Bloomberg News

Dimon May Get Questioned Over Hedging, Whalen Says

July 11, 2012

JPMorgan Chase & Co. (JPM:US) Chief Executive Officer Jamie Dimon will probably be pressed by analysts this week over whether money-losing bets by the bank’s chief investment office were really intended as hedges, said Tangent Capital Partners LLC’s Christopher Whalen.

Dimon is scheduled to hold a meeting with analysts July 13 to discuss how the New York-based bank lost billions of dollars on credit-derivatives positions so large and market-moving that a key trader involved, Bruno Iksil, became known as the London Whale. Dimon told lawmakers last month that the “poorly conceived” bets were intended to help protect the bank before they “morphed,” boosting risks.

“We’re going to ask him to finally say, was this hedging, or were you principal trading with the Whale in London,” Whalen, Tangent’s senior managing director, said today in an interview on “Bloomberg Surveillance” with Tom Keene and Sara Eisen. “Or maybe we’ll ask him something else.”

JPMorgan hasn’t yet said how large a loss it took from the derivatives bets. Citing unnamed sources, the Wall Street Journal reported July 10 that the positions will probably cost just over $5 billion in the quarter.

Whalen, who expects Dimon to disclose the size of the trading loss during the meeting, said every manager makes mistakes.

“All managers are fallible,” he said. “Regardless of how good of an operator you are, you really don’t know what the kids are doing down there in the trading room.”

Dimon called the transactions a “tempest in a teapot” on April 13 after Bloomberg News was first to report them.

“When he engaged Bloomberg and started talking about the tempest in a teapot, he dug a hole,” Whalen said. “They’re trying to get out of that hole, and get back to the point where they can control the news story.”

JPMorgan stock has been battered in the nine weeks since Dimon revealed the company expected at least $2 billion in losses from the trades. The shares (JPM:US) dropped 15 percent since May 10.

To contact the reporters on this story: Laura J. Keller in New York at lkeller12@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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