Not many of you aware of the incident that took place in the month of April 2012 Bloomberg and Wall street journal made the headlines JPMorgan Trader’s Positions Said to Distort Credit Indexes and ‘London Whale’ Rattles Debt Market.
Picking up from the CDX.NA.IG indices are composed of 125 North American corporate credits that are investment grade when the index begins trading understanding JP Morgan loss.Taking a position in the index allows traders to hedge or speculate. Going long means selling protection on the index in the expectation that the underlying company credits improve or at least do not default. Going short means buying protection on the index. The net notional value of the CDX.NA.IG.9 has surged from about $90bn at the start of the year to $150bn in April – indicating a big jump in trading. Continue reading “The Whale trade of JP Morgan in 2012”
Active investment still has some active defenders, And digging into the reasons for active funds’ persistent problems, it is easy to see why. Despite the claims of the Efficient Market Hypothesis (EMH) that it is impossible to beat the market other than by luck, it appears that an impressive number of managers do achieve the feat.
The problem is that they do not manage to beat the index by enough to be able to pay themselves and still pass on a decent performance to their clients. In other words, to quote Jack Bogle, the founder of Vanguard and the spiritual father of index investing, the case for passive investing rests on the CMH (Cost Matters Hypothesis), not the EMH. Continue reading “Mutual Funds : The Cost Matter Hypothesis”
Cyprus Closes Banks Until Next Week as Fear of Runs Continue: Cyprus is reportedly keeping banks closed until..that was the latest we heard from the financial media. What can we make it from it ? where the Bailout has gone wrong ?
Cyprus can’t really be about Cyprus, can it? After all, the banking sector in that country pales in comparison to things like the London Whale trade and the amount of capital the big banks have to raise to meet Basel III.
Some will say it is about depositor insurance. Fair enough.
Continue reading “CYPRUS – What next ?”
For those who believe in the random market theory; there will be no way of explaining how it is possible to consistently
win with spread betting. This is because they believe that trading financial markets is akin to flipping a coin in terms of success or failure with each trade that we take. In other words it is gambling pure and simple.
What proponents of this theory fail to realise is that, although spread betting is governed under ‘gaming laws’ in the UK, those who manage to be consistently successful cannot be simply flipping a coin. These traders, of course, are not betting on the price of a stock, currency or commodity going up or down simply as the result of a wild guess, but have highly systematic and thought-out plans of how each trade will be successful. Continue reading “A Thought-out approach to spread betting”
A year ago in May 2012 JP Morgan made a loss on credit derivatives trading, which chief executive Jamie Dimon blamed on errors,sloppiness and bad judgement” and warned “could get worse”. Understanding JP Morgan Loss .
Here are some of the findings by The U.S. Senate Permanent Committee on Investigations, which launched an inquiry into the trading loss last fall, is looking into the how different divisions of the bank wound up on opposite sides of the same trade, said one of the people familiar with the matter. source Reuters Continue reading “Was JP Morgan Beting Against Itself In The ‘Whale’ Trade”