I'm not too surprised losses from this trade have continued to grow, because whenever such trades become public, other Wall Street firms tend to gang up on the other side of the trade, putting themselves in a position where they can demand growing exit costs from the party that is suffering the losses.
Moreover, when the instruments being traded are thinly traded or illiquid (as is the case here), the ability of other firms to inflict pain on the losing party is magnified. In the worst case, this can force the losing party into "sell what you can, not what you should" mode, possibly leading not just to firm failure but also turbulence in other seemingly unrelated markets.
I read a lot of the same material, but its worth noting to those who aren't familiar with zerohedge that it is the biggest chicken-little as far as the global financial narrative goes.
Its partially "ahead of the curve" with respect to mainstream media, but often uses conjecture or hyperbole which makes it hard to separate fact from opinion.
Oh yes, you should take everything from ZH with a grain of salt. All of there posts are either eerily accurate financial predictions or ridiculous, conspiracy theory laden nonsense. (I think, they'd prefer to the call the latter 'prediction that haven't come to pass yet').
Sometimes I wish they didn't trade legitimacy for page views so I could send their links to others without people thinking I'm incapable of critical thought.
It also appears the JPM was nearly the entire market in the products they were trading. It will be extremely difficult to exit their position entirely. I suspect the real losses will be a good deal higher when it's all said and done.
The worst case scenario seemed to include that, it was $9B if they simply flushed the remainder. But it does remain to be seen where they will end up.
I'm curious though where is the story here? Is it that some bank made a trade they lost money on? Is it the ratio of income to trades? Is it just that 2, 6, 10 billion dollars still seems like a lot?
I understand that JPMorgan can lose credibility, and that credibility gap will lose it customers, but from an economic stand point they are simply meters on the money flow rather than the money itself. So I don't get how their poor planning actualizes in the economy itself.
It's that they're speculating with money from private savings accounts backed by the FDIC. If the company fails the government is on the hook in several ways. Privatization of profit and socialization of risk, etc.
Moreover, when the instruments being traded are thinly traded or illiquid (as is the case here), the ability of other firms to inflict pain on the losing party is magnified. In the worst case, this can force the losing party into "sell what you can, not what you should" mode, possibly leading not just to firm failure but also turbulence in other seemingly unrelated markets.
No one knows with certainty how this situation will evolve, but many seasoned Wall-Streeters have been expecting JPMorgan Chase to announce growing losses for months -- for example, see http://informationarbitrage.com/post/23227611033/ltcm-amaran...