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The $2 billion trading loss announced by JPMorgan Chase on Thursday as a result of a failed hedging strategy does not bear the earmarks of coming from only a “rogue” trader, and developments that follow are more likely to get worse for the Wall Street bank rather than better, Dennis Gartman, founder of The Gartman Letter, told CNBC on Friday.
"I operate under the old rule that there is never just one cockroach, when ill news comes out there is usually more ill news to follow,” the famed investor and former floor trader said.
“This clearly isn’t a rogue. This is not the same thing that happened at SocGen, by any stretch of the imagination,” said Gartman, making reference to the 2008 trading losses suffered by French Bank Societe Generale at the hands of a single trader, Jerome Kerviel.
A JPMorgan spokesman in London told CNBC that the bank is not commenting at this time.
While stressing that not all the facts are yet available, Gartman said he believed the failed hedging mechanism appeared more akin to “a proprietary trading operation,” whereby a bank uses its own money rather than its customers’ money to trade stocks, bonds, currencies, and other financial instruments.
Such “prop trading” would be a violation of the Volcker rule , which is not law but is currently being considered by Congress.
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