JPM- Went short JPM this am. At 29.70. Position trade with mental stop above $30. Now that it is a $20 dollar stock I think it will play lower in the $20's with all the bad press. Here is a piece that speaks of JPM's Gold connection.
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Card-House of Morgan
TRADING NOTES: It is hardly a coincidence that bullion prices zoomed to $300 on the day that J.P. Morgan Chase shares came crashing through their September lows. As I wrote here the other day, Morgan's problems could eventually dwarf those of Enron. They are bound up together right now, to the extent Morgan -- the largest lender in the world to U.S. firms -- supposedly has Enron exposure that exceeds $2.3 billion. However, as my recent note here suggested, the banking giant's risk in the derivatives markets could be considerably higher, since it holds leveraged debt paper with a notional value exceeding $30 trillion. You'd think things could not get much scarier than that, but on Tuesday -- with gold prices soaring -- they did. As it happens, Morgan is a big player in the gold market, mostly by way of bullion loans that work best when gold prices are weak. Those of you who went to the article I flagged last week by DeTocqueville Fund's John Hathaway will already know this. But for those of you who did not, here is the salient part of it concerning J.P. Morgan Chase:
The concentration of gold derivatives in the hands of one institution cannot be comforting to central bankers who had originally lent their gold reserves to a wide array of bullion dealers. JP Morgan Chase, also a major counter party to Enron in a variety of energy derivatives, held 80% of the gold derivatives reported by the OCC (Office of Controller and Currency) as of 9/30/01. Although total gold derivatives reported to the OCC have declined from the peak levels of $87.6 billion at year-end 1999, JP Morgan held only 40% of the total that time, which was prior to the merger with Chase. The decline in OCC-reported gold derivatives from the 1999 year end peak is most likely due to an offloading of positions to a non-OCC reporting entity such as Enron, an Enron-like organization, or a foreign bank. Now that many have abandoned the gold derivatives trade, it appears that JP Morgan Chase has become the rear guard to defend the derivatives universe against higher gold prices.
A "rear-guard" defense? If so, Da Boyz will have their hands full today, since gold's assault on $300 during yesterday's (Tuesday's) session hardly looked like it was going to subside quietly overnight. I had projected a short-term target for the April Comex gold contract in the range 305-306, but practically speaking, anything could happen. Morgan has friends in high places, as we all know, and they have proven many times in the past that they have both the resolve and the muscle to keep the gold price from drifting upwards of $300. Sooner or later, though, even more powerful forces than Morgan and its friends were bound to prevail.
Will it be this week?
Stay tuned. |
