03 August 2010

JP Morgan's Commodities Trading Head Blythe Masters to Troops: "Don't Panic"

Note to Blythe Masters: Sorry to hear about your losses in the coal market because of a 'rookie error' in taking on overlarge positions. But an epic short squeeze is coming for your massive and untenable positions in silver and gold, and hell is coming with it.

And the vampire squid and its minions are going to wrap themselves around your neck, and inexorably suck the life from you, while the hedge funds lick your wounds. Your protectors in the government will not even return your calls, because they will be running for their own lives away from the disaster that you created, denying all knowledge of it, any of it.

And then, by all means, you may panic.

JPMorgan's Masters Urges No `Panic' as Commodities Unit Slips
By Dawn Kopecki
Aug 03 2010

Blythe Masters, JPMorgan Chase & Co.’s head of commodities, sought to reassure her team on an internal conference call after “extremely difficult” dismissals, defections and a first half in which some results were as much as 20 percent below expectations.

“Don’t panic,” she said in summing up the 35-minute call, a recording of which was obtained by Bloomberg News. “No one’s going to get screwed. We’re not going to do crazy things on compensation at the end of the year.”

Masters, who was named to run the business in late 2006, said the bank began dismissals on July 21, a day before the call, to trim overlap after buying parts of RBS Sempra Commodities LLP. The bank cut less than 10 percent of the combined front office, even as the oil unit lost “key people” who needed to be replaced, she said. She was discussing results with top executives after “we made a bit of a rookie error” that left the firm “vulnerable to a squeeze,” she said.

The 41-year-old banker, who helped develop credit-default swaps while at JPMorgan in the 1990s (kharma, ain't it a bitch - Jesse), delivered her talk from a conference room in New York, where the bank is based, less than a month after the firm closed its $1.7 billion RBS Sempra purchase. The deal almost doubled the number of corporate clients the bank can serve for commodities, Jes Staley, Chief Executive Officer of JPMorgan’s investment bank, said in February....

...“You should think of this [the layoffs] as business as usual and definitely not a reaction to losses in coal, or anything like that,” she said. “It’s not because we are panicking. It is not because we are changing our minds, backing off, backing out, backing down, running away, none of the above.” (When an executive has to say this, they are indeed panicking, and ass-covering at the highest levels is already underway - Jesse)

Masters said had she spent the previous several days in meetings with Staley, Chief Executive Officer Jamie Dimon and the investment bank’s operating committee and was preparing a “deep dive” with JPMorgan’s board and Chief Financial Officer Doug Braunstein. (When the perfect metals storm hits their derivatives positions, Jamie is going to be throwing up in his wastebasket, and JPM's stock price is going to be doing a deep dive of its own as people realize that they are Lehman writ large. - Jesse)

When you have a bad quarter or a bad year, you should expect to spend a lot of time with senior management explaining yourself,” she said. (ROFLMAO - Jesse) “I have worked very hard, number 1, to own responsibility for what went on and to acknowledge it and not excuse it. We made an error of judgment. Frankly, we made a bit of a rookie error. We got overexposed in the market and made ourselves vulnerable to a squeeze. (Their position losses in coal compared to their risk exposure in silver is like a broken pipe in the wall compared to the 2004 Indian Ocean tsunami - Jesse)

‘‘But if you take that out and recognize that we’re not going to allow that to happen to ourselves again, the rest of the story really ain’t that bad,” she said. “In fact, if you look through it all, it’s extraordinarily encouraging.” (The 12 steps start with Step One - overcoming denial - Jesse)

Coal derivatives trader Chan Bhima made an error of judgment, not of character, (lol, this sounds like Michael Scott excusing Dwight's fire drill fiasco at Dunder Mifflin - Jesse) in “taking a risk on our behalf,” she said. Coal prices plunged 24 percent from January through March and then surged 35 percent through June. Marchiony, the bank spokesman, said Bhima wasn’t available for comment.

The company took an oversized position both relative to their fledgling operation and relative to the market, Masters said. The error cost the company as much as $250 million, the New York Post reported June 8, without saying where it got the information...

In the meanwhile here is some light reading while you consider you options with those oversized short positions China Seeks To Widen Gold Market