Wednesday, May 30, 2012

It's Official, JP Morgan is a Hedge Fund: Sells an Estimated $25 Billion of Profitable Securities to Offset Whale Losses (JPM)

 From our Oct. 26, 2008 post, "Calpers Sells Stock Amid Rout to Raise Cash for Obligations":

This is hedge fund behavior, selling your most liquid investments to prop up the illiquid....
If it walks like a duck...

From CNBC:
JPMorgan Chase has sold an estimated $25 billion of profitable securities in an effort to prop up earnings after suffering trading losses tied to the bank's now-infamous "London Whale," compounding the cost of those trades.

 Chief Executive Jamie Dimon earlier this month said the bank sold corporate bonds and other securities, pocketing $1 billion in gains that will help offset more than $2 billion in losses.

As a result, the bank will not have to report as big an earnings hit for the second quarter.
The sales of profitable securities from elsewhere in the bank's investment portfolio will increase its costs by triggering taxes on the gains and by eliminating future earnings from the securities.

Gains from the sales could provide about 16 cents a share of earnings, about one-fifth of the bank's second-quarter profit, analysts said.

But rather than creating new value for investors, the transactions merely shift gains in securities from one part of the company's financial statements to another....MORE