J.P. Morgan's Dirty Little Secret

J.P. Morgan's Dirty Little Secret
By Greg McCoach | Monday, March 24th, 2008

Events last week have prompted me to send out this communication regarding the sudden collapse of the precious metals market. Let's take a look at what caused the collapse and why junior mining companies are the one glimmer of hope amid the chaos.
Bear Stearns, J.P. Morgan, and the Precious Metals Market
The demise of Bear Stearns, which was reported to the public last Sunday evening and Monday, has in turn caused their assets to be sold off in masse this week.
On their book of liquid assets was a rather large, long gold position. It is being sold off in order to raise cash to offset their massive losses. The spot prices have been hammered because of this activity, but it will be short-term in nature. If you're looking to buy physical precious metals to diversify your portfolio at this point, you are being given an unexpected gift to do so. It won't last long.
Another item in Bear Stearns closet was a massive short-position in the ten year treasury. This of course is being unwound this week, which is making the dollar look a bit stronger than it really is. However, don't be confused by this nonsense, the dollar will soon resume its downward trend.
The fact that Bear Stearns was shorting the dollar to such a degree shows that they were not playing along with the the Federal Reserve banking crowd. And they have been severely punished by the powers that be.
What brought Bear Stearns to its knees was their own riverboat gambling mentality that not only jeopardized them, but the financial system as a whole. This story is just the beginning of what will be a long list of companies that meet a similar fate. Will the Fed and the citizens of the United States be able to bail out all the financial sewage that is about to be uncovered?
What the Fed is doing is nothing more than sleight of hand trickery to gain the assets of Bear Stearns. As I have said before, the Federal Reserve is no more "Federal" than Federal Express. It is a private organization owned and controlled by shareholders, the largest of which is J.P. Morgan Chase.
J.P. Morgan Chase, in other words, is the Federal Reserve... so don't be surprised that they end up with the assets while you and I pay for the debts from the whole mess.
When are people in the United States going to wake up to the ugly realities that are now upon us? This ongoing calamity of financial chaos is going to cause extremely serious consequences to each and every American. Your wealth, security and lifestyle are all at stake as the coming months and years unfold.
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4 Ways to Protect Your Financial Security
You should be doing everything you can, including:

Avoiding, paying down and paying off debt

Buying physical precious metals - particularly gold and silver

Getting money outside the country or at least in a better currency

Getting away from dollar-denominated risk

There are going to be banking failures in the United States and around the world. You should be evaluating the merits of who you bank with. Most of the big banks are in a world of hurt. The smaller, independent banks have not leveraged themselves like most of the big banks. So they may fare better, even though they don't offer all the nice, online services the big banks have.


What to Expect From Junior Mining Companies

As far as junior mining stocks go, they will rebound. Right now they are getting hit as investors like us prepare to write checks for our capital gains taxes. Yes, it appears many of us have waited till the last minute to raise money to pay for these taxes. Most of us will have to sell something to pay for them.

So, in the next few weeks, expect further weakness as this takes place. The better companies will be hit with this activity as well. Those who have the cash will be given the best opportunity to buy low and sell high.

After tax season however, and as the precious metals prices begin to make very large moves in April, the bigger junior mining companies will also make their move... going to much higher levels.

As we move forward in the next six to eight months, I see a time where we will begin to beef up positions in companies that are either in production or are near-term producers. Companies that are more speculative and do not have any near-term production capacity will be eliminated. The reason for this is that the risk capital markets are going to be getting much tighter moving forward, and many junior mining companies that are still in the speculative phase will find it much harder to raise monies moving forward. I will be talking more about this in the coming months.
Until next time,
Greg McCoach
www.GoldWorld.com


Current Metals Prices
Gold$923.703.70
Silver$1,715.0030.00
High Grade Copper$361.203.85
Palladium$432.50-13.55
Platinum$1,875.80-1.50




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Economic Releases for the week of Monday, March 24th, 2008:

Mar 24 - Existing Home Sales
Mar 25 - Consumer Confidence
Mar 26 - Durable Orders
Mar 26 - New Home Sales
Mar 26 - Crude Inventories
Mar 27 - GDP
Mar 27 - Initial Claims
Mar 28 - Personal Income and Spending
Mar 28 - Michigan Sentiment

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From the Archives...
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Why $1,200 by Year End Isn't Out of the Question
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Gold Hits $1,000 an Ounce
2008-03-13 - Luke Burgess