tisdag 23 augusti 2011

The Economic Republic of JP Morgan

the quality of JPM's derivative exposure is even worse than Bear Stearnsand Lehman‘s derivative portfolio just prior to their fall.

Total net derivative exposure rated below BBB and below for JP Morgancurrently stands at 35.4% while the same stood at 17.0% for BearStearns (February 2008) and 9.2% for Lehman (May 2008). We all knowwhat happened to Bear Stearns and Lehman Brothers, don't we???

I warned all about Bear Stearns (Is this the Breaking of the Bear?: On Sunday, 27 January 2008) and Lehman ("Is Lehman really a lemming in disguise?":On February 20th, 2008) months before their collapse by taking a close,unbiased look at their balance sheet.

Both of these companies were rated investment grade at the time, just like "you know who". Now, Iam not saying JPM is about to collapse, since it is one of the anointedones chosen by the government and guaranteed not to fail - unlike BearStearns and Lehman Brothers, and it is (after all) investment graderated.


JP Morgan Chase bank has $1.244 trillion in assets. Yet, it has a mind-boggling $91.73 trillion in derivatives contracts on its books. A person could buy the whole bank for a comparatively paltry $129 billion. That means that if JP Morgan was exposed to just 1.3 percent of its outstanding derivative contracts, and things went wrong, it would be completely insolvent.


Credit Crisis Cassandra

Inga kommentarer: