From ... http://maxkeiser.com/2011/03/09/jp-morgans-losses-are-exponentional-once-silver-breaks-36/ WB: JPM is in worse shape then we ever dared to hope. This is what I am now hearing from traders on the floor. These traders are not even sure if Blythe knows the full extent of JPM's silver exposure. When I first started to realize that JPM has shorted far more silver than they could ever hope to cover, my first question was "why would they do that?" Not only that, why do it with a commodity where you must report your positions through the COT and Bank Participation Report? After all,the whole world can see what you are doing. [Max's added comment: Ted Butler included!] Now I know the answer. According to Max Keiser and now a couple of other independent sources, it seems the reasons why first Bear Stearns and now JPM are so desperate to manipulate the price of silver down is due to the fact that BS and JPM shorted billions (yes billions not millions) in ounces of silver through their derivatives. Just like Joe Conason at AIG, silver shorting through derivatives have caused literally billions in losses not the millions that we know about publicly. That is why JPM has been so desperate to manipulate the price of silver downward so blatantly. If I am right about this, then JPM will be dead when silver hits $60 or so. Based upon the COT and BPR, if silver hits $60, JPM will lose around an additional $6 billion dollars, a large number but not nearly large enough to bring down mighty JPM. But what is not known is that due to the way that its derivatives are written, JPM's losses are exponentional once silver breaks $36 or so. Rumors has it that JPM could be losing as much as $40 billion once silver is above $50. It has something to do with how the derivatives are written with payment tied to the price of silver. Since JPM was a price manipulator with respectt to the price of silver, JPM assumed that any derivative payments tied to silver would be less than they would be tied to some other index like the CPI or TIPS implied inflation index. JPM's inability to hold down the price of silver relative to other measures of inflation will cause unbelievable losses due to a mismatch in their derivative structures. In essence,JPM has bet (a huge amount)through derivatives that silver will never outperform inflation. And why not,since JPM assumed that it will always be able to manipulate the price of silver. We have now come to understand that JPM's loss exposure to silver is much greater than we have ever dared to hope. WB: In an effort to clear up some recent confusion regarding my latest posting, I will try to explain what I have recently uncovered. JPM's current short silver position is estimated to be approximately 150 million ounces down from the recent 180 million ounces in August. The losses from these positions are easy to figure out. For every $10 rise in the price of silver, JPM will lose $1.5 billion. But what I have recently discovered is that through its derivative positions, JPM will lose about 5 times that amount ounce the price of silver is above $36. And ounce silver is above $45 dollars, JPM's losses will increase to 8 times the amount of losses in their short positions. The reason is that as the price of silver increases, certain provisions get activated which multiplies the losses. One reader asks the question why isnt the price of JPM going down to reflect the lossesd in silver. My answer is that the price of silver is not high enough to begin to trigger losses in their derivative positions. But once silver approaches this critical level say around $36, then you should begin to see the price of JPM stock begin to reflect these losses. In fact, traders are saying that once the price of silver surpasses the stock price of JPM, then for every dollar the price of silver go up, JPM should lose around 70 cents or so. This means that if silver hits $60, JPM will be a single digit stock. JPM market cap is around $170 billion. If silver losses are as great as $40 billion in cash , then JPM will be insolvent. Period. Peter H.
Thanks for the post. we live in VERY interesting times. Silver is VERY up & down due to the plays from JPM & Co. But a couple of billion is peanuts. They will go begging to the US Fed. Bring on QE3..................
Ben Bernanke will just mark up JPM's account with the FED by few billion or whatever it takes, when they run into financial trouble. By his own admission in his 60 minutes interview in 2009, he doesn't need tax payer money to do this he essentially just adds zero's electronically.
"JPM's losses are exponentional once silver breaks $36 or so." "But once silver approaches this critical level say around $36" Funny they plucked that number out of the air... not so comfortable with the timing of these reports. No doubt in my mind that silver's heading higher and bankers are getting hurt, but these stories seem way too timely and sensational
Yes indeed, I doubt we investors can take down the banks like this. The only way I see the banks goin down is if we take them on the way the Libyans took on Gaddafi.
Hmmm... somehow I don't think think the traders at JPM would be stupid enough to sell such ridiculous derivatives - At least not with the consent of their Risk department (I used to structure derivatives at another IB). Most derivatives sold are hedged anyway, so unless JPM has a rouge trader like our pal Jerome Kerviel back in 2007 that manages to hide their exposure, I don' buy a word of this....
If there short silver why can't they just cover it's quite normal to just cover. They could also go long on crude/gold or currency. The other thing is JPM would be using CDF's to cover any large losses from any part of the bank defaulting anyway.
Not sure about this. However my dad had J.P. Morgan Bond and has been losing money since this month. It is related to silver. I don't know...
No of course not... Banks would never sell ridiculous derivatives, they have a long history of rational behaviour in the past when it comes to derivatives.
I went long on copper recently. Got a whole bucket of scrap copper in the storage room! It doesn't stack as easy as silver though :/
When it comes to highly liquid and easy to model assets like silver, yes they do. Keep in mind that silver is not a credit default swap or asset backed security. No matter what the derivative structure is (i suspect they probably have a barrier knock-in at $45 or something like that, where another part of an option activates at a certain price, but the models for them are pretty well understood for liquid stuff like silver, FX and interest rates), as long as its over a PM, they can hedge it easily.
I lost track of this video when I saw it but found it again tonight, part 1 is here but fast forward to 6:54 in part 2 below to see Doug Casey and his opinion on the 'bullion banks' shorting the market. :lol: [youtube]http://www.youtube.com/watch?v=oGrLpq4EITU[/youtube]
MMM seems really convincing , ERR AHH how many banks,,,,which banks......ERR I dont know,,,,,,JFK and 9/11 could be true but this is just a conspiracy theory.... and then the smack down just keeps happening like clockwork.
