JP Morgan Loss Bomb Confirms That It’s Time to Kill VaR

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One of the amusing bits of the hastily arranged JP Morgan conference call on its $2 billion and growing “hedge” losses and related first quarter earning release was the way the heretofore loud and proud bank was revealed to have feet of clay on the risk management front. Jamie Dimon said that the bank had determined that its value at risk model was “inadequate” and it would be using an older model. And no wonder. The Financial Times report contained this bombshell:

JPMorgan also restated its “value at risk”, a measure of maximum possible daily losses, of the CIO [the unit that executed the trading strategy that blew up] in the first quarter from $67m to $129m

“Restating” greatly underplays the significance of what happened. VaR is a prospective risk metric. From ECONNED:

…the objective was to come up with a single figure that captured all the risks in a simple statistical fashion: what was the risk that the bank would lose a certain amount of money, specified to a threshold level of probability, in, say, the next 24 hours? The model output would say something like: “We have 95% odds of losing no more than $300 million dollars in the next 24 hours.”

It took seven years of refinements to reach that goal, which should have been seen as a warning that it might not be such a good idea.

While firms look at VaR over a range of time frames, daily VaR (what is the most I can expect to lose in the next 24 hours) to a 99% threshold is widely used.

So get this: VaR’s real use is prospective. The VaR for a big risk taking unit was found to have been nearly double the level reported two weeks ago (hat tip Joe Costello). Remember, this was the risk incurred in the first quarter; this change has nothing to do with the losses incurred in the last six weeks. It means the risk originally reported by the folks in risk management (in real time, for use in management decisions) was grossly off.

The fact that VaR is a lousy metric should not come as a surprise. Anyone who has paid much attention to financial firm risk management should know that it is not what it is cracked up to be. There is a tremendous bias towards scientism, towards undue faith in quantification and statistics (see a longer form discussion in “Management’s Great Addiction“) which leads to overconfidence. And when people are paid bonuses annually, with no clawbacks for losses, and banks show profits a fair bit of the time, who is going to question bad metrics when the insiders come out big winners regardless?

But VaR is a particularly troubling example, more so because it is sufficiently, dangerously simple minded enough that regulators and managers a step or two removed from markets have become overly attached to its deceptive simplicity.

For newbies to this site, JP Morgan created the widely used risk management tool Value at Risk (note to Felix Salmon: JP Morgan did NOT invent risk management, investment banks were doin’ it in the stone ages of the 1970s and 1980s. And the pioneer among banks wasn’t JP Morgan, but Bankers Trust, with its RAROC, or Return on Risk Adjusted Capital model). VaR set out to create a single risk measure across an entire firm. As we wrote in ECONNED:

….the objective was to come up with a single figure that captured all the risks in a simple statistical fashion: what was the risk that the bank would lose a certain amount of money, specified to a threshold level of probability, in, say, the next 24 hours? The model output would say something like: “We have 95% odds of losing no more than $300 million dollars in the next 24 hours.”

It took seven years of refinements to reach that goal, which should have been seen as a warning that it might not be such a good idea….

Using a single metric to sum up the behavior of complex phenomena is a dangerously misleading proposition…

The output formulation was designed around statistical convention, that of probability distributions. But the part of the distribution that the analysis cut off is the very part that will kill a leveraged firm. It was almost as if the team that produced VaR had drawn a map that simply marked the edge of the world with the legend “Beyond here lie dragons,”when the treasure seekers will inevitably venture into those uncharted waters.

That discussion actually understates how misleading VaR is. As mathematician Benoit Mandelbrot discovered in the 1960s, and Nassim Nicholas Taleb popularized in his book Black Swan, risks in financial markets do not have normal (Gaussian) distributions. Taleb, in his article The Fourth Quadrant, pointed out there are many situations where statistics are at best questionable and at worst unreliable: where you have non-Gaussian risk distributions (as you have in financial markets) and complex payoffs. Even if you have comparatively simple businesses, aggregating risk across businesses creates complex payoffs. And the risks in these business aren’t simple. Taleb indicative list of “very complex payoffs” includes:

Calibration of nonlinear models

Leveraged portfolios (around the loss point)

Derivative payoffs

Dynamically hedged portfolios

Kurtosis-based positioning (“volatility trading”)

JP Morgan and every big dealer bank is stuffed to the gills with risks like that.

Now VaR isn’t the only risk model JP Morgan is using, but it has served to allow the inmates to run the asylum. The fact that Dimon dwelled on VaR was likely not just to assign blame; it’s guaranteed to be a major tool in communicating with senior management and the board.

The good news is the regulators seem to be a step ahead of Dimon in turning their backs on VaR. FT Alphaville last week reported on the latest missive from the Basel Committee on Banking Supervision on capital requirements for bank trading operations. They said they don’t like VaR and want to move to other metrics:

….the Committee has considered alternative risk metrics, in particular expected shortfall (ES). ES measures the riskiness of a position by considering both the size and the likelihood of losses above a certain confidence level. In other words, it is the expected value of those losses beyond a given confidence level. The Committee recognises that moving to ES could entail certain operational challenges; nonetheless it believes that these are outweighed by the benefits of replacing VaR with a measure that better captures tail risk.

Note that this change will not win with Taleb’s approval. He has also written about the difficulty of measuring tail risk. He has shown in many markets how tail risk estimates are often (statistically) based mainly on one or two data points, and how fraught that is. His main point still holds: the type of risks embodied in trading books aren’t suited to statistical measurements. The best approach is likely to be to use a variety of measures and models and (gasp) apply judgment. But the authorities, and Dimon along with them, have not given up their hunt for a philosopher’s stone to turn lead into gold.

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  1. sd

    Well, at least Mr. Dimon waited 120 days after getting his $23 million pay package before dropping this little bomb shell. After all, no one else can do his job as well as he does it.

      1. JosephConrad

        WRONG! He’s a Wealthy Old White American THIEF, THUG & LIAR.
        He hides these traits behind a finely honed SOCIOPATHOLOGY!
        With American ‘Cpitalism’ a RACIST ‘Zero-Sum Ponzi Scheme, it’s hard to say Jamie earned ANYTHING except the hatred of every Rational American.

        1. chitown2020

          Dimon is a manipulative deceiver and a crook. These banksters have complete access to other peoples money and can invest it with no risk to their corps. There is nothing brilliant or exceptional about what they do. They grab the brightest students from the top business schools to create and institute new scams. What they do is create worthless junk and sell interests in nothing…with none of their own multinational corporate skin in the game. They are SICK GAMBLERS and are running a casino with other peoples money. The top dogs get paid well for using deceptive and manipulative practices to commit crimes and rob people. Someone said today that maybe Jamie Dimon should become a hedge fund manager. I agree with what Eliot Spitzer said on CNBC today….the risk involved for most people does not equate. CNBC reporting large institutional investors are pulling there money out. Looks like maybe the jig is up ……..right Mr. Dimon…?

    1. JosephConrad

      Perhaps Caligula or Commodus! If this nation were a representative democracy, Jami would have a target on his back – even in Soladad! The guy needs 3 TO 5 for lyin’ about being an ‘honorable man’. Dante’s 10th. Circle please!

  2. NYT

    Any comment on why this desk was located in London.
    I presume there is a good reason that a desk trading 200 billion of securities is located far from headquarters.

    1. Fiver

      Good question. Yet another “event” centred in London. Also wondering who flagged JPM’s outsized position in the first place.

    2. Conscience of a Conservative

      Historically every time you see a London operation, you wind up learning, the regultions,( or lack of) favored it. AIG, MF Global etc. It’s just a lot easier to do nefarious things outside the U.S. regulatory framework.

      1. GeorgeK

        London remains the wild west of trading; every time someone suggest financial reforms in the UK the traders threaten to move to some another country where their expertise will truly be appreciated.

        I suggest a country where beheading is still in vogue.

        1. Old Soul

          The People’s Republic of China would also execute an executive for this type of loss.

          1. APSS

            Well said “Execute and executive” ,, especially since he did not execute his duties.

      2. Chris Rogers

        I second that and have made the same point in the other thread dealing with this particular issue.

        Indeed, not withstanding all the dilutions that have occurred to the Volcker Rules contained in Dodd Franks since its passage, the casino banks were already expanding their Prop desks in Asia, namely Hong Kong to bypass any legislation/regulations that impinged on their unsavoury practices – this set back for JP Morgan just illustrates how useless and toothless Dodd-Franks is.

        Matters are worse in the UK with the Vickers recommendations being a whitewash – we shall see another huge crisis before any of these rules and regulations come into full effect and thats without focusing on the new Basel III arrangements.

          1. Literary Critic

            That has a little to do with it. Traders can trade while the boss in the US is still sleeping.

          2. chitown2020

            That is true. Max Keiser said most of their business is conducted on the weekend and after hours. What we are seeing on the financial channels is a smokescreen. The real deals are made and done electronically in their completely unregulated shadow electronic bank.

          3. Old Soul

            Trades going through the “City of London” is not due to “time zone.” “The City” does not require losses to be recognized because it does not require a “true sale” as defined under the laws of the United States, to the extent that the US actually has any laws that it might enforce. As long as there is no true sale, there is no point at which a loss must be recognize until the regulators try to find the funds which are no longer in the account. Think MF Global.

        1. Susan the other

          This must explain why we just ruled that a foreign state owned bank – the Bank of China – can open up branches in the US.

          1. chitown2020

            CNBC revealed the other day that the cabal owes the ICBC, the Communist Bank of China a lot of $$$$$. I personally refuse to pay for their fraud in any way I can avoid particpation in this Globalist scam that aims to steal all of our wealth, jobs, freedom, independence, prosperity and National Sovereignty. The American people have the power to stop participating and paying for our own demise and that will force the criminals to pay.

      3. EH

        As I’ve learned through Occupy machinations over the past year or so, the City of London is practically its own country.

        1. chitown2020

          The real problem is the $1.2 quadrillion dollars in debt fraud that these so called financial institutions have created out of tin air that is unsustainable and can never be repaid. They are using that fraud as an excuse to rob us into bankruptcy. Its all a scam to rob us and they are getting well compensated for committing insurance fraud through fraudclosures and MANY OTHER FRAUDS to steal our National Sovereignty for their unsustainable fraud . It is simply another Hitler Plan and they never thought they would get caught. They never lent us any money. They are the borrowers and WE THE PEOPLE are the real party in interest. We want OUR stolen wealth, property and bailout money returned and clear title to everything from these double crossers.

      4. Up the Ante

        “every time you see a London operation .. AIG, MF Global .. It’s just a lot easier to do nefarious things outside the U.S. regulatory framework. ”

        And in a country where they’re doing their level best to kill their nation’s spirit, multiple security cameras on every streetcorner.

        1. Nathanael

          Londoners have more fighting spirit than Americans, though; there’s already been one round of riots, and the security cameras are vandalized routinely….

          ….gonna be interesting. I think we haven’t even begun to see the reaction of England, perhaps because not as many of them have had their homes stolen yet.

          Irish, however, are sheep. I can’t believe what they’ve sat and taken.

          1. Up the Ante

            Have they practiced Lambert’s “discernment” yet, as in making a social call to Cassanno’s [AIGFP] house ?

    3. Literary Critic

      London is like Grand Caymen, except with cooler weather and much less sunshine.

    4. JamesW

      It goes back to the passage of the Commodity Futures Modernization Act, and the creation of the InterContinental Exchange (ICE) and ICE Futures, etc.

      1. chitown2020

        They took advantage of E- signatures EXPONENTIONALLY. The E-signatures allowed them to commit massive fraud with COPIES OF OUR SIGNATURES and oversell interests in our notes hundreds of times per note with copies of our signatures. They are using the same method to gain fraudclosures with Robo – signing notes and claiming they are originals. The bank attorney brought the ORIGINAL NOTE to court one day….he allowed my husband to view it in the hallway and my husband rubbed the signature and smudged it….! Proof they are cooking notes with Robo pens……they are also creating assignments that are fraudulent to steal homes because they don’t have them. They are simply oversold to the tune of $1.2 quadrillion dollars in fraud and are pocketing whatever they can get their greedy hands on because their debt is massive and can never be repaid no matter how much insurance fraud they commit. It is all a scam to defraud us out of everything.

        1. Old Soul

          It is exactly true that images of US mortgage notes are being traded and the mortgage notes are either stored in a vault without ever having been transferred to the securitization trust or have been destroyed after imaging. Most suffered the latter fate. The advantage of trading imaged notes is that they can be traded multiple times. This is fraud on the investors in the imaged notes, of course.

          1. chitown2020

            That’s why they don’t have the notes. The proof that the LEGAL transfer never occurred is in the Origination Fraud. They never recorded the legal assignments (the legal lien) to hide the Origination Fraud. They never transferred the instruments by delivery and acceptance which the proof is the ASSIGNMENT…. They could not perfect the legal liens by filing UCC 1s if they never transferred the instruments by legal assignment. This is the only means of perfection and is required by the UCC code everytime a loan is sold….

          2. chitown2020

            Perfection is not created by simply recording a mortgage as they would have us believe in foreclosure court.

        2. Old Soul

          The notes are not being marked paid or discharged and returned to the maker (e.g., the homeowner) even when the collateral, taken by fraudulent foreclosures, is sold and even after the 1099 is issued for debt forgiveness income. Millions of original mortgage notes should have been returned to the makers of the notes, marked paid or discharged by this point. Are all the images of notes upon which debt the foreclosures were purportedly obtained still circulating? Those notes, have not, to my knowledge been retired from commerce, except theoretically in Florida where the original note (if it is indeed the original) is placed in the court file for the purpose of marking the obligation paid or discharged after the confirmation of the Sheriff’s sale, but I do not practice law in Florida, so I cannot confirm whether or not the notes are being returned by the courts to the makers.
          If you have been foreclosed, demand the return of your original mortgage note. It would be interesting to see what happens then.

          1. chitown2020

            The FBI told me to ask CHASE for the ORIGINAL MORTGAGE and the ORIGINAL NOTE that I signed with the original lender MARGARETTEN MORTGAGE in 1992..after they aquired MARGARETTEN in 1994….that is the Origination Fraud that destroyed the title. As far as the banks STEALING PROPERTY with copies of FRAUDULENTLY INDUCED MORTGAGE CONTRACTS WITH NO LEGAL ASSIGNMENTS (NO NOTES)…THAT IS CRIMINAL THEFT OF PROPERTY. Those notes they have filed with the clerks down in FLORIDA are worthless without the LEGAL ASSIGNMENT…AKA THE ASSIGNMENT OF BENEFICIAL INTEREST and the UCC 1 FINANCING STATEMENTS and all other valid legal docs…there must be a legal transfer for every sale made regarding that mortgage
            and note. Buying interests in the mortgage and note is done by collateral assignment of beneficial interest. There must be 2k filings with the SEC in order to gamble on security instruments with these collateral assignments.

          2. chitown2020

            The cross collat on my home is still active in MERS even though it is an invalid contract and my commercial prop is in fraudclosure. It was never re written during the refi. Same with the house ….still being bought sold and traded via MERS even though the house is in fraudclosure. The scammers are still at it.

          3. chitown2020

            They converted the notes into stocks and oversold interests in them exponentionally. That is why the Origination Fraud occurred. They then took the mortgage contracts and structured the mortgages as bonds and oversold interests in those exponentially. Once a note is converted into a stock it cant be converted back to a note. The fact that ever even happened is criminal fraud. A note is a check that cant be converted into anything legally. Same laws apply to a note as a check. It is all fraud. If the note is unindorsed, the MORTGAGE and the NOTE must be transferred by legal assignment to a trust but the whole thing never occurred. It was a scam with the mortgages and notes done as separare instruments. The cant legally separate the two or the mortgage and note are rendered a nullity. Recording of assignments was deemed necessary by the Supreme Court 130 years ago for the purpose of deraigning title.

          1. chitown2020

            Leonova….they did this scam with anything that generated a money flow. Even credit apps.. ! That is why their debt is $1.2 quadrillion in exponential collateral fraud. They oversold sold interests in nothing….exponentionally. There isn’t enough stuff to steal to cover their massive unsustainable debts. They are just stealing and pocketing our wealth as well as reselling and recycling the fraud. They Fed and the Treas. Are doing a Ponzi Scheme with Treasuries. Bloomberg news reported the FED is collecting trillions of dollars a month in mortgage payments. Bernanke said the FED is using that money to buy treasuries with. Say what..? The FED are collecting money they never lent and using it to buy treasuries with…? This is insane….!

    5. readerOfTeaLeaves

      Check out the blog and book:
      “Treasure Islands: Tax Havens and the Men Who Stole the World” will give you a good start in understanding why this is centered in (the City of) London.

      Also note: PM David Cameron is ‘the City’s boy’ and basically represents neoliberal, tax-haven supported assumptions about both economics and politics.
      Further note: within the past month, he snubbed Hollande (when he was in London to meet with French citizens and campaign before last Sunday’s French election). That was stupid, but about what you’d expect Cameron to do — spurn a ‘socialist’ like Hollande.

      Note further: the work Michael Lewis has done (“Boomerang”) on banks and hedge funds betting on currencies. (You can get an Audible download; it’s also an easy read about the coming crisis in sovereign debt, which has a lot of interests that would be centered in the City of London slavering to profit off sovereign debt.)

      Note further that in recent weeks, the Fascists did well in elections in both Greece and France, and Merkel basically did whatever she could to retain Sarkozy as French President. So basically, both Merkel and Cameron spurned the guy who is now the Pres of France. Some might call that stupid ;-)

      I’m guessing that some financial interests – probably including JPM – were betting on election outcomes that didn’t happen. They probably thought they had the elections ‘under control,’ in which case the Greeks and the French would have been saddled with more austerity, and the end of much hope of democracy.

      Note in addition: the economic models in the BRICs (emerging markets: Brazil, Russia, India, China) are putting more emphasis and discussion on ‘sustainability’ as an inherent part of economic development. Now observe the fact that French Pres. Hollande has already announced he will go to the big, BRIC-led Sustainabilty Summit in Rio in late June. (Google BRICS + ‘Sustainability Summit’ for a lot more info.) Indeed, it was one of his first announcements.
      Why is this an interesting ‘tea leaf’? Because Merkel is not going, Cameron is not going, and Sarkozy had spurned the event.

      So it appears that the tides are shifting, although no clear outcomes as yet.

      So to revisit your original question: why London? Because it’s the heart of the Anglo-American web of tax havens, offshoring, and weird accounting. It has been phenomenally ‘profitable’ for many people, and they are determined to keep it intact, and Cameron is one of their main water boys.
      But what if the BRICs nations (plenty of whose businesses and elites use the tax havens) decide not to play along?

      We need new economic thinking, and INET is doing its part.
      Looks like the BRICs are also doing theirs… and Hollande now has a chance to link France’s/EU’s interests to newer, more sustainable economic models emerging in the BRICs- almost certainly these will not be pegged to the dollar as a reserve currency.
      (Don’t bother to blame Obama; the GOP will try, but after all Romney is basically in bed with Cameron economically, has $20,000,000 stashed in the Caymans, and likes the web that Treasure Islands describes, as it’s proven incredibly lucrative for he and his ilk. So the specter of the GOP harassing Obama about these larger shifts over which Obama has no control ought to be downright entertaining the next few months.)

      JPM picked a particularly stupid moment for this problem to show up on its books, but I’d sure love to know what the relationships are between this financial mess at JPM and the elections of preceding weeks. I’m guessing some asshats at JPM made very bad ‘political bets’ that are coming to haunt them. They probably bet that the Greek and French sheeple would hobble off to the polls and legitimize Sarkozy, Merkel, austerity, and the existing elites.
      But then, the people called bullshit ;-)

      Ironically, if Sarkozy had won, the French would have been tied to the Anglo-American system (centered in London) by the apron strings. What Hollande’s victory has probably done is create opportunities for the French that could never, ever have happened under Sarko.

      Wow, do we ever live in interesting times… (!)
      With the French now quite able to start aligning themselves with the BRICs, as a Yank I am almost jealous.
      We’re still stuck with asshats like the idiots running JPM, and that’s the past, not the future.

      Long answer to a simple question: why London.
      Give it a few years and your question will be: why Rio? Why Dehli? Why Beijing?

      8 ^ }

  3. snowedin

    Good note, S.
    VaR is just fine when you have a perfectly fine environment. It’s like calculating car insurance rates when you have one car to insure, it’s always good weather, there is no traffic, the car drives by itself and complies with all traffic rules, and never breaks down.

    I can’t tell you how many risk committee meetings I’ve been to when there is a big surprise that a client (or a position) breaks, “it wasn’t supposed to be a thunderstorm today according to our model”.

    I’ve found what works better are a couple basic rules:
    – full disclosure of all risk, there is no such thing as “off balance sheet”
    – simplify the “technicalities” of the underlying instrument. It’s either a real hedge or a bet, don’t get fancy with splitting hairs. SOmeone owes you money or the other way around.
    – use predictive metrics as much as possible, especially from clients. I won’t put x billions of clean risk on XYZ unless I have have a look-through stuff that drives their business, like order books, supplier contracts etc. And as for financial counterparties, I want to know their positions as best as possible, or risk “bandwidth”, or don’t deal with them. Relying on financials (which are largely made up) is like driving with a broken, opaque rearview mirror.

    It isn’t the holy grail, but it can help. I’ve seen this work in global banks, but in “hermetically fenced” businesses, usually smaller client sub-sets. It can work in PE, and with hedge funds who stick to specific instruments.

    It doesn’t surprise me JPM is in trouble, when their risk process (which is at the end of the day what banks do) is so unreliable. As you know, they aren’t alone, so its the blind leading the blind. I worked on the LTCM mess, and we all thought is was bad enough then.

    1. Nathanael

      It is notable that the first edition of Benjamin Graham’s _Securities Analysis_ says, not in so many words, that all financials are made up, and then spends 400 pages telling you how to dig up numbers which are harder to falsify.

      That’s the whole of the book, basically.

  4. JerryDenim

    Those silly bankers prove Taleb right yet again. You can’t construct a model to measure what you don’t know about what you don’t know.

    Absolutely nothing has changed since 2008 except more moral hazard and greater concentration of everything.


    1. jake chase

      First of all, Keynes identified the problem in 1923 in his Treatise on Probability. There is a big difference between uncertainty and risk. Trading involves uncertainty. You have positions which inevitably are correlated in ways nobody can predict. That is why banks should not be gambling, particularly when they are using deposits as capital and the Fed as an insurance company. Why do they do it? Because in the short run they can capture profits which are then extracted as bonuses. It is unbelievable that toadying academics still do not understand this, particularly Bernanke who is the poster child for this species.

      1. LeonovaBalletRusse

        jc, “the difference between uncertainty and risk” — and why this distinction is crucial — is demonstrated by Dr. Gerd Gigerenzer:

        Dr. Gerd Gigerenzer, Director, Max Planck Institute for Human Development, makes the distinction clearly and succinctly in his presentation at the INET Plenary Conference in Berlin: “Paradigm Lost: Economics + Politics” on Thursday, 12 April 2012 (day one), during the session entitled: “What Can Economists Know? Rethinking the Foundations of Economic Understanding.”

        It’s “pay dirt” at

        1. enouf

          bah … sed -i ‘s/congnitive/cognitive/’

          p.s. I need a spellchecker as much as Yves, heh…and BTW Yves, a search for ‘millions’ when only ‘million’ appears (your allusion to MSNBC text/transcript searh from another post) should fail–I always use ‘least common denominator’ techniques, even with search engines; Ya know, the LCD ones proffered via our Race-to-the-Bottom butthead globalist brainwashers ;-)


      2. JamesW

        Yup, and Keynes late in life came out against speculation (the Adam Smith did early in his life, and forever more).

        1. Nathanael

          Speculation is unavoidable, because people *do* like to gamble, but it needs to be very tightly constrained — nobody should be speculating with anyone else’s homes or livelihoods (and probably not with their own, either).

          There were periods when speculation was something done by rich people with extra money that they didn’t need, and they weren’t allowed to speculate on food or similarly important things.

    2. Literary Critic

      but..but…the Fed has “Resolution Authority” now!

      maybe we find out what that means? ben flies his drones full of money over to JPM?

      1. chitown2020

        Chris Whalen spoke about the lack of banking regulators to want to deal with breaking up the BIG BANKS. Chris said the FDIC is willing to do it and it will have to be done. This needs to be done before they clean everyone out.

  5. bmeisen

    Losses are likely to go higher – let’s say 10 billion. At what point will the taxpayer be called in? Timing is reminiscent of BearStearns: 6 months before the election. If it gets worse and worse as we get closer, then the chances of Obama throwing money at it will get better – Macris, maybe moreso than Dimon, may have bet on more than CDS.

    1. Because

      Sorry, but these losses were “politically calculated”. It was to show how solvent JPM with a cramdown.

      You really don’t get it.

  6. craazyman

    I can’t imagine that 99% of these guys don’t recognize the inadequacy of VAR. All one needs is common sense and an IQ someplace above 70. But it makes them money — even at tremendous social cost. That’s a bankster for you. Right there, a multi-millionaire wanting more and more and more, using any convenient fiction they can, not only to get it but to justify it.

    1. LeonovaBalletRusse

      They’re ADDICTED to “hot, fast money” that goes with the “primo tail” risk, the cocaine, with Crystal on the side.

      Dr. Gabor Mate will tell you why they canNOT be cured. The pols are addicted also, hence they are enabling co-conspirators, forcing the People to be enablers against our will. Think: crack cocaine system on the street, for How It Works: from plantation owners to manufacturers to brokers to pushers to hustlers dealing, doing, and dying in the gutter. “Uncle Sam” embezzles whatever “money” is required from the People’s accounts, and provides the Praetorian Guard to keep the system locked down. Full-circle payout to the 1% comes from every level of the Private Plantation Prison rackets.

      London has cut its deal with China, so “The Opium Wars” are meant to run their course in the Homeland. London says: “It’s your night in the barrel.”

  7. Conscience of a Conservative

    Anyone looking to better understand pricing risk needs to read Benoit Mandelbrot , “Misbehavior of Financial Markets”. The assumptions that traders often operate on or on which VAR is based on are simply not correct. Unfortunately once you recognize that the quetion of what tools to use becomes rather difficult, and so the often quoted analogy of the drunk economist looking for his keys by the lit lamp post instead of where he lost them because, “that’s where the light is”

    1. Capo Regime

      Good and central point C of C. Mandelbrot had it per usual correct. Nassim Taleb went to great lengths in technical work following Mandelbrot as well as in popular media to point out the perfidy of VAR. They were right and Jamie wrong…..

      1. enouf

        heh… i don’t see Jamie (Mr. Dee Mon, think mediterranean languages, and annunciation of vowels) offering algorithms to create “fractals” ..unless; you consider the fracturing of the collective brainscape via a never-diminishing kaleidoscope view.


    2. LeonovaBalletRusse

      But, what if there are no “tools” for perfection on earth? What if there is no god?

      1. enouf

        If one is so irrational as to deny a “Source” (of which; ‘~/o.. we are stardust, we are golden…~/o’) …then delusion is reality


        1. Old Soul

          Excellent point and a tautology put simply,
          Without an absolute Truth, there can be no truth.

          1. chitown2020

            Time for the FDIC and the banking regulators to do audits and use that resolution authority to break up the BIG BANK monster that is robbing us all blind for their massive unsustainable debts. They are insolvent and robbing us and pocketing the money….

  8. Fiver

    As I noted on Yves’ prior piece, I think there’s actually a chance to nail him. We need to poke and prod and pick and peel and pound away at him until he works himself into such a frenzy he simply explodes somewhere in public while the camera is catching every poisonous moment of it.

  9. decora

    the problem with ‘oops, lets fix the math’ solutions is that they dont address the problem, which is that a large part of the system is basically a con. i.e. nobody cares if the models are accurate – the point is not to be accurate, the point is to get other people to think its accurate long enough to milk them for a few billion dollars, and then run off and say ‘oops sorry, but i didnt break any laws’.

    think about the guys running bear stearns, specifically Alan Greenberg, who loved to tell everyone about his reputation for memos regarding the saving of paperclips.

    he works on the street for decades, him and jimmy cayne riding to work together every day for years and years. then comes the rise of the computers, and the derivatives. do you think he understands all this stuff? CDS, MBS, CDO, CDPC, etc etc? obviously he doesnt understand it. but he doesnt need to.

    he understands the con. he understands the game. he understands that he can make huge amounts of money off the backs of other people. Bear Stearns was the investment bank where the boiler rooms went when they needed a pipe to the market. They have been playing this type of game for decades. you dont need to understand the fundamentals in order to run the con – because the con is not about fundamentals or math or calculus or gaussian curves. the con is about people and their beliefs and expectations. the con is about the well spoken guy in the armani suit.

    the con existed before computers and formulas and risk models, and it will exist long after these companies that will cease to exist when their own cons blow up. the game itself is never ending. only from time to time, does a society try to organize itself so that the leaders are not the same people who are the con artists. the US used to be such a place, but it is slipping.

    1. a crude interest

      The US has been different? When was that? The first president was a land surveyor who magically ended up with hundreds of acres of the finest bottom land in the fledgling republic. Meet the new boss.

      1. enouf

        true dat;
        However, the Declaration of Independence is a masterpiece (as are (to a lesser degree) many writings from the 18th Century, and even much earlier; try, not to be forgotten.

        The 13 yrs (1776-’89) between the Independence Declaration and final adoption of the InCorporation of the ‘thirteen united States’ of the Constitution is a period in need much more focus. (as well as the decree of the Stamp Act prior to Decl-Of-Indep, etc).

        Gee, i wonder why it took so long… the machinations of the Globalists were biding time, and jiggering the constructs, as history has shown


        1. enouf

          though i must come clean; the idea of a “State” that governs (via ‘Force’) is the underlying fundamental flaw.


    2. Fiver

      Agree with a good deal of this, i.e., the models are the shells, but you still need to know which one the pea is under.

  10. Kevin de Bruxelles

    This may seem overly simplistic but if JP Morgan “lost” $2 billion, who actually “won” it? All I know is that if I were JP Morgan and knew my “losses” would be compensated for by the taxpayers, then I would have every interest in setting up an “independent” hedge fund who I could make sure won most of my “losses”.

    1. Peripheral Visionary

      Good question, but I think it’s highly unlikely the deal was rigged. Setting up a hedge fund that ends up trading opposite the bank would be the sort of thing that would get sniffed out very quickly.

      There actually seems to be a strong consensus on this story: JPM started placing super-sized bets in a moderately sized market (hence the moniker, “the London whale”), and the regular traders in that market figured out what their strategy was and started putting the squeeze on them.

      So who made the money? Well, whoever the other traders in the same markets were. If I were to guess, I would say the usual suspects (GS, etc.) as well as some savvy hedge funds. Somebody loses, somebody wins – just another day in the casino.

      1. Susan the other

        The world of finance is nothing if not incestuous. Betcha there are hundreds of instances just like Abacus out there.

      2. Fiver

        It is precisely when there’s a “strong consensus” that my BS alarm goes off.

        Why was this so “sloppy” in the first place? This guy wasn’t exactly a newbie. No reason it could not be a con within a con. Think this is going to go way beyond “oops” with a flawed model.

    2. enouf

      they “lost” nothing; and nobody gained–it was a total miscalculation … nevermind the cooking-of-the-books, off-balance-sheets, derivatives, and just sheer blatant fraud

      Fraud of phoney money .. All the Global Financial Terrorists are completely and utterly “Insolvent” (i cannot stress that enough).. where do you think the idea of “austerity” comes from?


  11. Warren Celli

    Yves said; “But the authorities, and Dimon along with them, have not given up their hunt for a philosopher’s stone to turn lead into gold.”

    But the authorities, and Dimon along with them, have not given up their hunt for the perfect plausible deniability mask to turn bullshit into truth.

    From the get go it was created to; mask and justify JPM gambling, use as a fall back talking point if needed to assuage pissed off clients, use to draw out and lengthen litigation so as grind down any would be opponents in court, and of course to be used in the now formula “whocouldanode” cover up scenes that all will so soon be obediently watching on Frontline.

    This is another case of legitimizing illegal and immorally created self anointed elite Noble Lie corporate fraud with your attention. Examining the mechanics of the VaR process validates it and gives it and the players involved legitimacy.

    We should by now be discussing a FaR (Freedom at Risk) number — its rapidly sinking — and be well into organizing election boycotts and a rewrite of the Constitution to include direct democracy.

    No Balls! No Brains! No Freedom!

    Deception is the strongest political force on the planet.

    1. enouf

      [i]…Examining the mechanics of the VaR process validates it and gives it and the players involved legitimacy…[/i]

      I concur — just another way to defer liability (Insurance Scam, at its finest).

      [i]Deception is the strongest political force on the planet.[/i]
      Yes, and the Good News Book has a name for that; Satan (and his minions)


    1. JEHR

      I wish someone would write this letter (with necessary changes) to every bank that has ripped off homeowners or foreclosed illegally on same.

  12. DP

    VAR is a joke. It tells investors what the estimated daily risk is for the 99% of days when the trading range is normal while telling them nothing about what’s relevant, which is what’s the risk during the 1/2 of 1% in the losing tail during extreme events (like a “whale” trader needing to reverse a position that’s so big he dwarfs the market and the rest of the market participants smell blood).

  13. Alex SL

    I find these perennial swipes at “scientism” here rather bizarre. The economy is a highly complex system, but so are weather or ecology, and we can still do science to them. Human behaviour is as non-random as the behaviour of insects or oxygen molecules, only more complex (but on the plus side, there are way less of us than of the latter). It is possible that the failure of economics both macro and micro to achieve a consensus on what will happen and what should be done under what conditions has more to do with monetary interests, which do not really introduce a bias when trying to figure out how to e.g. predict hurricanes, than with some spooky supernatural ingredient that makes it impossible to understand the economy with reason and evidence, AKA science.

    Perhaps more importantly, what Taleb and Mandelbrot did is in principle exactly the same as what the developers of those metrics did, only they seem to have done it better. If one attempt to model risk is scientism, why isn’t the other? The main difference is how well each model fits the data.

    1. Literary Critic

      well, maybe we should be telling weatherman jokes instead of ragging on bankers.

      “there was a 1% chance of rain today – and it rained like hell. the federal sunshine insurance corporation (FSIC) closed local weather channels and replaced picnicers’ sunshine. the federal sunshine reserve made huge amounts of sunshine available at low cost to the top 19 weather channels. last but not least, the sunny treasury demanded that the top 19 weather channels pull back the tarp and let the sunshine thru!”

    2. liberal

      It is possible that the failure of economics both macro and micro to achieve a consensus on what will happen and what should be done under what conditions has more to do with monetary interests, which do not really introduce a bias when trying to figure out how to e.g. predict hurricanes, than with some spooky supernatural ingredient that makes it impossible to understand the economy with reason and evidence, AKA science.


      In fact, economics is highly accurate. It emphasizes the importance of financial incentives, which IMHO is correct. It then predicts that economists, on the whole, will whore themselves out to the rich and powerful, since those folks can outbid anyone else in terms of providing a monetary incentive.

    3. DP

      I find an attempt to elevate academic finance and economics to sciences by using the word “scientism” to be bizarre. Finance models like CAPM, Black-Scholes and VAR all rest on assumptions that are demonstrably false, such as rational investors and continuous markets.

      1. mario

        “I find an attempt to elevate academic finance and economics to sciences by using the word “scientism” to be bizarre. Finance models like CAPM, Black-Scholes and VAR all rest on assumptions that are demonstrably false, such as rational investors and continuous markets.”

        actually the science works, just a different kind of.

        1. G Booth

          mario, I’m sorry, but there’s only one “kind” of science. A lot of academic disciplines may attempt to apply the methods of science to the study of their subjects, but that does not make them “a science” in the same sense as mathematics, physics, biology, chemistry, or medicine.

          While the application of the methods, tools and models of the physical sciences can be useful and has yielded new insights into other non-science fields, this does not make any of these fields truly “a science” in their own right. Social and behavioral sciences, in particular, fail to meet the scientific tests for applicability, predictability, and repeatability. If anything, the only repeatable, predictable characteristic of financial models is their proclivity to failure.

          But please, do feel free to continue to believe that “the science works, just a different kind of”. Given their precarious situation, the banks need all the clients like you that they can find.

          1. mario

            “Given their precarious situation, the banks need all the clients like you that they can find.”

            Oh well, like all of us.

    4. enouf

      Sorry, but ; “…The economy is a highly complex system,…” No, it’s not; only intentional deceptive practices could ever make E=MC² “complicated”


    5. G Booth

      @ Alex SL. You appear not to have read any of the cited works by Taleb and Mandelbrot. Nor do you seem to understand what is science and what is pseudo-science; for instance, the differences between nuclear physics and sociology, or the distinction between economics and biochemistry. The differences between the predictability – and repeatability – of physical processes and the behavior of individuals, groups, and markets is, in practice, far greater than you imply.

      In reply to a financier who attempted to apply Brownian Motion (“a bunch of molecules in a box”) to the movement of securities prices, someone once noted “the critical difference is that, unlike people, when something unexpected happens molecules don’t all run screaming to one corner of the box.”

      1. Alex SL

        Being a scientist, I hope I know what science is.

        “the critical difference is that, unlike people, when something unexpected happens molecules don’t all run screaming to one corner of the box.”

        Well, this sure looks as if the someone who said that assumes that you actually can predict human behaviour, in this case predicting that humans panic when something unexpected happens. A good scientist would observe that behaviour and incorporate it into their predictions. A bad scientist would not pay attention and thus miss that aspect of human behaviour. A corrupt pseudoscientist would write whatever the rich and powerful want to hear.

        But the charge of scientism here can only be that the economy or human behaviour in general cannot be understood using reason and evidence and we should not even try. That is ridiculous. And if what I just wrote is supposed to be a straw man, because look, Yves Smith et al here also use reason and evidence when discussing the economy, then I say, well, that is exactly my point. There is only one reality, and only one way of understanding it (reason and evidence, AKA science broadly construed), and you cannot call somebody who uses that approach “scientistic” when you do it yourself and your real beef with them is that they are doing it badly.

        What I would understand is if a postmodernist, who pretends to believe that all science is merely opinion and ideology, or a religious person who thinks that “I know it in my heart” is a superior way of finding truth than reason and evidence would charge others with scientism. But this is weird.

    6. Fiver

      Tend to agree, in that it isn’t exactly news that probability is not now and never was certainty.

      Similar to: How do we know stats “blah, blah, blah” are wrong but via some other set of stats? Or, how do we study history other than by studying history?

      Wouldn’t matter what model or economic theory is “true” so long as lawlessness prevails.

    7. Walt

      Alex, I think you’re misunderstanding the term. If people mean “science”, they say “science”. “Scientism” is playing at science — imitating the form of science while lacking the essence.

  14. polistra

    We don’t need “modified models”, we need to eliminate speculation entirely. 100%. All of it.

    That’s how the problem was solved before, and it’s the only way to do it now. See Walpole 1721, see FDR 1936.

    Do what works, and you’ll find that it works.

    1. Capo Regime

      As pointed out in earlier response good ol Nassim Taleb has for a while been critical (polite) of VAR. He can rightfully enjoy and I told you so…

  15. Skeptical

    There’s this strong reluctance to admit that all financial models, especially VaR, are tools with serious limitations. Quite often, they are used to define reality, or as a substitute for thinking or common sense. Consequently, billions in trading losses were incurred by these rogue traders:

    Howie Hubler at Morgan Stanley,
    Jérôme Kerviel at Société Générale,
    Kweku Adoboli at UBS,
    Boaz Weinstein at Deutsche Bank,
    Friedhelm Breuers at West LB,
    Richard “Chip” Bierbaum at Calyon

    Anyone who thinks the “London Whale” is an aberration has his head in the sand.

    And then there are all the non-bank counterparties–Amaranth, Orange County, AIG, LTCM–that put the system at risk.

    1. G Booth

      @ Skeptical: “Anyone who thinks the “London Whale” is an aberration has his head in the sand.”

      Precisely. Well said.

      Regarding failures of VaR, Creditmetrics, and other financial models, one eventually comes to the conclusion that “it’s not a bug, it’s a feature”.

  16. Tyzao

    Diamond is speaking for the entire industry — massive collusion going on here, kind like a dam of shit, how do you let it all out?

    1. G Booth

      Well, as the old saying goes “sunshine is the best disinfectant.”

      When faced with a large pool of infectious shit, perhaps a way to begin is to reform the accounting and regulatory structures in order that we can begin to understand just how large and deep the pool is. This would mean bringing an end to the selective application of mark-to-market (“heads I win, tails you lose”) and an end to “extend and pretend”. Given the large array of powerful interests arrayed on behalf of the financial industry, I would not expect to see any of this happen soon – if at all.

  17. ftm

    Every dollar loss by JPM is one less second we’ll have to listen or read about how great Jamie Dimon is. What a gift!

    To the hedgies trading against JPM, stay the course — we want maximum pain!

  18. Schofield

    I guess if the loss had been larger Obama would have been rushing to hose JP Morgan Chase with public money to ensure he gets some back for Presidential campaign expenses. Hang on maybe the loss is tax deductible everything else seems to be for large corporations these days!

    1. ajax

      Yes, the TBTF problem has not been addressed in the US.
      In Canada, there’s a “Living Will” requirement, should
      a bank have to wrap-up and close.

  19. Francis Bobo

    Now that the Eric “MERS” Holder’s Justice Department is going after the Arizona Sheriff for the birth certificate stunt (as opposed to the anti-social qualities of white, air-conditioned xenophobia) – the FDIC can swoop into Manhattan, seize, shut down, and break Dimon’s junta into smaller public pieces for the good of the nation. Go ‘Murica!

  20. Conscience of a Conservative

    Funniest part in all this is Maria Cabrera Caruso keeps calling this a JP Morgan “hedge”.

  21. Crazy Horse

    Great News! Jamie “tapeworm” Dimon has done the economy a great favor. Now we won’t have to wait any longer for QE3, and Bernanke will be free to switch to a negative interest rate lending policy. The stock market will absorb the additional gambling chips with relish and resume its upward levitation.

    Even better, we liberals can relax as another 60 days of prosperity is bought and the threat of “let them eat dog meat” Romney is held at bay.

  22. Ivent

    The Guv’mint giveth (created Dimon’s TBTF) and the Guv’mint taketh away.

    Washington’s Blog:

    The government created the mega-giants (they are not the product of free market competition), and their very size destroys the real economy like

    1. Because

      Wrong. These banks sizes were absolutely created through “free market competition”. They have been buying up the market share for decades.

      1. F. Beard

        These banks sizes were absolutely created through “free market competition”. Because

        Wrong. By allowing that ALL demand deposits need not be fully redeemable on demand, the government gives larger banks an advantage over smaller banks since larger banks are less likely to need to borrow reserves than smaller banks are.

        You should really pause before you ever mention banks and the free market in the same breath.

        1. Because

          Which has little to do with bank size. There was similiar results in the 19th century.

          Reserve side is as much free market as government fiat. Free Market does not exist.

  23. Mogden

    All we have to do is let these fine capitalists go out of business if they lose money.

    HAHAHAHA – oh sorry, what was I thinking? This is the United States of America! You a rich banker? Taxpayer got yer back!

  24. Because

    Sorry, but this was calculated. These losses were nothing more to show how financially stable JPM is. They probably could cramdown ever derivative they have.

    Media misreads once again.

  25. Fiver

    What was the real world outcome JPM has bet would occur (or perhaps, not occur)? Who might’ve been screwed by a good outcome for JPM vs who gained from JPM’s loss? Under what conditions would JPM deliberately lose a bet this size? or JPM’s counterparty deliberately lose?

    Point is there could easily be multiple, overlapping agendas that go beyond the simple money transfer(s). I still have trouble believing someone at that level would build a position that alerts half the universe just because he got lazy. There’s got to be a lot more to this than what we’ve got up until now, I say.

  26. chitown2020

    The worms are turning..Kudlow reporting Clinton calling Obama an amateur….Yeah right Bill…you are a lousy TRAITOR for repealing Glass-Steagal and signing NAFTA. BILL CLINTON WAS INSTRUMENTAL IN PUTTING US ALL HERE…

  27. SH

    I’m too lazy to read the comments, but implicit in the shortcomings of VaR is that wealth distributes itself according to power laws. If you accept Var is invalid because of tail risk, you must accept the 1%.

    I’m not discounting the simple solutions like no bailouts or no favored treatment and I don’t even think the 99% movement is concerned with how, but when we look at two different models of wealth and one explains more than the other, there must be a little acceptance of innate wealth inequality. It just happens just like the normal distribution does not happen.

    1. F. Beard

      It just happens just like the normal distribution does not happen. SH

      In an honest system, I’d bet that wealth would be normally distributed. But banking is not honest; it steals purchasing power from everyone for the sake of the banks and the so-called “credit-worthy”.

    2. Ellie Kesselman

      You and me both @SH, regarding being too lazy to read through the 150+ comments.

      Regarding VaR, and RiskMetrics, yes, it has obvious shortcomings. But it was developed without ill-intent. What I mean to say is that it pre-dated the dissolution of Glass-Steagall. THAT was a watershed event, one which left most of us much worse off, in my opinion. Separation of banking and proprietary trading activities was a good idea, I wish it would return.

      Anyway, this is my point (maybe you or some other kind soul will clarify for me): As The Naked Capitalist (correctly) stated, the significance level most commonly used for VaR is 99%. Granted, that wouldn’t necessarily have made much difference in this abysmal situation. Regardless,


      I don’t think that was a typo. Is it a typo from the source publication? It was quoted several times though. Any ideas would be most appreciated, as I am curious.

  28. Anton

    It is not true that Taleb “popularized” Mandelbrot’s work . Taleb’s idea is that tail risks are not computable (Mandelbrot thinks they are but using Paretan powerlaws which incidentally were “popularized” by Mandelbrot since Pareto discovered them ).
    Taleb: = Tails UNCOMPUTABLE
    Taleb said he was rich from fat tails before he knew who Mandelbrot was.

  29. Nylund

    Yes, the way companies commonly calculate VaR sucks. The assumption of a Gaussian distribution is terrible. They likely do it on purpose to hide their true risk. But, that doesn’t mean VaR itself is the problem. The problem is the underlying assumptions about the distribution. One could calculate a perfectly reasonable VaR by using better underlying assumptions regarding the distribution of returns. There’s nothing stopping anyone from using a distribution that has fatter tails (ie, a higher probability of extreme events) and is skewed towards losses. There are literally an infinite number of distributions one could use.

    That is, the problem isn’t with VaR itself, it’s that people assume a Gaussian distribution when calculating the VaR. They could easily assume something better.

    It’s a bit like saying that since deep fried zucchini is bad for you, we should all just stop eating zucchini altogether. That’s silly! Just cook the zucchini in a healthier way. The problem isn’t with the zucchini itself, it’s with how you cook it. Similarly, the problem isn’t with the VaR number itself, it’s with how the banks “cook” those numbers.

    That’s not to say there aren’t other valid critiques. Using a single number to capture a huge amount of information will be inherently flawed, and maybe if you can’t trust people to properly “cook” their VaR, you should indeed throw it out altogether, but this article isn’t saying that. It’s making it sound like ALL VaR calculations MUST use a flawed Gaussian distribution. That’s hogwash. There are an infinite number of distributions one could use. Some of them may actually be OK!

    1. Anton

      That’ exactly N.Taleb’s point. The VaR doesn’t work REGARDLESS of distributions, whether Pareto (as Mandelbrot says) or Gauss, or anything. Small probabilities are not conputable and in some aplications with fat tails they fail more.

    2. Ellie Kesselman

      Yes, I like that better, Nylund, about using a more appropriately shaped probability distribution. Skew and kurtosis will help us find it.

      I had some trouble following Yves, or rather, I got confused after reading what everyone in these comments said that Yves meant. I don’t see any discrepancy between your suggestion regarding judiciously chosen probability distributions (sometimes Gaussian, sometimes not), then folding in with Yves’ post’s closing lines:
      “The best approach is likely to be to use a variety of measures and models and apply judgment.”

      This is what I thought was done now though. It probably is. Something was very amiss to cause the JPM situation, something in the nature of an externality, I think. Neither quantitative analysis, nor vigilant regulation can prevent selfish, immoral people from doing bad things and ignoring the consequences to others. Sadly…

  30. chitown2020

    Traitors in CONgress are ALLOWING the foreign owned and operated FED to clean us out. If we continue cooperating…we will ALL wake up broke and homeless one day soon.

    1. chitown2020

      Then we are done…it will be microchipped debt enslavement for ALL. The same goes with the fascist healthcare plan. It will hijack our entire infrastructure and force the implementation of the microchipped mark of the beast which is the WORLD BANK/FED MONETARY SYSTEM. This is not religious crap, this is another Hitler Plan.

  31. Conscience of a Conservative

    The Federal Reserve is very much promoting this sort of behavior. Banks earn money on lending out securities, and by NIM and to some extent traditional banking actitities(which are not that profitable), so by engaging in a zero interest policy Jamie Dimon is becoming well imaginative here. Ironicaly the point of zirp is to encourage people to buy risk assets by taking away all those safe treasuries.

    1. chitown2020

      The FED and taxation is a scam being used to rob us. Blame the traitors Politicians. Who gave the FED such legal authority??? Not the U.S. CONSTITUTION or WE THE PEOPLE….NO MY FRIENDS…IT WAS THE TRAITOR POLITICIANS..CONGRESS CREATED AND INSTITUTED THE UNCONSTITUTIONAL AND ILLEGAL FEDERAL RESERVE BY DECEPTION…

  32. chitown2020


  33. Nathanael

    True “value at risk” is always “all of it”, unless you have arable land protected by a private army of fearsomely loyal fanatics. Every single financial asset could become worthless and unsaleable tomorrow.

    Every investor should know this; it’s humorous that the major banks pretend not to know this.

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