JP Morgan, Silver, Leverage and Trouble…

15 Nov

The silver story expands, and deepens… which is what all these stories seem to be doing..

To the Top Shareholders of JP Morgan

(Your company is bankrupt in terms of silver!)

Silver Stock Report

by Jason Hommel, November 13th, 2010

To the Top Ten Institutional Shareholders and Top Ten Mutual Fund Shareholders of JP Morgan:
It’s news that JP Morgan is being sued for manipulating the silver market by maintaining a large concentrated naked short position in futures contracts on the CME’s COMEX metals exchange.

The lawsuits were announced just days after a brave man in government, Bart Chilton, Commissioner of the CFTC (, the Commodities Futures Trading Commission, made a statement that acknowledged silver price manipulation.

The lawsuits mean that very intelligent lawyers believe that JP Morgan’s short position is so obvious and provable that there is a case to be made, and money to be won from JP Morgan, and they feel that perhaps they will get help even from those in government, such as Judges.  Blood is in the water, and JP Morgan is the one bleeding.

The news articles of the lawsuits don’t tell the full story.  See, I know the men who helped expose JP Morgan as the silver short, and I help to inform those men, and promote their work.  I was the first to file an antitrust complaint to the US Justice Department against JP Morgan for silver manipulation in April of 2010.

JP Morgan is also the custodian of the silver ETF, SLV, which also does not likely have all the silver, which would be another short position.

JP Morgan’s third short position in silver is likely a much larger naked short position in silver than the other two combined, and it’s through the “over the counter” silver market, which has been up to $200 billion in size according to the BIS, the Bank of International Settlements.

See the second link, above, the pdf file, the second table, Table 22A:, under the category “other precious metals”.  The “Notional Amounts Outstanding” in June 2009, were $203 billion.

Jeffrey Christian, bullion bank apologist, at the CFTC hearing on silver on March, 25th, 2010, admitted that silver was traded and leveraged “over 100 to 1″ in the London market.

JP Morgan also holds the largest derivatives positions of any banks, at $69 Trillion, according to the US OCC.  Thus, it is likely that JP Morgan also holds the largest short position in silver derivatives, too, as a matter of course, since they dominate derivatives trading in general.  So, to them, a $100 billion short position in silver would be “chump change” compared to their other derivatives positions, and may, in actual fact, be a part of a larger overall strategy to maintain the value of their other derivatives, (including the US dollar) to keep interest rates low.

See the last page of the second link, the pdf link, above.  The OCC sometimes changes the location of these links, so if the link breaks, you might want to ask one of your junior researchers to locate them for you, or look around the page for a few minutes to find it yourself, or simply contact the OCC as ask them for a copy of their “Quarterly Report on Bank Trading and Derivatives Activities” Second Quarter 2010

So, the problem is simple to understand, but complex to solve, because JP Morgan’s market influencing positions cannot be closed without massive losses that will bankrupt JP Morgan, and perhaps also significantly devalue the US dollar.

The world’s annual silver production is estimated at between about 550 million ounces of silver to about 650 million ounces.  At 600 million oz., at $25/oz., that’s a tiny $15 billion market.  The investment side of the silver market is even smaller, at only 100 million oz annually, which, at today’s silver prices, is a much smaller $2.5 billion market.

Key problem:  How can the world’s leading banks, (probably mostly JP Morgan) sell $100 billion worth of silver in 6 months, which is 6.66 times the entire world’s annual production of only $15 billion worth of silver, and about 50 times the actual physical silver investment market, and it not be fraudulent silver, not real silver, which creates this problem?

But the problem is much bigger than how it might appear from just that.  See, in 1980, silver prices hit $50/oz.  That was when M3, the money supply in the US, was a tiny $1.8 trillion.  Today, it’s $18 trillion, and growing at a rate of about $2 trillion per year, which is the what the US government must print to pay their bills.  So, the inflation-adjusted price of silver could be ten times higher, or up to $500/oz., if only 1% of the population of the USA began to buy silver.

See, 1% of $18 trillion is $180 billion.  How can $180 billion pour into the real and actual physical tiny silver market of $15 billion (or the tinier silver investment market of $2.5 billion) without driving the silver price to $500/oz.?

See, the problem is that the silver price will hit $500/oz. just for starters, by the time only 1% of people in the USA alone try to protect their wealth from inflation by buying silver and gold, and the way things are going in government, that’s nearly a given by now.

If my reading of the OCC report is any indication, then JP Morgan’s short position in silver could be as high as 25% to 50% of the entire world banking system’s short position of $200 billion in silver (and that was when silver was $15/oz.)!

JP Morgan’s short position in silver could thus be as high as 3.3 billion ounces if we are conservative, and estimate their position at only 25% of the BIS report numbers.   By $500/oz., JP Morgan’s short position could be worth a negative $1.5 trillion, and that’s just for starters.  It could grow worse if they add to their short position, in a misguided attempt to manipulate a market that is clearly moving against them.

That kind of activity by a rogue trader brought down Barrings Bank, as showcased by the 1999 movie, “Rogue Trader”.

The other problem is that silver is mostly consumed by industry, as it’s the greatest conductor of electricity in the world, and is used up in 10,000 applications.  Only oil has more applications, but oil can’t be used as money.  It’s just way too hard for the average person to store $8000 worth of oil in 100 barrels on their front lawn, and apartment dwellers never could.  Gold is also unsuitable as money for most people, because a tiny tenth ounce piece is just too valuable if it became worth about a month’s salary, a historic norm.

I submit the problem is bigger than what your brightest minds, your brightest economists, and brightest students in today’s world can solve.

See, there is no central bank of silver. There is no lender of last resort for silver.  And you can’t print silver to solve this problem, because at the end of the day, real silver is needed by industry.

Developed nations, such as the USA, consume, in industry, about 6/10ths of an oz. of silver per year, per person.  As the world economy grows, that will increase.

Silver also has the smallest number of years of resources in the ground of nearly any major metal.  It’s about a 14 year supply.  (This is substantially smaller than the world’s 40 year supply of oil.)

But the solution is simple if you can trust in God.

Be honest.  Be honest first.  Trust that honesty brings rewards and blessings from God.

May I humbly suggest a few simple solutions to your problems concerning your positions in JP Morgan, given JP Morgan’s major financial problems with their short position and shortage of physical silver?

1.  Buy silver.

2.  Sell JP Morgan shares.

Or, well, scratch that, or you can reverse it.  You could sell JP Morgan shares and use the proceeds to buy physical silver.

Most of all 20 of your institutions own about $2.5 billion worth of shares, on average, of JP Morgan.

I can guarantee you that the facts dictate that your shares of JP Morgan will not retain their value nearly as well as will silver.

I can also guarantee you that it’s a race to get silver, and you are all probably not even in the race, given the tiny size of the silver market.

If even one out of 20 of you decided to act, I can guarantee you that silver prices would double and exceed $50/oz, before any one of you were able to buy even $1 billion worth of physical silver.

On September 2nd 2010, at the start of this rally in silver prices, I wrote a simple letter to the top 25 billionaires of the world, declaring that none of them would be able to buy much silver below $20/oz.  Based on recent silver prices rising to over $29/oz., and holding at $26, it appears I was right.

Dear Billionaires of the World

I gave specific advice on how to accumulate large positions in silver, and who to contact to get it.  Of course, you, or anyone else, can also simply call me or my associates at the JH MINT.

It is actually against my best interests to write to you, for several reasons.  See, since I know silver is money, I therefore use silver as my “unit of accounting” internally as a bullion dealer at the JH MINT.  I count all my assets in terms of dollars, and also in terms of silver.  During the recent rise in silver prices, our assets are increasing in terms of dollars, of course.  But not in terms of silver.  Why not?  Because we lose “silver value” on our small cash positions, and we lose “silver value” on our larger gold positions.  So, even though over 65% of our assets are in the form of silver, and even though we are having record sales volumes, we are not able to “accumulate silver value” from operations during this bull market in silver, because silver prices are simply rising too fast.

Furthermore, by sharing with you this information, I risk creating a silver shortage at many of my own suppliers, which could literally put my successful silver dealing business out of business.

I can therefore state with near absolute certainty that if you tried to value the wealth of your institutions in terms of ounces of silver, you would do nothing but “lose money” in terms of ounces of silver, no matter what you do, no matter how great you think your investment decisions will be, no matter how much silver you accumulate, during the next ten to twenty years of the continuing bull market in silver.

This is your first and only warning about the facts of silver that I will ever give you.  I will not contact you again, just as we never pester any of our clients by phone.

God bless.


Jason Hommel


Tags: , , , , , , , , , ,

Leave a Reply

You must be logged in to post a comment.