WoD – Batting 1000

I saw this bit of news tonight:

“Batting 1000: Bloomberg reports that JPMorgan Chase racked up a “perfect trading record” in the second half of 2010, making money every single day.  For the full year, the investment bank lost money in only eight days, all of them in the second quarter.”

We see this headline, and we don’t even really bat an eye, right?  A big bank makes trades on a daily basis (for its clients but I guess for itself, too), and in doing this they made money each day over the last 6 months.  Yawn, what’s next.  We collectively just shrug our shoulders and move on.  (And by “we” I mean me, you, neighbors, business professors, news reporters, the SEC, etc.)

But hang on.  This is an amazing thing.  Certainly worth thinking about (from a WoD-like perspective).  How could a huge firm like JP Morgan, or ANY firm, beat the market every single day of the year except 8 days?  Statistically speaking, this is unfathomable!  Think about it – 252 of 260 days?!  They are right 96.9% of the time!  How could this possibly be?  Unless…

Unless what?  Well, the only conclusion I can reach – and probably any of us can reach – is that the game is rigged.  There’s no other way.  Something is up here.  They are either front-running everyone else’s trades and taking tiny slivers along the way, or using some method that advantages only them (remember, all markets are a zero sum game).  They have some proprietary way/method/algorithm that clearly has figured out how to play – nay, beat – the system.  And of course, JP Morgan is not alone in this; all the major money center banks are consistently making money each and every day, to the tune of ~252 out of 260 trading days.

But should a bank be able to do this, and have this proprietary advantage?  This is effectively a license to print money, is it not?  There is something really pretty rotten in this.

Beats me what it is though.  Yawn.  Shrug…




Stuff; silly stuff

Get your shmontses together, we’re about to leave!


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