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Buying Silver to Break JP Morgan

By: Dr. Jeffrey Lewis

-- Posted 1 December, 2010 | | Discuss This Article - Comments:

For just over a week, activists have been spreading an online call to silver investors: buy physical silver and help bring down JP Morgan.  Though the title “activist investor” is often reserved for billionaires with more proxy votes in a company than they know what to do with, this new age surge in investing activism should be appreciated, even if it is a little misdirected.


The call started from Max Keiser, who in the sake of neutrality, has been to gold and silver what Jim Cramer is to CNBC and the stock markets.  Of course, all the talking and sky-high price targets aside, there are few people who can get masses of people excited about an investment.  Since Max Kesier first went on his anti-JP Morgan rant on a series of online and offline radio shows and blog posts, videos on YouTube about the event have attracted nearly one million views.  Certainly, people are listening.


Why JP Morgan?


There were actually two JP Morgans.  The first was the man and investor who founded the second, a bank he named after himself.  Believe it or not, only a few years after JP Morgan's humble beginnings in investing and speculation, he actually purchased defective rifles from the American government, had them shipped directly back to the Union Army during the Civil War, and collected $5400 in profits in what was a crooked deal.  Of course, being JP Morgan, he got away with the deed, and he went on to have a healthy relationship with the US government.


In 1907, following a banking panic, JP Morgan (the man) had a hand in distributing some $35 million in what was basically a 20th century TARP.  JP Morgan, being the savvy banker he was, made a series of deals with the public's dime, creating a legally protected monopoly in the steel industry (which he controlled) and allowed his banking competitors to go broke.  Then, six years later, JP Morgan was instrumental in the founding of the Federal Reserve System.


Fast forward nearly a full century from the founding of the Fed, JP Morgan as an institution is perhaps still as corrupt of a company, involved in everything from complex derivatives deals, and as suggested by allegations in the metals market, a key piece of the naked short interest in silver futures contracts.


The history of JP Morgan Chase and the banker, JP Morgan himself, are quite storied, filled with deals that most people would find downright corrupt.  It should be no surprise that so many are rallying to bring the company down.


Why JP Morgan Won't Break


Besides JP Morgan's healthy relationship with government, as well as its likely “too big to fail” status, buying silver on the market, fortunately or unfortunately, will have very little impact on JP Morgan Chase.  To precious metals investors, especially physical precious metals investors, it isn't about the cash the silver is worth, but rather the metal weight itself.  To JP Morgan, the speculators and other bankers who play in the futures and derivatives market, cash settlement is as good as metal.  It's the paper money that makes the difference, so what good is silver to a privileged bank like JP Morgan?


The futures market has unfortunately lost their value as a means of physical delivery.  More and more contracts are settled in cash, and silver contracts can now be fulfilled with delivery of an effective derivative, the SLV ETF.  People and banks like JP Morgan, with their long ties to government and regulators, will forever make the rules.  They have instituted a type of financial democracy, where since they have all the money, the ball is in their court.


A play on monetary metals like gold and silver through the futures market is a play on the dollar and fiat currencies more than JP Morgan.  Already, confidence in global currency is plummeting so quickly that the dollar is actually rising against a basket of currencies, never mind America's own fiscal problems.  In this race to the bottom, you can bet that even if the Fed has to soak up the whole of America's debt to bail out JP Morgan, the deed will be done.


Buy silver for you, as an investment and protection against the falling confidence in global fiat currencies.  Focusing on JP Morgan is giving them more attention and notoriety than it deserves.


Dr. Jeffrey Lewis

-- Posted 1 December, 2010 | | Discuss This Article - Comments:

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