JPM and Silver

I’ve been following an interesting story over the past week that I thought you might be interested in.

This story has to due with a recent lawsuit filed against JP Morgan. To my understanding, JPM inherited a massive regular short position in silver contracts through its Fed-orchestrated acquisition of Bear Stearns in 2008….and then, to profit on that inherited position over the last two years, a select group of JPM traders amassed an even bigger “naked” short position on silver to artificially suppress silver prices and rake in huge profits. A lawsuit is now being filed by some commodities traders – I’m not sure the lawsuit matters much as defendants like JPM in this example rarely lose cases like this.

What is intriguing, however, is the fact that this lawsuit reveals JP Morgan’s Achilles heal, and it has nothing to do with bad mortgages – it’s the silver market.  To be clear, if enough people buy or demand physical delivery of silver and prices rise enough, JP Morgan will go bust because they will be unable to cover their short positions – apparently, they have $1.5 Trillion in derivatives betting against silver on their books right now. There are hedge funds out there right now attempting to exploit this fatal weakness – Canadian firm, Sprott Asset Management is one example.

Even though I’m a gold and silver bug, these stories typically don’t really phase me, but in this case, I have a feeling this has legs and could go potentially go viral.

I attached two articles below for more information:

http://www.marketwatch.com/story/jp-morgan-hsbc-sued-for-silver-manipulation-2010-10-27

http://www.deepcapture.com/manipulating-gold-and-silver-a-criminal-naked-short-position-that-could-wreck-the-economy/

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