Big Banks | timiacono.com - Part 20

“Crash JP Morgan Buy Silver!”

This is one of the tamer videos over at Max Kaiser’s blog where, by the looks of it, there is a concerted campaign to bring down TBTF bank JP Morgan by urging the masses to buy and take possession of silver bars and silver coins.

Recall that JP Morgan is believed to have massive silver short positions that, you’d think, after the recent price surge, would be causing  a good deal of grief for whoever is keeping the books over there. It looks to be another interesting week in metals markets with gold and silver rising along with the trade-weighted dollar so far today. It’s always kind of creepy when that happens because you know something really bad is happening in Europe.

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A Dismal Outlook in the U.K.

Between cleaning paint off of my fingernails, changing addresses, and holding the front door open while all sorts of installer types traipse through the new house, there hasn’t been time to write much here lately (we move on Thursday), but I couldn’t help but notice this dismal set of headlines at the Telegraph today in a brief scan of the latest news.

There appears to be some optimism there in the lower right. Hopefully, the 2010 green shoots in the U.K. lead to something more enduring than the 2009 green shoots in the U.S.

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Silver, JP Morgan, HSBC, and the CFTC

It looks as though the JP Morgan/HSBC silver market manipulation story has developed some serious legs after CFTC (Commodities Futures Trading Commission) commissioner Bart Chilton said yesterday that market participants have made “repeated” and “fraudulent efforts to persuade and deviously control” the price of silver.

The details are in this story that leads the Money & Investing section of the Wall Street Journal (yes, that  means it’s more than just a conspiracy theory now).

The CFTC’s investigation of silver has heated up in recent weeks. The agency’s enforcement staff has circulated a packet of information to CFTC lawyers and commissioners, outlining some of its findings in the silver probe, including documents that could suggest there have been attempts to manipulate prices. In recent days, the commissioners have been discussing how to proceed in the investigation, but they haven’t made a decision.

Earlier this year, the investigation took a new twist when the CFTC began looking into allegations by a trader in London who contended that J.P. Morgan Chase & Co., one of the largest silver traders, was involved in manipulative silver trading, a person close to the situation says.

In recent months, CFTC lawyers have interviewed employees of J.P. Morgan in its metals-trading business as well as industry traders, commodity executives, experts and employees of other metals-trading firms, a person familiar with the situation says.

J.P. Morgan and HSBC Holdings PLC traditionally have been big players in the silver market. A CFTC weekly report for Oct. 19, the most recent period, shows that less than four market players hold 24.3% of all net bearish bets in the silver market. J.P. Morgan and HSBC are among those market participants, according to silver traders and a person close to the investigation.

There is a good deal of background in the report about the Hunt brothers in the 1980s and the email campaign prodding the CFTC to action, an effort that was spearheaded by silver analyst Ted Butler. Of course, both JP Morgan and HSBC declined to comment.

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A Questionable Future for Wall Street?

David Weidner ponders the future profitability of Wall Street firms in our post-2008 environment in this timely commentary at MarketWatch and comes up with one of the more succinct summaries of the current condition as highlighted below.

The bailouts have come and gone, leaving a vastly consolidated, less-competitive marketplace. Washington’s swipe at the industry, the Dodd-Frank Act, largely avoided remaking the industry or ending “too big to fail.” The economy isn’t exactly humming, but the market is up, interest rates are low and deals are getting done.

Yet the recent earnings reports from the biggest Wall Street banks don’t reflect this era of opportunity.

Something’s amiss. Without a bubble, Wall Street is a lackluster industry. Profitable? Yes. But its ability to turn in the kind of performance it regularly turned out in the 2000s, without hollow capital being created out of dead-on-arrival Internet start-ups or straight-to-default mortgages, is questionable at best.

Wall Street’s loss may be the economy’s gain. Until 1985, the financial sector never represented more than 16% of the economy. During the bubble decade, the financial sector churned out 41% of domestic profits.

There were a lot of contributing factors, but the biggest was the phony creation of wealth: overvalued tech companies that created paper fortunes and mortgage securitization that did much of the same.

Of course, bonus pools have risen to a record high this year, so it’s not all bad for those who continue to push the nation’s paper around for a living.

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