How to crash JP Morgan

December 4, 2010 3:30 PM

Max Keiser (previously) writes in the Guardian about a strategy to try and cause JP Morgan to crash; a strategy which he encourages.

Keiser suggests that by driving up the price of silver this could force JP Morgan into bankruptcy, because of the liabilities accrued by its short-selling. An organization called the 'Gold Anti-Trust Action-Committee' discusses how many large organizations (including JPMorganChase) manipulate the precious metals markets.

posted by a womble is an active kind of sloth (35 comments total)

A little more about Max Keiser that I omitted from my post.
posted by a womble is an active kind of sloth at 3:34 PM on December 4, 2010

The last time this was posted to Metafilter, I lost all my money.
posted by (Arsenio) Hall and (Warren) Oates at 3:34 PM on December 4, 2010

As a bitter and spite-filled individual, I can maybe get behind a plan to drive JPM into bankruptcy. But that seems quite a long way from:

- returning to a "precious metals-based backed currency" which is crazy to begin with, and even more so in the pipe-dream citizen-driven incarnation Keiser seems to be advocating.

- "transferring wealth back to the people from where it came," which, have we learned nothing?
posted by eugenen at 3:44 PM on December 4, 2010

A bit more about Max Keiser, according to Wiki:

He's a former futures trader and previously managed Karmabanque, a hedge fund setup to short certain companies "susceptible to boycott," such as Coke and McDonalds. It funded groups that would encourage boycotts of those companies.

He now wants you to buy silver in the hopes that it will tank JPM.
posted by justkevin at 3:54 PM on December 4, 2010 [7 favorites]

If it had any chance of success, I'd call this plan irresponsible and immoral. Crashing a major bank would increase unemployment and spread misery, panic and unrest.

But as it stands, it's a laughable, pointless waste of time.

FTA: "A few days later, I suggested on the Alex Jones show" tells you all you need to know about the author.

Oh, and he's got something called a "Financial Anarchy" blog. (search for it on google if you must - I won't link to it).
posted by BobbyVan at 3:57 PM on December 4, 2010

Prevrecently.
posted by BeerFilter at 4:02 PM on December 4, 2010

Wasn't this yanked the last time it was posted on the blue?

On preview: what Beerfilter said.
posted by SirOmega at 4:05 PM on December 4, 2010

Speaking for coin collectors everywhere, please do not drive up the price of silver so that coins get melted down again. That makes me sad.
posted by Nabubrush at 4:08 PM on December 4, 2010

Previous campaign? Buy Pepsi, Crash Coke!

http://www.guardian.co.uk/business/2004/nov/25/2

He predicted Coke could drop as low as $22 from $41 at the time of his comments. Over the next few years Coke shares rose 50%.
posted by justkevin at 4:08 PM on December 4, 2010 [2 favorites]

Prevrecently.
Hmm. No overlapping links (or tags) which is why I didn't see it.
posted by a womble is an active kind of sloth at 4:08 PM on December 4, 2010

(And if I'd read the rest of the post I would have seen that was covered)
posted by justkevin at 4:11 PM on December 4, 2010

So in the previously deleted post it said that they were calling for people to buy 100,000 ounces which sounded like an impossibly small amount -- $30 million worth of silver is going to take down a multinational giant? But in the Guardian link he says that if 5% of the world's population (340 million) each bought just an ounce that JP Morgan would collapse, which seems like an impossibly high number -- you're seriously expecting that a volunteer effort based on a viral campaign is going to get people to buy (at least) 10.2 billion dollars worth of silver? Yeah, right. Nothing about this story makes a lick of sense, unless it's just some dude that's heavily into silver and wants to see the price rise.
posted by Rhomboid at 4:47 PM on December 4, 2010 [3 favorites]

Alex Jones, Max Keyser, Glenn Beck, basically all of these fear-pushing fucknuggets advertise precious metals on their shows and blogs. You can consider this to be some weird cross between product placement and audience participation.
posted by fleetmouse at 5:04 PM on December 4, 2010

An organization called the 'Gold Anti-Trust Action-Committee' discusses how many large organizations (including JPMorganChase) manipulate the precious metals markets.

This is from that wikipedia link:

GATA's allegations have been called "fringe" and "conspiracy theories" by some analysts,[who?] and the conclusions "far fetched."[8][1][3] GATA was founded by Bill Murphy, former commodities trader and wide receiver for the Boston Patriots. Its board includes Catherine Austin Fitts, president of Solari Inc. and former assistant secretary of the U.S. Department of Housing and Urban Development.[9] According to the New York Times in 2006, GATA "for the most part is a one-man show," referring to Murphy.[1] According to the Wall Street Journal, GATA receives part of its funding from gold companies.[8]

These guys are just bear raiders. That ZeroHedge guy is supporting this, but he always strikes me as someone who knows a lot about the markets, although his conclusions on the economy are based on his ability to trade and understand the market, which is a mistake a lot of hotshot hedge fund operators and libertarian-leaning traders make - that their direct knowledge of investing in assets makes them wiser about the economy than anyone who isn't a trader, so they summarily dismiss the entire "Fed" and anyone associated with it, or anyone who doesn't believe that fractional reserve banking is a giant conspiracy. This makes it difficult for me to take this crowd seriously, as they seem to really love the intrigue and have a vested interest in the way they advocate. Anyway, traders who aren't dumb don't short without careful consideration of how to exit the trade, including covering the short position if it doesn't work out, and the traders at JPM are anything but dumb. That's not to say they aren't incapable of hubris and letting their bets get away from them, but I just don't see this working out the way these people claim.

Yeah, if everyone who worked at the Pentagon flushed their toilets at the same time ...
posted by krinklyfig at 5:15 PM on December 4, 2010 [4 favorites]

This is a scam.
posted by empath at 5:21 PM on December 4, 2010

These guys are just bear raiders.

Eh. Sorry, gold bugs. I was thinking about a group formed recently, who is bear raiding some of the high flying Chinese stocks in order to make a profit by shorting the stock and simultaneously releasing dubious reports about the companies' credibility and accounting standards. Just the rumor at the right moment is enough to take one of those down.
posted by krinklyfig at 5:21 PM on December 4, 2010

BTW, if JP Morgan has a short position on silver, they must be betting big on gold going down, because silver prices are way out of line with gold prices right now, historically. EIther silver is going to go up or gold is going to come way down. Looks like JPM is betting big on the latter.
posted by empath at 5:22 PM on December 4, 2010

This is utter bullshit. He's trying to have the public "corner the market" and cause a Silver Thursday. But this is basically impossible. He obviously drew the wrong conclusions from the story of how the Hunt Brothers tried to corner the silver market. This guy is a gold and silver broker, and "TV Presenter" and I think he's conning his own clients with this crap. I suspect he's young enough that he wasn't even alive when the Hunt Brothers were active.
posted by charlie don't surf at 5:24 PM on December 4, 2010

I wish Metafilter had weekly economic news digests...
posted by lslelel at 5:29 PM on December 4, 2010

A simple pyramid scheme, really. The whole gold market is. If someone talks to you about fiat currency, you can be 100% sure they bought into this scam and want more people to buy gold so their holdings will go up. It's going to be as bad as the housing market when the gold market collapses, and it'll be a lot of glen beck watching morons losing their life savings this time, because they're at the bottom of the pyramid.
posted by empath at 5:30 PM on December 4, 2010

I have a 1962 dime right here. WHO HAS YOUR SILVER NOW, BABY?
posted by maxwelton at 5:52 PM on December 4, 2010

It's going to be as bad as the housing market when the gold market collapses

No, because even if gold is in a bubble, the situation does not involve securities which were essentially worthless but so sliced up it became very difficult to trace the problem back to fraud, which was committed by the mortgage brokers who pushed no-doc loans on people who had no realistic ability to pay, and banks which securitized these assets while failing to do proper due diligence. Gold is "frothy" but not at the point where outright fraud is being committed in the way it's traded. It will correct pretty hard at some point, but when that will happen is anyone's guess. $2000 is a number I hear from a lot of credible analysts (gold just passed $1400 last week), most of whom aren't exactly thrilled at the prospect of a parabolic run up of the fear trade. What goes up must come down, although this really is not a market which is fraught with giant black holes of worthless paper.
posted by krinklyfig at 5:59 PM on December 4, 2010

It's the same situation with Treasury bonds, which I keep hearing are in a bubble just as bad as the housing market. No, because bonds are also a fear trade, and again, this isn't a market which is concealing a terrible secret. The dollar reversed course recently and started to climb as Ireland started to really falter, but it's heading down again as the EU has stepped in. Bonds may yet correct hard as well, but this isn't going to result in banks becoming insolvent due to over-leveraged positions based on a hell of a lot of people looking the other way while they jumped on for the ride, hoping to cash in while the illusion of an economy pumped with easy money based on leverage from a whole lot of underwater loans was much stronger than the desire to rein it in by anyone who should have known better.
posted by krinklyfig at 6:14 PM on December 4, 2010

Gold IS essentially worthless, though.

How much money is tied up in gold right now?
posted by empath at 6:14 PM on December 4, 2010

Gold IS essentially worthless, though.

Yes and no. It's inherent value is difficult to determine due to the way people trade it, although it's never been considered worthless - that's not to say you can't lose your shirt on it, just like any other investment. Even if its value is illusory, it doesn't matter so much as long as everyone agrees it's worth a certain amount of other assets, and that this value is understood as playing a role other than pure speculation. It's a commodity that's often traded like a currency, although it's not really considered a "serious" investment by a lot of people, as in, you probably shouldn't expect to make money on gold but rather prevent the loss of your investments due to inflation or a sharp market sell-off. It's a good idea to hold a little of your investments in something like gold, in the sense that you should have some money in assets which go up rather than down when equities sell off - in other words, as a hedge. I realize this view is considered ridiculous by the gold bugs, who actually do see gold as an investment, but typically with an armageddon scenario tied to it to see it work out the way they think it will. Good luck with that.

Nassim Nicholas Taleb introduced the idea of the Black Swan as a starting point to long term investing right around the time that worked out very well for him, but you typically need a very long timeline and a lot of research and patience to see that work out, if you're lucky. So, putting all your eggs in that basket is pretty foolish, just as the people who sold out their 401(k)s to put physical gold in their basements, or people who put all their investments in two stocks, say Yahoo and Microsoft (I know someone who did that and is struggling to retire now), but got in well after 2000. As for someone who buys a lot of physical precious metals to survive doomsday, hope you can find a place to unload it when it starts to fall, because that's when it gets tricky, which is why you never really want to hold more than a small position in precious metals and hedge the rest with other asset classes like bonds. You really do not want to have to sell gold when it's falling, particularly not physical gold, where you will automatically get a much lower price than the spot market price.
posted by krinklyfig at 7:00 PM on December 4, 2010 [3 favorites]

It's inherent value

Its its its ... urg.
posted by krinklyfig at 7:01 PM on December 4, 2010

How much money is tied up in gold right now?

Actually, that's the part that's a little tricky. The thing is, a lot of money is tied up in ETNs which hold gold futures or physical gold, or both. There is a growing concern that the derivative ETNs based on futures aren't going to ever be able to deliver the asset which is promised when you invest in futures, that the money invested in these funds at this point is actually bigger than the physical stockpiles, which means there is a pricing imbalance - if this is the case and enough people agree, the market will move very quickly to the price level those people feel comfortable with based on an approximation of actual physical storage, even if the SEC fails to act on those concerns before then.

However, lots of newly middle-class people in China are buying gold, and India is a steady and growing market, due to a growing middle class as well but also for traditional reasons. These trends are likely stronger in the long therm than short-term pricing fluctuations in gold due to some speculative trading in commodities, due to the fact that both of these economies are growing in ways similar to the US in the 1950s.

Caveat emptor. YMMV. IAN your investment advisor.
posted by krinklyfig at 8:28 PM on December 4, 2010

Speaking for coin collectors everywhere, please do not drive up the price of silver so that coins get melted down again. That makes me sad.

This.

When the Hunts did it, it was a major factor in raising the cash value of traditional Hmong silverwork. That in turn contributed to the confiscation and melting down of much of that silver by the Lao government and international traders. Quite apart from the fact that there was a fair bit of violence involved in dispossessing them of their silver, it was an absolute cultural disaster for the Hmong.

So much as I'd like to JP Morgan suffer, screw this for an idea.
posted by Ahab at 8:39 PM on December 4, 2010 [2 favorites]

The vast majority of gold is in the form of jewelry, more so than those gold bricks you see in vaults, or coins. Sounds weird but true - gold chains are where most of the gold is. I hear in India, billion plus people, most housewives put more store in gold jewelry than bank accounts or cash, so they just keep buying it up at record rates as the India economy improves. Cultural thing. But who doesn't own gold jewelry. Jewelry might keep gold going up long than expected. It also means at any time there could be a rush to cash in since everyone owns a piece.

A simple pyramid scheme, really. The whole gold market is.

George Soros in August or so went into gold big time, said it was a bubble, riding it up. The hard part is knowing when to get out :) I'd like to see some analysis for that.
posted by stbalbach at 9:06 PM on December 4, 2010

what is it about precious metals that attracts so many crackpots? is it because they're shiny?
posted by 3mendo at 9:07 PM on December 4, 2010 [1 favorite]

I think it has something to do with the reasons why people searched for El Dorado for so long (and I'm 100% certain someone out there on the interweb believes it is still out there, but I am not falling into that rabbit hole by looking). Gold is mysterious.

Also, maybe they just really like the that scene in Indiana Jones and the Search for the Holy Grail where the Nazi picks the gold cup.
posted by feloniousmonk at 9:35 PM on December 4, 2010

Once upon a time I had a English Composition class with a guy who might as well have been named "Dr. Conservative". It was fun to play the game of doing the weekly writing assignments such that they either played up to his beliefs (which he's cheerfully go on about in class) or directly contradicted them and then see what grade you got. (Correlation may not equal causation, but that was certainly the way to bet.)

Anyhow, for the final paper I wrote this opus on how we had to return to the gold standard as soon as possible or woe unto Delphi. Somewhere in this, I found an estimate on how many cubic feet of gold humanity has laid hands on in all of history and worked out how much it was worth. It seemed like a lot but not when you remembered how much money humanity actually used. I vaguely remember presenting this in a "Golly! That's a lot of gold!" kind of way and skirting the issue that it wasn't really worth as much as you might think assuming he wouldn't work this out himself. A-/B+ (Content/Mechanics)

If I'd shown that paper to the guy who taught my macroeconomics class, he probably would have kicked me in the groin.
posted by Kid Charlemagne at 11:29 PM on December 4, 2010 [1 favorite]

"Let me use my Guardian column to participate in someone's silver trading scam!"

The thing that baffles me most about this is that anyone thinks crashing JP Morgan is a good idea. I mean yeah, screw those investment banker guys, they suck. But stop for a moment and think what it would mean to the world economy if one of the biggest US investment banks crashed. You know, it worked out so well for everyone a few years ago...
posted by Nelson at 9:30 AM on December 5, 2010

Crash4Gold
posted by charlie don't surf at 12:13 PM on December 5, 2010

The thing that baffles me most about this is that anyone thinks crashing JP Morgan is a good idea. I mean yeah, screw those investment banker guys, they suck. But stop for a moment and think what it would mean to the world economy if one of the biggest US investment banks crashed. You know, it worked out so well for everyone a few years ago...

Especially when you remember that JP Morgan-Chase stepped up hard and bought a bunch of failing institutions. Yes, they got a fantastic deal on them, but it's better than having to pay what conservatorship would have cost.

If someone else has to fail for you to succeed, you aren't an investor, you are a vulture.
posted by gjc at 3:24 PM on December 5, 2010