By: Michael Gray of the NY Post
Yes, it is really happening. After years and years and years of market manipulation, JPMorgan is about to realize there is only so far you can push your luck against the criminal envelope.
Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice’s Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.
The probes are far-ranging, with federal officials looking into JPMorgan’s precious metals trades on the London Bullion Market Association’s (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.
JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.
Regulators are pulling trading tickets on JPMorgan’s precious metals moves on all the exchanges as part of the probe, sources tell The Post.
JPMorgan has not been charged with any wrongdoing.
The DOJ and CFTC each declined to comment, as did JPMorgan.
All Things Considered – John’s Commentary:
The ironic, and somewhat disgusting thing, is that JP Morgan Chase is also the custodian for the world’s largest silver exchange traded fund – Barclays’ iShares Silver ETF (AMEX:SLV). The last time I looked, JP Morgan Chase held 220,000 silver futures contracts short. The contracts are “naked” in that the physical silver to settle these contracts, should physical silver be demanded, is not available through the COMEX (the Commodities Exchange Division of the New York Mercantile Exchange).
Ask yourself this – “why would the custodian (physical holder) of the largest silver ETF (long position) in the world concurrently hold the world’s largest unbacked short position in silver? Seems like a conflict of interest – what do you think? I am not anti-metals ETF’s, but bear in mind – ETF’s are a derivative product dependent on the performance of numerous counter-parties in order for the investment to perform. Please realize that a metals EFT is a proxy in the form of a paper prospectus. Physical metals that you hold in your hands and put in your pocket carry no counter-party risk.
Action to take: Gold has had a big run-up in the last couple of days. I was speaking with a new client today who was vacationing with his family in the Northeast. He was contemplating an additional purchase of approximately 10 ounces of gold and asked me what I would do.
I shared with him that on one hand, gold had run up hard. On the other hand, even if it pulls back to $1,200 that will be a savings of $400 on a $12,500 investment – not pocket change but not a huge amount either. There is a tremendous amount of resistance at $1,250 that gold must definitively penetrate. That is not likely to happen on the first try. There is excellent support at $1,195. So, the initial trading range consists of approximately $55.
As I have mentioned before, and most prudent investment advisors would concur, don’t try to time the market. If you don’t have a position, my advice is simple – take a position today! Don’t worry about the price. Get in or you will never get it. And no, this is not the south Florida housing market where everyone is already in. Only about 3% of those with investable assets hold physical precious metals.
If you are already in, continue to add modest amounts over time on regular, predetermined intervals – MCA (Metals Cost-Averaging).
What to buy: Barring special circumstances, the least expensive form you can obtain! There are lots of options. Please call so I can bring you up to speed. Allocate silver over gold 2/3 to 1/3.
Quotes of the day: “No matter how much you paid over the spot price, when you melt it down, it all looks the same.” – John Fisher
“The fate of the nation and the fate of the currency are one and the same.” – Dr. Franz Pick
