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J.P. Morgan to accept gold as collateral

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February 08, 2011 – Comments (14) | RELATED TICKERS: JPM , GLD

http://finance.yahoo.com/banking-budgeting/article/112067/jp-morgan-will-accept-gold-as-type-of-collateral?mod=bb-budgeting&sec=topStories&pos=7&asset=&ccode=

"J.P. Morgan Chase & Co. (NYSE: JPM - News) said it will allow clients to use the metal as collateral in some transactions. For example, a hedge fund wanting to borrow money for a short period can put up gold as collateral and use the borrowings to invest elsewhere, betting on making a better return."

Doesn't this go against the whole "JP Morgan wants precious metals to collapse" argument?

14 Comments – Post Your Own

#1) On February 08, 2011 at 3:43 PM, ChrisGraley (29.80) wrote:

Well it's true that JPM has been manipulating silver prices (with support from our government I might add), but since they have been caught I suspect that they are trying to slowly unwind those positions.

As far as taking gold as collateral, it makes perfect sense to me. It's very easy to liquidate when a loan defaults, and they can store it in their own vaults.

 

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#2) On February 08, 2011 at 3:45 PM, SockMarket (42.34) wrote:

just a bit :)...good find.

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#3) On February 08, 2011 at 4:23 PM, Valyooo (99.43) wrote:

Chris,

I have seen the JPM manipulation argument, but where is the proof of government support? I have heard people say this but haven't seen evidence.

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#4) On February 08, 2011 at 5:23 PM, XMFSinchiruna (27.50) wrote:

Valyooo

I just refered to that development here as well:

http://www.fool.com/investing/general/2011/02/08/5-imminent-catalysts-for-gold-stocks.aspx

As for your first question, I have to say ... I'm not aware of any well-formulated arguments out there to the effect that JPM wants gold prices to collapse. I believe they had an interest in keeping a lid on price advances when they maintained serious leveraged short exposure, and I have myself argued that their activities in the pm markets could potentially trigger something of a collapse in the paper markets for pretend bullion, but I am unfamiliar with serious arguments that they sought a full-on price collapse. To the contrary, I have always maintained that by the time precious metals approach their most epic price gains to date, all of the najor bullion banks will have shifted entirely from the role of obstacle/delayer to the the role they understand best (maximum long exposure for legendary investment gains). 

To your second question (comment #3), there is no slam dunk proof as yet. Keep in mind there is a major distinction between the Fed and the federal government. The Fed is not a part of the latter, but rather a consortium of private banks.There are multiple pieces of circumstantial evidence that would appear to implicate the Fed. There is ample, and even well reasoned speculation. And there are compelling 'qui bene' points of logic to consider carefully. But as for absolute proof I am not aware of any with respect to direct involvement by either the government or the Fed in gold and silver price suppression.

GATA is busy working the legal system in search of hard evidence, and they recently scored a minor victory. A judge is at least going to review the unredacted content of Fed documents that were heavily chopped before release under the FOI Act. Discovery processes in the pending lawsuits against JPM and HSBC may permit broader access to the evidentiary record. But then again, little evidence on paper may exist at all.

BUT ... with all that said ... and as much as you know I've reviewed the matter in substantial detail ... ask me if I think it happened. :) 

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#5) On February 08, 2011 at 5:54 PM, Valyooo (99.43) wrote:

Sinchi,

Thank you for commenting.  As you should know, whenever I ask questions like this, I am trying to provoke people like you (usually specifically you) to prove me wrong, because I want to be proven wrong.  Since I don't desire to spend my life working in just one field like you do (no offense, just a personal preference thing), I usually use you as my go to source for this kind of stuff.

However, it would be nice to completely understand this stuff for a few reasons. 1) There may come a time where silver has topped out, but that you may like it too much to see that it is topping (again, please dont take offense because you are much more knowledgable than I am, I just think given the situation,  you are more vulnerable to get too involved than I am) 2) If silver drops like a rock, and I dont have strong conviction that it will go back up, I am going to vomit.

That being said, I know what you think, which is why I am on board...to date, you have a pretty ridiculous track record.  I was just wondering if there was any slam dunk proof.  I will now shift over to the links you provided and continue this discussion there.  

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#6) On February 08, 2011 at 6:32 PM, ChrisGraley (29.80) wrote:

Evidence of gov fraud would be hard to come by indeed, but given that the government benefits from the manipulation and it seems less than enthusiastic to police JPM, I can only put 2 and 2 together.

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#7) On February 08, 2011 at 8:17 PM, Valyooo (99.43) wrote:

The government can also benefit form holding up citizens at gunpoint a milliontimes a day, but I can't conclude that they do that, so that alone doesn't make much sense to look at IMO.

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#8) On February 08, 2011 at 8:25 PM, rfaramir (29.39) wrote:

This from the article made me laugh: "Morgan is effectively saying gold is as rock solid an investment as triple-A rated Treasurys"

Duh, Sherlock! "as rock solid"??? In 30 years, will US Treasuries be worth the paper they're printed on? Maybe some fraction of value left, but not much. Gold? Pretty much exactly the same as today.

This says a lot more about Europe than gold: "The market [for gold] is more liquid than many government-bond markets in Europe" 

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#9) On February 08, 2011 at 8:47 PM, DragontoadX (64.54) wrote:

If JPM is massively short precious metals and getting squeezed, I would think they would want a way to quietly amass as much as they could without spooking the market... Accepting gold as collateral would be a way to accomplish this, no?

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#10) On February 08, 2011 at 11:59 PM, Valyooo (99.43) wrote:

If JPM was manipulating gold and silver because the government asked them too, dont you think they would not try to get the price of it to go higher?

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#11) On February 09, 2011 at 12:14 AM, XMFSinchiruna (27.50) wrote:

Valyooo

No offense taken (comment #5), but I will say you presume too much in that instance. I have no idea what gave you the idea I've spent my lifetime in the financial field, but I can assure you this is but one of multiple and varied endeavours.

As for your suggestion that I may be too 'involved' to recognize a top when it forms, on that I do actually take some offense. If you think I'm the kind of guy who can spend years crafting a winning play on the bull market of a lifetime, without safeguarding my gains in the process, then again I would politely suggest that you may not know me as well as you think.

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#12) On February 09, 2011 at 12:50 PM, Valyooo (99.43) wrote:

I believe you misunderstood me.  I didn't mean that you spent your lifetime in the financial field, I meant that you spend most of your investment time on gold and silver plays...I am not pulling this out of nowhere, you told me " it is a full time undertaking" in another blog.

As for the second part, I didn't mean that you're blinded, and I am almost positive that would never happen to you.  However, when I read a lot of posts from somebody suggesting that silver and gold are the only real forms of money...think about it.  If fiat was worthless, then even infinity dollars would not be worth but one ounce of silver.  If the financial market collapsed, there would be no reason to sell silver at a top....it would only make sense to convert all dollars into physical bullion if you truly belive silver is real money and that someday soon fiat will fail.  I do not hold that belief.  My primary reason for holding silver miners is 1) bernanke 2) the clear manipulation (demand not meeting supply).  If you don't feel that way, than I apologize and was wrong...I am just trying to become self reliant rather than take your word as God as many do (Even though as far as I know, you are the best there is in regards to silver, I just refuse to treat anybody like a God, know what I mean?)

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#13) On February 10, 2011 at 11:20 AM, silverminer (31.40) wrote:

Valyooo

Understood. Tracking this market certainly is, at present, a full-time undertaking ... and then some. :)

As for para. 2, I don't think I've said the dollar is worthless, but rather only that it will be worth less. Big distinction. I will emerge from this bull market with phenomenal gains in tact, and the entire reason I'm doing this labor of love is to help ensure that fellow Fools also close out when the time is right. To clarify, I would never want anyone to simply follow my recommendations in place of conducting their own independent analysis, and I'm glad you want to develop your own knowledge of the sector. But as to whether I may be too close to the subject to recognize the appropriate times to reduce and/or terminate pm exposures, I believe that's where I will offer my most important contribution yet.

And once that call has been made, I'll move on to my next adventure.

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#14) On February 10, 2011 at 3:10 PM, Valyooo (99.43) wrote:

Awesome, I understand better now.  As for doing my own independant analysis, I would rather do it of silver itself than of silver miners.  For miners, I just use price action and best of breed....so I buy GPL and SLW.  Lazy, yes, maybe I will get blindsided, yes, but it has worked great so far. 

At times, I do wish I could just be a fly on your wall for a couple of weeks to better understand where to dig for info.

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