Just Kids Playing With Dynamite

Henry Blodget's article on Yahoo Finance was direct and to the point: "JPMORGAN PROVES IT: Wall Street Is Just Kids Playing With Dynamite".

The story was a reaction to the announcement of a $2 billion trading loss from JP Morgan-Chase. It is well worth a read/listen. (For a Reuters review see, "London Whale took big bets below the surface".)

The part of Blogett's story that will twist people's knickers is the statement that people who do damage do so without endangering their own compensation. The expectation that someone with a multi-million dollar compensation who screws up will lose their job and then get a position at a hedge fund with better compensation.

  The term "London Whale" has been attached to this announcement because Bruno Iksil, the trader at the center of the furor, acquired that nickname because of the size of his trading positions. It would be reasonable to expect that working for a bank the size of JPMorgan-Chase that their trades would be larger than average. Iksil had 3 years of success prior to this. I haven't seen a story to determine whether JPMorgan actually came out ahead even with the $2 billion loss. The big deal apparently is that the money which was used for the trading was money which was not supposed to be used for hedging. Ooops. Of course the weasel factor looms large as to whether the money in question was for insurance or a hedge. The former would have been OK. The later a no-no.

Maybe time to check the facts.