JP Morgan's made up (synthetic!) credit securities.

Well, well, well... JP Morgan back in the dog house with an after market shock

"revealing its second-quarter performance will be dented by a huge trading loss on synthetic credit securities at its Chief Investment Office. The firm said that so far the losses amounted to $2bn but could "easily increase during the quarter" (http://www.digitallook.com: London open: Chinese data, JP Morgan weighs on stocks). 

So despite recent statements (http://www.digitallook.com: Bernanke says banks are stronger but must still improve liquidity) from Ben Bernanke the Chair of the US Federal Reserve, that US Banks had made considerable progress, JP Morgan:

"The biggest US bank by assets tumbled 6.7% after the close of regular trading, as chief executive Jamie Dimon said in an extraordinary conference call with analysts at 5 p.m. EDT that the bank made egregious mistakes and that trading losses were 'self inflicted'. Bank of America shares lost 2.6%, Citigroup retreated 3.6%, Goldman Sachs slipped 2.3%, Morgan Stanley slumped 2.9% and Wells Fargo & Co. lost 1.9%." (http://citywire.co.uk: Overnight Markets: Shock JP Morgan loss hits stocks).

Synthetic credit securities?...After second thoughts I'm not sure about the dog house possibly the zoo might be more suitable....with the other leopards! (or "leper"ds).

"Synthetic credit securities are bets on hypothetical credit instruments with credit default insurance. This is a credit derivative, and “synthetic” usually means there is no real asset in the instrument, but is a bet made on the performance of another instrument." (dailycapitalist.com)

I think that the CEO, Jamie Dimon sums it up nicely with the following statement:
“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored,”  (http://www.digitallook.com: JP Morgan harpooned by 'London whale').

Poor indeed!

Elsewhere, Greece remains rudderless, an interim grey area which might still result in them receiving interim bridging funds between bailouts (as they have just received), but does little to suggest that the country can remain solvent.

In the Euro or out of the Euro it doesn't really matter to the long term view of Greece as an administration that can't fend for itself e.g just collect the taxes due.

Spain has part nationalised what is probably its most toxic bank formed out of a consolidation of many of its regional banks and is rumoured to be considering a cap in hand request to the European Financial Stability Fund (EFSF).

Despite being a much more active ECB President, the heightening situation does pour cold water onto Mario Draghi's recent statements that the Europe situation was stabilising (http://www.bbc.co.uk: ECB chief Mario Draghi says worst of euro crisis over).

Fair to say that we might already have put a foot over the precipice without his actions but it perhaps serves as an illustration of Europe's political leaders (and inability to resolve the crisis) that can so easily put the situation to one side thinking it fixed.

Chinese data again suggests a slowdown in imports and exports but with inflation slowing it actually raises the prospect of China loosening its money supply restraints.

Of more concern for Europe is the suggestion that China no longer wants European debt.

So lots of risk starting to build up again within markets and any good news looks set to struggle against the headline grabbing disaster scenarios. 

Looks set to be a trial of nerves for the foreseeable.

Related article links:

- http://www.digitallook.com: London open: Chinese data, JP Morgan weighs on stocks
- http://www.digitallook.com: Bernanke says banks are stronger but must still improve liquidity

- http://www.digitallook.com: JP Morgan harpooned by 'London whale'

- http://citywire.co.uk: Overnight Markets: Shock JP Morgan loss hits stocks

- http://www.bbc.co.uk: ECB chief Mario Draghi says worst of euro crisis over

- http://en.wikipedia.org: Synthetic CDO