JPM Trading Loss Investigation: Money Moves (08/14)

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Aug. 14 (Bloomberg) -- "Money Moves" brings insight to investors looking for alternatives Deirdre Bolton talks to the professionals in hedge funds, private equity, venture capital, angel investing and real estate. Find out where they see opportunities. (Source: Bloomberg)

What is the incentive to buy more equipment?

Second of all, it might cost more.

Farmers may not want to pay up.

Inventory is falling, but more slowly than support.

Reps have already been told there will be production cuts for combine's. this quarter implies a peak in sales.

That was something and analysts have been wary about 4 y 0. despite the blowout quarter, more could be in store.

Always goes back to corn.

The gun at this time around.

Back with more on the markets and 30 minutes.

-- not this "money moves" up next.

Welcome to "money moves" where we focus on alternative assets.

We show you what investors and entrepreneurs are doing as well as what is going on in hedge funds, private equity, real estate and more.

U.s. prosecutors expected to announce charges in connection to jpmorgan's loss on derivative trades.

Hedge funds unavailing big bets on banks.

We will bring you the details.

Dan loeb taking reinsurance public.

First up , it is official.

To former employees of jpmorgan charged with attempts to conceal the trading loss.

We have learned that the trader known as the london whale has been cooperating with u.s. prosecutors and the fbi.

First of all, what is the very latest?

What's we know that two men him a, javier martin-artajo and julianen grout are charged with trying to hide the loss.

Jamie dimon has called the lost the most embarrassing situation.

The board cut his pay and an sec settlement is pending.

Top executives have been ousted.

One of them is caught on tape saying, i cannot keep this going.

He says -- the senate panel concluded that javier martin-artajo pressured julien grout and another to make the loss look smaller.

Jpmorgan chase really never posted a loss.

Shareholders will not aware.

The whale is now helping the government to make their case so that the defense could have a challenge.

Thank you very much.

Su keenan joining us with the latest on jpmorgan.

Numerous 13 f's are being released.

Hedge fund managers have to announce what they buy and sell.

We have seen some interesting things happening.

This has boosted financial companies in the second quarter including bank of america, citigroup, with the thinking being that with the u.s. economy is strengthening, with the housing market strengthening, that will prop up earnings for these companies.

He is pretty bullish on the outlook.

Yes, he has been bullish since the beginning the year.

He has been vocal saying that he is bullish.

His is a snapshot of where they are long.

We know that bridgwater is garnering a lot of attention.

They are very bullish as well.

They went the year very long.

In the second quarter, we saw that they were going pretty long.

They added shares.

It is interesting because emerging markets really fell during the second quarter by about nine percent.

That was after two of the indexes in the emerging markets went into the bear markets.

It might be a time to see these stocks as cheap.

The last one is looks like a play on micron.


This is in opposition to bridgwater.

He was very bearish at the beginning of this year.

It seems like they are going long on technology companies like micron, which is a computer chip maker.

That is something for them.

Also gold miners is something in that.

Thank you very much.

We will take you to the u.s. federal courthouse in lower manhattan.

Two former jpmorgan traders have been charged in relation banks more than $6 billion trading loss.

We will listen in.

Maintained by the chief investment officer at j.p. morgan.

The losses reached over $6 billion.

The main defendants are javier martin-artajo who served as the managing director and head of credit-rating, and julien grout , who is a vice president and derivatives trader.

As the complaint described him at the heart of this case are alleged lies and misrepresentations about the fair value of synthetic credit derivative products and in particular, credit default swaps.

The transactions and the financial products involved might be complex, the criminal conduct alleged is simple and straightforward.

The defendants deliberately and repeatedly lied about the fair value of billions of dollars in assets on jpmorgan's books in order to cover up massive losses that mounted a month after month at the beginning of 2012. those lies misled investors, regulators, and the public and they constituted federal crimes.

As has already been conceded, this was not a tempest in a teapot but rather a perfect storm of individual misconduct and in adequate internal controls.

We also announced a cooperation and nonprosecution agreement with another former trader at j.p. morgan.

That is the u.s. attorney for the southern district of new york.

Alongside, april brookes, the special agent in charge.

Also, the commission's codirector of the enforcement division.

You can continue to watch the press conference.

We will go back to hedge funds because billionaire hedge fund manager dan loeb is taking his company public.

This is meant to boost capacity.

We are joined by our correspondent who covers insurance.

What do investors get if they are into this?

They will get a small reinsurance company that uses most of its investment portfolio and hands it over to dan loeb and his hedge fund.

Dan loeb is not the only well-known hedge fund manager.

There is a pretty long list of hedge fund managers that happened to have reinsurance.

You have john paulson, david einhorn, steve: all have reinsurance companies.

The reasons for it are a couple.

One is that it can be a more permanent source of capital.

There are some tax benefits.

The other thing is that if they do a good job, they can get a really low or no cost point of leverage.

What is the track record of the others that might give us an indication on how loeb is going to do?

Once we know with david einhorn, they have been around, they went public in 2007. they have done a pretty good job.

They had an issue last year with some contracts they wrote on commercial motor vehicles.

Dump trucks, garbage haulers, things like that.

That did not pan out too well.

For paulson, loeb,:, we don't have much information.

What about the pricing?

How does this stack up to what we have seen in the past?

If loeb's company prices in the midpoint of the range, it would be pretty much on par with green light.

So, right in the middle.

Any indication of the proceeds?

Like you said in the intro, the main idea is to boost underwriting capacity and they will also be a public company.

Thank you very much.

We are joined with the very latest on dan loeb's third point reinsurance and the ipo.

When we come back, we will be speaking with the founder and ceo of a big data powerhouse.

They are winning customers from ibm and oracle.

Also, a startup that might be the next generation of avon or tupperware.

We will introduce you to the direct selling retailer.

We will keep you up-to-date with date with the very latest with what is going on downtown.

You can see the very latest with jpmorgan chase.

To traders being charged.

If you do want to watch, you can go to our website.

We are back in just two minutes.

This is an accepted practice.

It is a value derivative.

If you would like to see the press conference, check out

More details coming out.

To traders have been charged in connection to the trading loss.

You see the u.s. attorney for the southern district of new york.

They have the entire press conference live.

We will focus back on venture cap investing because deloitte services released their global surveys showing where investment money is going.

Venture capital say they are more confident investing in u.s. start up sources overseas.

Cloud computing and mobile tech areas getting the most money.

Jim atwell is the partner for emerging growth practices.

Thank you for joining us.

Your studies show that vc's are less confident to put money overseas.

Why is that true?

I think the u.s. venture capital market is good right now.

The only thing brighter than the sun is san francisco is the -- in seven cisco is the venture capital market.

They are focused on margins here in the u.s.. in particular, silicon valley, seven cisco, and new york.

As far as brazil, china, other markets, these were pretty hot for a wild.

Why the shift now?

What they tested the market in brazil last year.

China for the last few years.

It is difficult to obtain results and liquidity.

The difficulty of actually getting the returns of their limited partners are looking for.

I think when they look at those spaces, mobile, cloud, security, privacy, they see those coming.

We will see a spike in the ipo market.

There is a heavy backlog of companies looking to go public.

After labor day, we will see a spike in ipo's. you mentioned five areas that seem to be garnering a lot of extra money.

You had cloud and mobile.

It seems something like 92%. 90% is going towards these five areas.

The mobile cloud, enterprise, healthcare and consumer software.

That is pretty high.

They invest where they are confident and those are the areas where they are confident in.

92% of the u.s. capitol dollars has flown into these five areas.

If you look at these areas, they are all technology.

Which is sectors are losing investment?

Are those the ones gaining?

Which are seen less interest?

Primarily, consumer business, the non-tech friday, energy.

Primarily because of the capital involved in building those companies is pretty significant and therefore the more capital, the higher the returns need to be.

Those are double-digit decreases.

We thank you very much for the time.

Thank you for bringing the report.

He will come back and we will stay with healthcare and introduce you to a startup founder who says the affordable care act is helping his business grow.

We give patients a second opinion digitally with the help of the world's most elite position.

John paulson making a successful bid for vpn oh maker steinway.

We will bring you details.

-- john paulson making successful bid for the pn oh maker, steinway.

That is all coming up right here on "money moves." there is a press conference going on right now.

If you would like to watch, check out our website.

To warmer traders from jpmorgan chase have been charged in relation to these $6 billion trading loss.

You can see them there.

This is the sdc codirector of the enforcement division.

If you want to watch the press conference, just go to

If you have ever been to the doctor and thought you needed a second opinion, you will not be surprised by a statistic from johns hopkins.

Diagnostic errors have accounted for 28% of insurance claims at a cost of $40 billion.

Some have resulted in death.

There is a company that seems to improve on that with a modern medical system.

It is a cloud network dedicated to providing access to state-of- the-art information and opinions from the nations top physicians.

The ceo joins us from san francisco.

Your strategy strategy is pretty compelling.

He was motivated to get the company started basically because his son was sick.

What made you get involved?

It is good to be with you.

This is a company that was started because we saw a gap between what the average patient good access and what the average patient needed.

My cofounder is one of the specialists.

He is perhaps one of the best blood clot doctors in the country.

When his son got sick, he turned to this network.

If you either live in an area where geographically you don't have access to a specialist or you have 40 been to a specialist and you think that person is wrong, this is one way to get more information.

Or even if you are not sure.

We seek second opinions on which flatscreen to buy come -- flatscreen to buy, but we will not seek a second opinion on a $30,000 surgery.

We make it easy for people to do right from their home.

I know that this is a little bit more than a year old and i know that venture capital firm 's have invested money.

What would you do with the money, what is your growth goal.

Lex we operate in a 1.8 trillion dollar marketplace -- we operate in a $1.8 trillion marketplace.

Today, we offer these expert consultations.

You can see a doctor with a 48 hour turnaround time . we want to expand, we want to provide local access.

We want to connect these physicians in more ways, amongst each other and to the patients that need them the most.

What is the affordable care act do for your business?

The affordable care act is aiming to do the same thing that we want to do as a group of founders and companies.

The affordable care act would like to sell the problem which is that of the american economy is spending 20% on healthcare and the results are number 37 according to the world health organization's in terms of the outcomes.

We want to see quality, we want to deliver quality.

The best doctors in the country deliver the best quality.

We thank you very much for joining us.

He's the cofounder and ceo of grand rounds.

Secretary of state john kerry speaking now in d.c.. you can see him , saying he will try to stem the state of emergency that has currently been declared in egypt.

Here is the secretary.

What's the path towards violence leads only towards greater instability, economic disaster, and suffering.

The only sustainable path for either side is one towards a political solution.

I am convinced from my conversations today with a number of foreign ministers including the foreign minister of egypt, i am convinced that that path is in fact still open and it is possible, though it has been made much much harder, much more complicated by the events of today.

The promise of the 2011 revolution has simply never fully realized.

The final outcome of that revolution is not yet decided.

It will be shaped in the hours ahead am in the days ahead.

It will be shaped by the decisions which all of egypt's political leaders make now and in these days ahead.

The world is closely watching egypt and it is deeply concerned about the events we have witnessed today.

John kerry they're speaking about the state of emergency in egypt.

We will keep you up to date with any of his comments that you need to know.

It is 26 minutes past the hour.

It means that it is time for bloomberg on the markets.

Let's get you caught up on where the markets are.

We are trading close to session lows.

The selloff has picked up momentum.

The dow is off by hundred 16 points, the nasdaq is down by 10. energy-efficient lightbulb maker in the markets today.

That is up 21% with a slew of downgrades.

We want to highlight zynga for you.

More after the break.

This is "money moves" where we focus on innovative alternative investments.

Here is a headline we are following for you.

John paulson hedge fund getting into the music business.

He is buying a piano maker.

The deal is valued at 512 million dollars.

The shares of steinway are up over 95% year to date.

For more on the top headlines, we will take you out to the newsroom.

Adam johnson is there.

Egypt's army has declared a state of emergency.

Security forces are storming cams of islamist protesters.

Almost 100 people were killed.

In europe, the eu has finally emerged from a record low recession, six straight quarters of recession.

It finally turned around in the second quarter.

His was led by the continent's two largest economies, germany and france.

-- this was led by the continent's two largest economies.

Earning to economic policy in the u.s., ben bernanke will reduce the central banks 85 billion dollar buying program as early as next month according to 65% of economists surveyed.

He is presumably doing so because our own economy is moving -- is improving as we are getting evidenced that the european economy is improving.

It has been an epic week before bill ackman.

He quit the board of jcpenney.

Then he told charlie rose what he learned from investing in the retailer.

In the investing business, you need a high degree of confidence, but you also need a high degree of humility.

Where is that coming from?

This comes from the stakes.

Jcpenney's a big as appointment and you learn from mistakes like that.

He served on the board before affectively declaring defeat and exiting the board.

There are very many parts in the story.

You also want to stay tuned for "shriek smart." we will talk about -- you might want to stay tuned for "street smart." we will be talking to gary sinise about his work for veterans.

With more on apple stock and what other investors are buying and selling, we bring in su keenan.

Who is buying what?

Once we usually get a rare peek into how the big boys are trading.

-- we usually get a rare peek into how the big boys are trading.

Carl icahn jumped the gun by telling us that he bought a large portion in apple.

As these regulatory filings come in, we have seen the stocks recent slides having an impact.

One fund was cut in apple by a third.

They added shares of citigroup, which is the second-largest position.

He was up 17%, mainly on his banking bats.

Meanwhile, oh megabyte more than 12 million in apple shares.

A new position after the second quarter dip.

And one of the filings coming in from tiger global shows that it exited its entire stake in apple selling 200 60,000 shares.

You just mentioned how icahn tweeted his position.

The sec said that you can tweet or face but your investors, you just have to let them know which social media you will use.

This might be an instance where the sec will revisit this.

Su keenan joining us with what some big investors are buying and selling.

The data is one of the hottest areas of tech, -- is one such company.

They respond to real-time events for their clients . the founder and ceo is with us now.

He is with us from stanford.

Thank you for joining us.

What is the biggest challenge in leading a big data company right now?

Well, it is convincing people that we can actually do things that sound almost magical.

We can prevent power outages, we can find cures for diseases.

We can solve even simpler problems like lost baggage and it is almost too good to be true.

I started my company with the notion that if you get the information with the right place, right time, then you can make the world a better place.

For some it sounds magical.

They have to analyze it.

There is a lot of work behind the scenes and the result seems magical.

Now, the tools exist to do that.

You have to be able to do that in real time.

The dinosaur companies like ibm and oracle will make you an office -- and offers six months before after you leave the store.

The key is being able to spot those patterns and spot them and real-time so that you can prevent things from happening.

I know in your non-corporate life you recently beat out microsoft ceo steve ballmer to take the majority of the sacramento kings.

How did your love of math get you to this point?

Basketball is a big data problem.

I was involved with the golden state warriors when we beat out very ellis and.

I applied technology.

Gosh i was involved with the golden state warriors when we beat out -- i was involved with a golden state warriors when we beat out larry ellison.

Basketball is a big eight a problem.

You can see who is buying tickets, merchandise, who likes what.

What form should the offer take?

On the game side, what combinations of players produced the best results.

Where should you shoot from?

How do you defend the other team?

Lex is not the same's -- it is not the same sport but i am sure that you saw " moneyball" which was all about baseball and the same respect.

I have done the same thing with basketball.

There is lots of data.

There are answers and that data that can lead to some amazing conclusions.

This is true in the business world as well.

We have a company in europe and they were trying to solve the problem of credit card fraud.

What we found is that if you bought razor blades, champagne, and diapers, it was probably a stolen credit card.

There is no way you could have predicted that.

Razor blades, diapers, and champagne?

Those are the three.

Those are the things that you can pawn off.

And you say, why diapers?

He's trying to look like he is a good guy.

That is an example of mass trumping science where you don't need to know the what of something, you just need to know if a and b happen, then c will happen.

That is true for power grid outages, that is true for what kills what diseases.

Thank you so much for joining us.

Glad to have you with us.

When we come back, an entrepreneur who is using the best of social media and a direct selling model to reach gen x and general y customers.

Personalized handbags and accessories.

The cofounder will be with us next.

? collects when you think of the direct selling business model, you might think of avon, mary kay, or tupperware.

-- when you think of direct selling business model, you might think of avon, mary kay.

Our next guest is the founder and ceo of initials inc.

How are you updating the direct selling model?

We just mentioned names like avon and mary kay.

They are five decades old but social media changes the way you sell things.

The modern woman is causing our entire industry to revolutionize himself.

She wants more, she does not want to just have a successful career, she wants a successful life.

How does this contribute to the way that you sell your products?

It is direct selling, a social media aspect.

The spirit of community is how this industry was built.

Obviously it is a thriving industry.

We are tapping into that $14 billion industry of handbags and homework is a and.

We leverage it through social media.

How did you get the idea for the company?

How did you know these were the right products to offer?

We saw a need.

My sister and i started the company together.

We were in independent markets.

She was in texas, i was in georgia.

We had a built in beta test.

The woman in texas and georgia were saying the same things.

We decided to take a personal journey for us and expanded to women across america and let them live their dreams through us.

Della and thought is another company -- stella and dot is another direct selling company.

Are they competition or a front runner?

Once we think about competition -- we think about competition, but we think about expanding our entire line.

Every consumer has retail dollars to spend.

We see the retail market as competition as well which is why we focus so heavily on really back to our mission which is believing there is only one you.

We focus on that experience.

How are sales?

How is that going?

We have had triple digit percentage growth year over year.

We just wrapped up our national conference and we are pace to be a $300 million company.

Is it a worry at all on the flip side?

There can be but we have managed that well.

We have adopted the right to get smarter.

This can guide us in a safe way.

How many people do you have on staff?

How does it work?

We have a huge corporate staff that does things internally.

We also have external resources that we have to expand our reach.

What is is the number one goal for you?

It is all about the people.

That is the true opportunity that direct sales offer.

It is a beautiful aspect of the company.

Well, that changed as we mentioned five decades ago for a lot of women.

Pleasure to meet you.

Take you for coming in.

The cofounder and president of initials inc.

The buzzword of the day.

The bond traders are using the word speed limits.

Welcome back to "money moves." time for our daily buzz word.

Bob rice is here from tangent capital partners.

This is a new term that bond traders are using to talk about rising rates.

It is really interesting way talking about interest rate duration risks.

It is the amount of interest rate increase that a bond can withstand before the resulting capital losses wiped out the coupon and therefore create a negative total return.

You are basically paying the government for the landing.

The way it is working, that is right because the speed limit is scary slow.

If you look at medium-term governments right now, two or three increase.

This would wipe out the coupon for the month.

Even when you look at regular investment grade, this beat limit is only five or six basis points.

Even in the high yield world, the speed limit is only 14 or 15 basis points.

People are looking at significant losses here.

What are the implications for hedge funds?

What's this has become a very interesting and hot topic even among the very fancy and most famous hedge funds in the world . they provide a risk parity strategy and they have been very successful during the long run in bonds.

The idea of risk parity is that you have to rely a lot on leverage, apply to fixed income.

You are using levers to hold the bonds.

If you are using levers to hold the bonds, that if the rates pick up, you're looking at a potentially significant loss.

You mentioned bridgwater.

The weather fund has been underestimated and there are losses of like $40 billion.

We underestimated how expose we were.

The question will be how effective that will be for them, the fund going forward.

Even the biggest funds, they have paid attention to interest rates.

This applies to the fanciest hedge fund managers.

Thank you.

If you do have an idea for bob, you can go ahead and tweak it to him.

We are back with just two minutes and an update on trades.

Tomorrow, all money manager launching a new vc and we will give you the details from the managing partner.

Also the founders of maxwell health, they have a new tax to simplify benefits, decrease in insurance costs as well.

It is 56 past the hour and bloomberg is on the markets.

We will take you to the newsroom.

We are off session lows but it is a down day across the board.

The dow was down by more than a hundred points, the s&p off by about seven point and the nasdaq down by about nine points.

We are seeing the heaviest selling in consumer discretionary and utilities.

We have seen a lot of action in phone makers.

Apple breaking the $500 a share.

Carl iconahn bought a large position.

Blackberry has pared earlier gains falls.

They are considering putting themselves up for sale.

They are actively seeking a buyer for up to a year and they haven't found a taker yet.

We are putting the phone makers in focus.

It kills me to be asking you this but clearly the markets are wondering, can blackberry hold on?

I think they will go private.

That is my guess.

There was a member of the board who stepped down.

He is the warren buffett of canada.

He has great connections.

The speculation is that the canadian government is really behind this move to keep it a canadian company.

Some of the major pension managers have come out and supported the idea of potentially taking the company private.

You don't think it will be gobbled up by the likes of lenovo?

Well, there is sensitivity to the chinese buyers.

The canadian warren buffett might be at play.

This text has been automatically generated. It may not be 100% accurate.


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