I’ve been buying for practical reasons – to protect some portion of my net worth from the eventuality and likelihood of a currency crisis.
But right now, at this very moment, there’s a group of people spurring a movement to buy silver in order to bankrupt JP Morgan (NYSE: JPM).
One especially vocal provocateur is financial analyst Max Keiser. He’s been credited with starting this movement. And to be honest, I think Max is spot on when it comes to his analysis. I just don’t know if his plan will work.
To give you the brief back story: for years – maybe even decades – a group of banks have allegedly been manipulating the silver market for their own gain.
I don’t doubt the claim. The Commodity Futures Exchange Commission is currently investigating JP Morgan’s alleged manipulation. On October 26 CFTC Commissioner Bart Chilton said,
“I believe that there have been repeated attempts to influence prices in the silver markets… There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public, and reviewing in publicly available documents, I believe violations to the Commodity Exchange Act (ACT) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.”
To absolve this article of any double-speak: I still advise buying physical silver (and gold) – but I have my doubts that doing so will bankrupt JP Morgan.
Why? Well, for the same reason that I wouldn’t be surprised to hear about another Federal bailout of the auto, airline, bank, mortgage, rail, union, State, or Municipal sectors.
For incredibly stupid and altogether short-sighted reasons, the Federal Government has granted itself a suicide-pact mandate to let no large American institution fail. The Feds publicly prescribe to a falling-domino theory when it comes to these large institutions.
They either believe that allowing large institutions to fail would enflame problems across the country in some kind of Armageddon scenario…
Or they are simply using any crisis as an opportunity to put their sticky fingers in any pie willing to cede temporary (and sometimes permanent) control in order to avoid failure.
So will US Treasury Secretary Timmy Geithner allow his banker buddies over at JP Morgan to go belly up in the event that this “buy silver” campaign succeeds?
I’d be surprised. Right now, the US Treasury and JP Morgan interests’ are intertwined. The US Treasury needs banks like JP Morgan in order to play its shell game with the trillions of new Treasury issuances every year. JP Morgan gladly plays along and in return the whole banking system is backed by the full faith and credit of the Treasury.
Additionally, Timmy Geithner probably isn’t too big a fan of precious metals. When silver and gold make huge dollar denominated gains, it’s seen as dollar weakness across the globe. That makes his job much more difficult.
So the fact that JP Morgan is allegedly manipulating silver to the short side, puts them in Timmy’s good graces. I’m guessing he would reward them with a tip of the cap to the CFTC, the SEC and Congress with another bailout if necessary. Maybe change the rules to benefit silver’s short sellers and harm investors on the long side.
There are so many devious ways that the Federal Government could step in to lessen the blow for JP Morgan, and unfortunately I just don’t have a mind for deviousness.
Don’t get me wrong, I think it’s very noble to want to teach JP Morgan a lesson. It makes buying silver a win-win proposition right now. Even if Mr. Keiser’s movement doesn’t bankrupt JP Morgan, it will bring many of the problems inherent to our financial system spitting and screaming into the light.
It might even kick the end-game scenario for the dollar into high gear.
So for the record, I think it could be a good thing. I just don’t really see how the Feds would let JP Morgan crash.
ETF Daily News Notes Some Silver Related ETFS: iShares Silver Trust (NYSE:SLV), ETFS Physical Silver Shares (NYSE:SIVR), ProShares Ultra Silver (NYSE:AGQ), PowerShares DB Silver (NYSE:DBS), ProShares UltraShort Silver (NYSE:ZSL), UBS E-TRACS CMCI Silver TR ETN (NYSE:USV), Global X Silver Miners ETF (NYSE:SIL).
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Ian Wyatt is an active investor, a well-regarded investment expert and an Internet entrepreneur. He is the Chief Investment Strategist at Wyatt Investment Research, and plays a leading role in each of the company’s investment newsletters and trading services. As a well-regarded market expert, Ian has written for Marketwatch, Zacks Investment Research, Seeking Alpha, Yahoo! Finance and The Burlington Free Press. He has been interviewed or quoted in articles in well-known publications including AOL Finance Blogging Stocks, Kiplinger’s Personal Finance Magazine, Barron Magazine, Barrons.com, Forbes.com, The Dick Davis Digest, The Dick Davis Income Digest, The Wall Street Transcript, TheStockAdvisors.com, Money Show Digest, The New Jersey Star Ledger, The Wisconsin State Journal and The Seattle Times.