The last blog was about how Americans like being BIG.
But the blog was too small to fit
in some important big things. I had to
leave out some things Americans do big, like eat really BIG meals. To read a good story about the new trend in eating big, check out the article by Jim
Hightower on Nation of
Change. Hightower describes the
new trend-setting "Heart Attack Grill" in Vegas where, if you weigh over 350 pounds, you can eat for free! They serve things like a "Quadruple
Bypass Burger", "Butter Fat Shakes", and "Flatliner Fries" cooked in pure lard, all
with "Taste Worth Dying For." As Hightower notes, “two diners have
collapsed so far this year while pounding down Bypass Burgers.”
I also had to leave out the story of really big bank losses
($2-$7 billion in the case of JP Morgan Chase.)
To the ordinary person $7 billion, or even only $2 billion,
seems like a big amount to lose, but for a bank as big as JP Morgan Chase, $2
billion is considered chicken feed. Chump change. JP Morgan Chase has more money than most
countries do. It is too big to fail on steroids. Greece can fail. So can
Portugal and maybe even Italy, but JP Morgan Chase is way too big to fail.
What does “too big to fail” mean? It means that when the too-big thing starts to
fail, the little guys and poor people have to bail it out.
This is what we taxpayers did for the biggest insurance conglomerate in
the world, AIG, when it looked like it was going to fail and bring down lots of
other companies with it.
A bank or other financial institution becomes too big to
fail when its impending failure involves losses referred to as “systemic” because they
will set off a chain reaction causing the collapse of the entire financial
system worldwide. Apparently, because several
banks and other financial institutions are now so big, this can happen any time
now, more or less at random.
What else is big?
Whales, that’s what. The largest known animal in the world
is the Blue Whale. The biggests of these ever found was, a female 110.14 feet in
length weighing about 150 tons.[1]
Whales are the biggest mammals on the planet now that
dinosaurs have become extinct due to global warming or an asteroid hitting the
earth near Yucatan—or whatever it was.[2]
Whales are so big that you can get swallowed by one and
wander around in their stomachs. That is what happened to Noah –or was it Jonah
or Moses? Anyway, it was one of those old
testament dudes. This is the God’s truth
because the Bible is God’s word, translated for us by some illiterate goat herders
out in the Saudi Arabian desert.
We also know that the whale story, and all the
other bible stories too, are the real history of the way things went down back in the day because we have the polls to
prove it. Polls show that 77 percent of Republicans believe every single word
of the bible to be the historical truth, together with 59 percent of Democrats,
and 50 percent of the other smart citizens of the USA.[3]
Today there is a new species of whale, known as the “London
Whale.” This creature brings us right
back to the America's biggest bank JP Morgan Chase.
The London Whale is –or was—employed by that
too-big-to-fail firm. The London Whale
was a very big trader; hence his name. However, he personally was not too big to fail. He gambled
away $2 billion, or maybe even $7 billion, and got fired after he was found out
by the ever watchful Jaime Diamon, CEO of JP Morgan Chase.
How did the London Whale do it?
The Whale by his other name was Bruno Iksil. He was
a trader for JP Morgan Chase in London. He bought credit default swaps (CDSs)
to cover the firm’s exposure to high yield bonds. OK. No problem there.
 |
| The London Whale |
But…. when he realized he was losing money on the
swaps because the bonds were looking better, he bought some different CDS’s
betting in the opposite direction to cover the possible losses on the first basket CDS
purchases. Now it is getting dubious.
Then when the market
started moving against the second CDS package, he bought a third package
betting in the other direction, a package of CDS betting on investment grade bonds.
Iksil was like a snake chasing his own tail around. He was hedging, then hedging against his hedge and then
hedging against that hedge.
The problem was that the Whale's purchases
were so big that he threw the entire market out of whack. Some hedge fund managers were getting hurt by
his moves. Hedge fund managers are known as “sharks.”
The sharks were pissed. They decided to eat the whale. And they did. To the tune of somewhere
between $2 and $7 billion. So far.
Those who want to learn more about the trades (a.k.a. g
“bets”) made by the Whale, which were horribly
complex and about the tasty big meal that the sharks enjoyed, can read
about it here.
And if you think this is over now, think again. J.P. Morgan
Chase may still be about to go off
the cliff.[4]
Warning! This is a certified organic free-range blog.
To comment on this blog, click
on the hyperlink at the bottom that reads “Post a Comment.”
[3]
The survey appears on the wind
website.
[4]
The link refers to an article by Colin Lokey, advising investors to stay as far
away from J.P. Morgan Chase as they can,
or maybe take a short position on the company which, Loeky says, could
be in for losses in the $31 billion range as they try to unwind the Whale’s
mess.
No comments:
Post a Comment