that went bad on JPMorgan which kind of -- -- by the -- a zero sum game it's basically one against another its derivatives trading.
Therefore the big gains on this mark to market loss -- spread around the street.
And it doesn't seem like the underlying markets were very much -- ended during this period when JPMorgan had this -- -- really does seem like.
-- badly designed attempted to hedge that that clearly didn't work as planned so I think you want it is essential.
I mean I'm asking you some yes I don't answer to -- it's now absolutely I believe it was initiated with the intention of hedging exposures that JPMorgan has just.
JPMorgan has a two trillion dollar plus balance sheet.
Okay they they have exposure to all kinds of stuff the problem is there's no perfect hedge there's actually probably not even hedge -- fits very well that you could -- -- Against certain -- -- -- portfolio so that's why even if it was intended as a hedge it doesn't mean it really did operate as one at least until the end.
Explain to us what you know about what they were doing and the reason I ask that is because I wonder how much of their people that are paid obviously.
To analyze what the banks do we had -- on earlier in the beyond they'll -- -- all throughout the day telling us what they think they know or what they actually do you know about JPMorgan and other banks.
And I sometimes wonder how much they really know about what's going on.
You know we it -- -- in markets like these that are coming up.
Kind of obscure the simple and you simply don't know what's going on as a -- of two trillion dollar balance street therefore.
If the bank has an obligation to talk about what's material like what kind of exposure material.
It's such a huge number that -- matter to two trillion got these over the counter markets that they were operating and there's no way to look at exactly at what the way you can see the pricing -- -- who's on what side of what trade.
So what they were trying seemingly to do.
Is you know they are exposed.
To corporate credit.
In various forms basically the credit worthiness of companies and they were looking to offset that on some level.
With trading in -- derivatives in the in the derivatives based on an index based on other derivatives.
Right but our collect up my point I mean art.
Lack of knowledge -- kind of collective clue business about all of this is a problem it's a big potential problem isn't.
It is a big potential problem well first it's a problem in terms of figure out what these companies are -- the Andrea banks -- work.
Obviously that's why they trade near their book value because people don't think like there's any kind of way to actually know on a given day what they're exposed to.
And I think for the overall market absolutely it's it's a concern I don't think this in particular was that big -- deal terms of roiling world markets.
I like what you pointed out that these when you're trading these contracts these derivatives it's a zero sum game that there winners.
It's JP mortgage your loser here but there were smarter guys trading against taking one actually this go around case in one respect which is.
Those what seem like smarter folks right now betting against it because they saw the distortions in the underlying -- is what we can glean.
They actually went and we're talking -- the press I mean you know Wall Street Journal had stories about how.
You know -- hedge funds who are thinking it was a -- pricing in this market may be -- JPMorgan was too big to hedge in this particular market who knows.
That is rarely actually had a preview of this -- -- JPMorgan was asked them -- on the last.
Earnings conference call about this exact thing and Jamie Dimon CEO kinda dismissed -- the same as it doesn't exist hot.
Campus teapot it's time for it to be all -- arrogant and too little income -- glimpses of what's going on but to some of the some -- -- today go around dig -- for four or what what does gold looking for after this story.
You can look at the way those markets are priced.
You can talk to people involved in the markets and say look if you have people otherwise been piling into the articulate.
And it's not easy to figure -- -- -- everyone only sees one little.
You know narrow window what they do what's going on of what they do and what the overall markets to -- Mike.
Mike -- toll from its high.
