- JPMorgan Loss Could Be Next ‘Shock’ Event!
The JP Morgan (JPM) trading blunder could result in a $100 billion loss, a contagion of its massive portfolio, and even the wipeout of its entire asset base. Even worse, these extremely risky and potentially-illegal actions on behalf of the CIO office and the “London Whale” could be the unexpected “shock” that breaks the market, derails the Fed’s huge monetary stimulus, and sends us back into a global recession.
The JP Morgan Shock
The entire world has forgotten about or ignored what could be the upcoming “shock” that puts the global financial system in severe jeopardy. To make matters much, much worse – I don’t think anyone even has a clue as to what is really happening. Investors, economists, financial powerhouses, top business executives, politicians, lawmakers, consumers, students, governments, and even central banks are completely confused. None of them are expecting what I will describe below.
There is one event that may ultimately solve the mystery of the global economy. This event would not only plunge the economy back into a deep recession and lose investors hundreds of billions of dollars, but it could bring about the collapse of some of the world’s largest financial institutions and even render central bank stimulus and QE completely ineffective and futile. This event is by no means a guarantee; its probability is even likely under 5 percent. But this event has all the necessary ingredients to culminate into a major panic. Together with slowing global economies and an extremely unstable financial system, this could be the next Lehman Brothers.
This event is JP Morgan’s huge trading mistake. The massive losses that were racked up starting in April and May 2012 are by no means over. What has been represented by JP Morgan as a trading mistake and “hedging” strategy with an initial estimated loss of $2 billion, was really a leveraged and speculative bet that could soon infect JP Morgan’s entire portfolio and result in losses of $100 billion.
The Global Economy and Huge Underlying Risks
Most investors already know about the very weak economic growth, European financial crisis, Chinese slowdown, Middle East tensions, and dangerous Fed actions. All are huge threats and may drag the global economy into a double-dip recession. But most investors don’t know if the fears are overblown; they don’t know if central banks will be successful in boosting the economy; and they don’t know the real risks out there. Most investors are either overly-optimistic, over-confident that they will be able to pull their money out quickly, following the crowd, or simply taking way too much risk unnecessarily. After a 115% + rally, and only 7% away from the all-time stock market highs, it’s just not worth staying invested right now.