@grandmajsilver /Risky trades and Irrational exhuberance

@grandmajsilver /

Once again the banks have made the headlines:

  • JP Morgan Chase is still counting their losses after the London Whale debacle. $ 5-9 Billion is estimated as the likely loss as Chase unwinds these trades.  Essentially, JP Morgan has been operating as a hedge fund using FDIC  insured deposits within the Bank.  Good thing no Black Swan event occurred , or the losses would have been greater.
  • Barclay’s Bank was in the London News & the Financial Times for rigging LIBOR .  Naively, I thought the rates were down because the economy was bad.   But no, the rates were set by traders  in collusion with Banker’s looking to make a sure bet on their trades?  A totally manipulated market!

To quote from the FT,  they can’t understand how this happened.  There has been an abuse of power and a sense of entitlement prevailed.  “Laws and regulators need to step in to prevent these risky trades for ever greater unattainable reward”.  Sounds like these guys are addicted to wealth.   No amount of money  is as satisfying as the first big win.  Then,  there is the insatiable quest for more, MORE.

FT comments: since these guys have no shame and don’t step down from their positions, they should be retired.  They further suggest, retiring this generation of flawed Bankers and then maybe the rest of us will be able to sleep at night.  Some comments by Philip Augar; his new book “The Greed Merchants” How Investment Bankers Played the Free Market,

  • After all of this “bad” news the hint of a minor agreement in Europe, was enough to send the stock market soaring?  Irrational exuberance ?  What made the market so giddy?  Did something really change?  Have we re-instated Glass Steagall?  Did we rein in derivative trades?  Did unemployment suddenly disappear and we have 3% unemployment?  ???

I guess, the only conclusion to be drawn was the traders have lived to trade another day!  As the kids would say YOLO!

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