The Doc and Eric Dubin Clarify JP Morgan’s Decision to Exit Physical Commodity Business

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In this week’s SD Weekly Metals & Markets The Doc & Eric Dubin discuss:

  • This week’s rally in gold & silver- metals close strong ahead of next week’s FOMC statement
  • GOFO negative 15 days & counting
  • India gold smuggling & unprecedented Chinese gold demand
  • JP Morgan’s announcement Friday evening of the sale of its physical commodities business- is JP Morgan really closing down their gold vaults?

SD Weekly Metals & Markets is below:

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By Eric Dubin:

JPMorgan selling physical commodities business: Is JP Morgan closing it’s metals vaults?

The physical market in question here are the supplemental operations JPM and Goldman Sachs and others have gotten into aggressively within the last decade, roughly. We’re talking about warehouse operations to store base metals, food stuffs, etc. We’re talking about leasing of oil tankers to attempt to have greater control (and extra profit) from oil trading (above and beyond futures market activity). We’re talking about pricing of electricity at the point of movement on the physical grid. Get it? NOT options and futures exchanges and the derivatives market overall that has been their cash cow for decades….

But there is indeed an INDIRECT link to what’s going on with their massive decline in COMEX gold inventory. The COMEX and LBMA bullion futures and forwards markets are under extreme stress on account of plummeting confidence in the ability of those institutions to actually deliver physical against contracts. That’s also a big part of the reason why GOFO has been negative for a record setting stretch of time, and why there is short-term backwardation. Confidence in the system is on the decline and people want gold and silver in hand more so than being willing to take what should be an easy trade of simultaneously selling physical today and buying the same amount to be delivered via a futures contract one month forward (you don’t want to do that if you think the system is at risk of failing to deliver one month forward, so gold in hand today is worth more as expressed in terms of the prices the fractional reserve gold system generates). All that said as background, as we see the natural outgrowth of all this declining confidence — JPM’s crashing gold inventories at the COMEX — the regulators are starting to come out of their coma and are starting to look around. It’s not that they want to look around. Believe me. They’re probably just as happy to keep surfing internet porn and sticking Bart Chilton out in the media to say, “we’re looking into it.” But 2014 is an election year and over at the marble nuthouse known as the US Congress, some politicians are starting to feel pressure to “do something” about banking sector corruption.

 

If you were Jamie Dimon, what would you do? Well, how about shifting focus of general criticism. Give up this ancillary physical market operation. It’s about the same level of pain as the occasional slap on the wrist fines that investment banking firms sustain when they’re busted for manipulation of energy, LIBOR and other markets. Exiting the physical infrastructure add-on business gives the bankers the ability to say to politicians, “Yes, we’re sorry, our actions did add to the cost of overall commodities products but we’re out of that business now so please, leave us alone.” Meanwhile, their core derivatives market operation in gold, silver, interest rate swaps, oil and on and on continues.

Tune into the radio show this weekend for more by clicking the play button below or downloading the podcast!

 

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Comments

  1. As a nobody out here, pretty much throwing my crap around like a monkey in a zoo, it doesn’t mean a whole lot, but I have an itching feeling that this may have greater ramifications than at first might seem apparent. This is a ‘dot connection’ to that wonderful insight raised by BrotherJohnF about the Brits KNOWING exactly where that silver was sitting over the past 70 years and … now, all of a sudden … commissioning a salvage of it … at its low point of the market. These are only two very recent signs on a growing ‘string of pearls’ indicating to me at least, that precious metals ARE on the verge of exploding real soon.

    • Well I’m a Brit. The silver is in the south America, just south of Texas. Shit loads of it. Oh and palladium is in North America. Wonder why there is a new index for palladium? Oh and platinum, Russia and Canada. I think I will stick with silver and gold. You yanks can’t be trusted with your indexes, as corrupt as us limeys with our spot prices. :-)  

    • I think I know the wreck you are referring to. It is the S.S. Gairsoppa sunk during WW11, I do believe it is 5km down, deeper than the Titanic, not exactly easy to recover and damn expensive too. The pressure down there is approx 2500 psi. Oh by the way retrieval started May 2012.
       
      http://images.nationalgeographic.com/wpf/media-live/photos/000/572/overrides/silver-recovered-s-s-gairsoppa-ww2-shipwreck-deck_57224_600x450.jpg
      http://images.nationalgeographic.com/wpf/media-live/photos/000/572/overrides/silver-recovered-s-s-gairsoppa-ww2-shipwreck-compass_57223_600x450.jpg

    • @PatFields:  Ah, but Pat, the spoils go to the one that sees the most dots to connect in the first place — which you usually see far more than most!  While I haven’t listened to BrotherJohnF’s recording (I assume that’s what it was) speaking to the find, fact is, her majesty’s kingdom only gets 20% of the booty.  The wreck was indeed known to be in a general area but the exact location wasn’t known and it takes experienced treasure hunters to find stuff like that (the UK could do it, of course, but that’s really not their gig;  they’ve got fiat to print, wars to participate in, etc.!)  The technology to locate it exactly, and lift it off the sea floor safely at the deep depth of this find, while duplicatable, isn’t readily available and that’s the other reason why the UK contacted with the company in the first place.
       
      How do I know all this?
       
      I own a small position in the stock of the company that found the wreck.  I’m pretty familiar with their business, why governments bother to contract with them, and the specifics of this find.  Governments getting 20% for doing no work usually like that deal — although Spain threw a hissy fit when they were involved in a similar salvage effort not too long ago. Spain wanted to back out of their deal once their booty was found.
       
      As I say quite often:  Conspiracies are everywhere, but not everything is a conspiracy.
       

    • PatF….perhaps that is what the Fed means by “Gold in Deep Storage”…..a shipwreck.

    • @Neo: Spot-on.  Odyssey Marine Exploration is the company.  
      Some background for others:  click here.
      No doubt, some in the financial media will try to make people think this find will hurt the price of silver.  That song and dance has been tried w/ respect to previous finds.  Even though it’s a big find, it will not hurt the price of silver because the market is way too tight for that to happen and the bullion banks are holding this shaky house of cards up with considerable effort.

    • “As I say quite often:  Conspiracies are everywhere, but not everything is a conspiracy.”
       
      Indeed so, FW.  To those who say there are no conspiracies, I reply that this is no more rational than to say that everything is a conspiracy.  Conspiracies exist because through them individuals and groups can profit… and where there is profit to be had, there is motivation to conspire and get it.  ;-)

  2. LBMA is not the same as the COMEX. Why constantly put the two in the same category? The COMEX influences LBMA spot prices, but that’s the limit. As someone who deals with LBMA members regularly, I find it ignorant and divisive to put the two in the same article. LBMA is a quango and a price fixing organization in the same breath as LIBOR. But it does deliver physical. It deals in the now, not the future. GOFO prices are for indication only and not actually used for anything. The COMEX should have supplanted the out moded spot fixing, but alas absolute corruption, corrupts absolutely.

    • I put them in the same article because the point I was making – declining inventories of gold and declining confidence in both institutions and the “fractional reserve” “paper gold” system in general – is happening on both the COMEX and the LBMA. 
       
      And to claim that GOFO is for “indication only and not actually used for anything” is silly.  While it might not inform your trades on the LBMA — or the trades of others you might read about in the event you don’t trade.  The fact is, the GOFO rate running negative for 15 trading days straight is unprecedented, and can NOT be denied as to what it means.  You can’t seriously be trying to argue the contrary?  People might call you a troll for such a statement.  Gold in hand, right now, associated with the LBMA, is perceived to be of greater value than gold in the future.  That’s a mathematical statement of truth that GOFO proves.  Period.  Full stop.
       

    • Well, when I put my fiat up for exchange for physical metals I use the spot price for the day, not GOFO. So where is the meaning in GOFO? Its like saying the Vix has any meaning or ratings from dubious agencies, controlled by the state. You can’t predicate anything these days, the only thing we have is raw fundamentals. The decision to buy for me, in the quantities of silver I buy, its all about the LBMA spot whether I like it or not.

    • @WaitingForSilver: The world is a much bigger place than what impacts your personal decisions “to buy for me, in the quantities of silver I buy, its all about the LBMA spot whether I like it or not.”

      The powers that be do not have 100% control over the physical bullion market and when that market gets as tight as it is right now, it has the potential to pull paper prices higher going forward, and some investors like to get ahead of those type of moves. Indeed, that is exactly what is happening right now. So, while you might not make use of GOFO as an indicator, a great many investors are looking at it, understanding the message it signals. You speak about buying on fundamentals alone (“…the only thing we have is raw fundamentals.”). However, for some reason you don’t understand that GOFO is indicating conditions in the FUNDAMENTAL physical market. You can do whatever you want in your own life. That’s fine. Heck, it’s even honest intellectually to debate the construction of GOFO, the mechanics, and interpretation of GOFO. But I must remind you that this whole discussion started when you made the statement, “…GOFO prices are for indication only and not actually used for anything.” That’s nonsense. Just because you don’t think it has value doesn’t mean it’s not of value and not used by others. And to talk about the VIX in the way you have structured that analogy is not even applicable. It’s a straw horse argument.

      I don’t think we need to discuss this further. You’ve made your position clear. I have done the same. Others here can come to their own understanding of this discussion.

      Thanks and nice chatting with you,

      Eric Dubin / Flying Wombat

  3. @WaitingForSilver:  It’s not called the “Anglo-American Empire” by accident.
     
    Where do you think the greatest concentration of financial leverage in the form of hypothecation and re-hypothecation is permitted to take place?  Where do you think a quasi city state exists that happens to reside within its host government, segregated to some extent from its laws, which is not known by most within that host country?
     
    The “City of London” — right in your backyard, mate.  Heck, oligarchs there own a big part of the American banking system too, including a chunk of the Fed. 
     

    • These people you talk of do not care about matters of state. They are above the state and operate on a unilateral basis of require , want, get. My limey, yank comment is all about how small we really are in the bigger picture. Obviously it was too subtle. Maybe I should shout things out in bold capitals :-)  what’s the racial stereo type for an Aussie these days? Criminal? ;-)  

  4. I feel a movement coming on! Which one is first I have no idea!

    • I already predicted it last Sunday Ranger, Silver to go up in two weeks. One week left. LMAO

    • @Ranger:  Stay away from the prunes ;-)
       
      Sorry, couldn’t resist…  <grin>
       

    • Ha! Flying Wombat… I was gonna say!

    • “Stay away from the prunes ”
       
      LOL!  On the other hand, maybe this is the ONLY way Ranger CAN “feel a movement coming on”!
       
      Prunes are good… tasty AND useful at times.
       

    • The Americans should have joined the war earlier, maybe the atrocities of bomber Harris would never have occurred. But then again the second front would have opened up and Britain would have been lost as collateral damage. Too many men were lost in Italy, and the battles in north Africa were a joke, although Rommel as a soldier was awesome. The war was won on the Russian front, and the bombing of Japan. Saying that mind, if Russia had not stepped up like they did, the Germans rocket program would have killed us all. I think we don’t praise the Russians enough. Too many lost their lives. It saddens me greatly to think about it.

  5. @Waiting for Silver,
     
    The French saved our asses during the American Revolution and we The Americans saved Brit Asses with Eisenhower and Lend Lease!

    • Sorry boys & girls, the system will continue with the false propaganda, digressing from the truth in order to make money, such as the winners & losers. Sounds like a win-win to me. Money in-money out, it does not matter as long as they pay their taxes. (Side note)We need to end fractional reserve system. There has to be a pirate ship out there to keep you interested in the fight rather than the truth. The truth IS the competition of real dollars & cents. Do you see the close of $19.99 ? A lot of shorts when into $20. +? This is manipulated paper game, what side of the game are you on, or did you simply walked away (long ago)?

      Real money IS silver/gold.

      One day it will return to the gold & silver as real money with the help of other countries.

      I am not patting you on the head with agreement, nor I’m I kicking your teeth in as you you are falling down saying inflation made me do it.

      Yet “Global Transformation” is going to happen in your life time, history will change for the next 1,000 years.

      Support Real Gold And Silver!

      STACK THE SMACK. BUY PHYSICAL SILVER & GOLD

    • @Ranger
      The battle of the Atlantic was won by code breakers at Bletchley Park UK, who broke the German naval Enigma code. Lend lease was pretty much ineffectual as WW1 destroyers lacked the technology to combat U boats. I think you have watched too many Hollywood bullshit epics. The difference Americans made amounted to industrial might. The war was won through industrial attrition.
      In other words the allies could replace tanks and planes quicker than the Germans. The Sherman tank was inferior to German machinery, typically taking four to five Sherman tanks to take out one Tiger tank, these were acceptable losses to the planners.
      The Americans played a vital heroic role in the battle for Europe, but they were not alone, something Hollywood should be ashamed of. Just remember 160,000 soldiers landing on 6 June 1944: 73,000 Americans, 61,715 British and 21,400 Canadians.

      Have a read: http://en.wikipedia.org/wiki/Military_production_during_World_War_II

    • @Neo:  The decision to not open a second front until Germany was deep into Russia was also a major factor in the Allied victory, along with Germany’s lack of oil and the US being the world’s largest producer of oil at the time.  The US produced something like 10 million barrels per day back then, which is near what Saudi Arabia produces these days.

    • “The Sherman tank was inferior to German machinery, typically taking four to five Sherman tanks to take out one Tiger tank, these were acceptable losses to the planners.”
       
      The original Sherman was not as powerful as the Tiger or as heavily armored but then the Germans didn’t have a lot of Tigers and the US DID have a lot of Shermans.  The primary problem with the Sherman was remedied via the use of a 90 mm main gun to replace the original 75 mm main gun.  The Tiger was a powerful weapons platform but it was finely engineered and not reliable in combat.  They had MANY mechanical problems that degraded their efficiency.   We can all be glad that this was the case.

    • @ Flying Wombat
      The Russians can really be credited with winning the war in Europe, they single handedly destroyed the cream of Germany’s army; the Russian winters were crucial to the victory. Germany falling to the same fate as Napoleon in 1812. The allies opened the third front, remember the allies were fighting their way through Italy as well, though not very successfully. The timing of the Normandy landings were brought forward because of the concern at the speed of the Russians advance into Western Europe, as time would show this concern was merited. The ill fated operation Market Garden (17–25 September 1944) was also a dash for Germany because of the concerns of the Russian rapid advance.
      The main reason the allies won the war was due to American industrial (and Russian) might. Winston Churchill knew this fact from the very beginning of the war, that is why he so relieved when America entered the war after Pearl Harbour. Winston knew from that point the war was won, as long as the Russians could hold out. Which at one point didn’t look likely.
      @Ed-B
      Yes there were many variants of the Sherman by the end of the war. The losses of tank crews was sapping morale so a number of up gunned variants were developed, the American version you mention was one. The British developed the Sherman Firefly with a 17 pounder 76.2mm gun that was more powerful than the Germany’s famous 88mm. But typically only one tank in five was an upgrade, the up gunned version being designated a tank destroyer.
      One fact that should be mentioned the allies produced 4.34:1 tanks more than the Axis powers. Game over.

  6. The JP Morgan Story
    “The bank said it will continue to provide financial products tied to commodities, such as derivatives, and will continue to house and trade precious metals such as gold.”
     
    http://www.huffingtonpost.com/2013/07/26/jpmorgan-chase-commodities_n_3660727.html

  7. Run baby Run



  8. This is interesting!

    • to others for your context – Max is interviewing Alasdair Macleod at the 13 minute mark onward, talking about GOFO and backwardation – well worth zooming into that part of the video…. 

    • holly cow… from 18:20 minute mark onward, Alasdair Macleod talks about a journalist friend suggesting he look at the Bank of England website, where the bank PR people added an “ap” that gives a virtual tour of operations.  At the point when gold inventories are discussed, it notes that there are 400,000 bars of gold, 400oz each.  Well, that “ap” was produced and released at some point in June, 2013.  But the BOE annual report dated Feb 28th, 2013 notes that the BOE has an inventory of 505,000 400oz bars!  That’s a discrepancy of 105,000 bars, or 42 million ounces of gold (roughly 1300 tons, which is also I might add, roughly what we’ve seen Asia scarf-up during the hyper cartel assault following the April 12-15th drive-by shooting on COMEX.)

      While the dopes in the mainstream media would never run with data like this because it’s hard to nail down and get corroboration, the sad thing is that mainstream reporters wouldn’t get off their butts and actually start asking questions of the BOE regarding this odd mis-match between their communications PR and their formal annual reports.

      Interesting indeed, Neo.  Thanks…  And this is why I commented a few weeks back about the value of adding just a short note about the subjects covered in a video.  It need not be something as large as what I just wrote.  But the thing is, knowing the subjects discussed makes more people likely to watch and I could have very easily missed this huge news story, but I decided to watch anyway, because it was Max…

      Thanks again.  If this story doesn’t get more widely spread over the coming days, I’ll make an effort to help push it along.  Hopefully, his journalist friend that pointed out the “ap” will cover the story.
      ———

      A correction to what I said above: It looks like the Feb. 28th date is in reference to a statement made in the BOE report on page 18 and not the date of the report’s publication: “As part of this strategy the Bank also provides custodial services for a range of customers. As of 28 February 2013, total assets held by the Bank as custodian were £699 billion,(2) of which £210 billion were holdings of gold.”

      The footnote (2) reads: “This value excludes assets held under custody for Bank of England Asset Purchase Facility Fund Ltd (BEAPFF).”
      http://www.bankofengland.co.uk/publications/Documents/annualreport/2013/2013report.pdf

      We’ll be looking into this further.

    • “…but I decided to watch anyway, because it was Max…”
       
      Interesting.  I decided not to watch it for that very same reason.
       

    • Max’s style of delivery isn’t for everyone.  But he delivers where it counts, with factual content not covered in the mainstream broadcast media.  He also has outstanding guests. 

  9. Whoa, what a revelation. Lol maybe my prediction will happen after all, a week from tomorrow. PM’s are going up. Lol

  10. Rats leaving a sinking ship is more like it…

  11. Podcast audio has been restored for anyone looking to download this week’s episode.

  12. It looks like the scum wants PM to be allowed to rise slowly with occasional raids so that the dolts don’t wake up and get into PM. Of course the mass misinformation media will “forget” to cover any of this. I am concerned about the volume of $100 bills that are being taken out of circulation. (Go to http://www.beforeitsnews.com and search “impending financial collapse-the grand finale”).
    The new $100 bills might be introduced in October when Basel III is expected to be implemented and there is a distinct possibility of a devaluation when that occurs. 

  13. About the media monkeys… they report on fluff and other safe stuff that their masters say is OK to report… but not much of anything of real interest or vital importance.  Trivia rules the “news” these days.  There’s WAY too much glop presented about who is now on trial, who’s diddling whom in Hollywood, and some other nonsense via “reality” TV.  If all TVs were required to have a bullshit filter built into them, there would not be much coming out of them.

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