JP Morgan buys 50% of LME copper

[Winehole23]

JP Morgan revealed as mystery trader that bought £1bn-worth of copper on LME

The American investment bank JP Morgan is the mystery trader that grabbed more than half the copper on the London Metal Exchange, The Daily Telegraph has learned.


http://i.telegraph.co.uk/telegraph/multimedia/archive/01777/copper_1777937c.jpg The trade was described in the LME's daily update as 'between 50pc and 80pc' of the 350,000 tonnes of copper in reserves








By Louise Armitstead and Rowena Mason 8:30AM GMT 04 Dec 2010 98 Comments (http://www.telegraph.co.uk/finance/newsbysector/industry/8180304/JP-Morgan-revealed-as-mystery-trader-that-bought-1bn-worth-of-copper-on-LME.html#disqus_thread)

(http://www.telegraph.co.uk/finance/newsbysector/industry/8180304/JP-Morgan-revealed-as-mystery-trader-that-bought-1bn-worth-of-copper-on-LME.html#disqus_thread)


The $1.5bn (£1bn) trade was described in the LME's daily update as "between 50pc and 80pc" of the 350,000 tonnes in reserves. This pushed up the price for the immediate delivery of copper to $8,700 – its highest level since the financial crisis in October 2008.




A high premium on the spot copper price normally reflects fear of a shortage of the metal, which is in hot demand across the world as a vital component in a mass of products from electrical gadgets to wiring.




A source close to the situation said that JP Morgan had bought the copper contracts, adding that amount is closer to the "lower portion of the range" disclosed by the LME.



Traders said JP Morgan's name had been circulating the market all day as the most likely buyer, especially since it is about to launch a physically-backed "exchange-traded fund" (ETF) in copper imminently.



One metals broker dealing on the LME said: "The story is that they're positioning themselves in front of the ETF. There's been a lot of speculation it's them."



Traders noted that there was no physical shortage of copper in the markets but that fears of a squeeze have persisted ever since a raft of investment banks announced their intention to launch ETFs this autumn.



Last month metal traders wrote to the Financial Services Authority (FSA) claiming that licensing the funds, which are also likely to be launched by BlackRock, Goldman Sachs and Deutsche Bank, may amount to "approving the next financial bubble".



It is estimated that if the copper funds are fully subscribed they would be looking to buy more than half the total stocks in LME warehouses.
Traders' concerns are based on the ETF model that will require the investments to be backed by physical metals, such as copper, lead, aluminium and nickel, rather than paper assets offered by futures contracts.



Daniel Major, a metals analyst at RBS, said: "There isn't a huge buffer available for the market. The supply situation can quite easily tighten in copper."



The LME moved to quash claims that a rogue speculator was attempting to corner the copper market.



Diarmuid O'Hegarty, head of compliance, said: "The LME has noted recent comments about the current circumstances in the copper market. Such circumstances are not unusual and the exchange is exercising its well established procedures for maintaining an orderly market."
He added that large trades were not a cause for concern because the market's rules dictate that holders have to lend out a proportion of their stock to ensure a smooth supply of the metal.



Fundamental supply pressures have also been pushing up the copper market. Rio Tinto, the mining giant, warned last week that next year's copper production would be lower than expectations. And a strike at an Xstrata mine in Chile, the third largest in the world, has been going on for longer than predicted.



JP Morgan declined to comment.

[Cant_Be_Faded]

Are they betting on the economy truly rebounding?

How weird.

[boutons_deux]

no, betting on a critical, expensive commodity becoming more expensive, restricted supply in face of constant/increasing demand.

[Cant_Be_Faded]

no, betting on a critical, expensive commodity becoming more expensive, restricted supply in face of constant/increasing demand.

ehhhhh which would only happen with an economic rebound

Particularly in the construction aspect.

Weird move. Gotta research more about this.

[Winehole23]

Matter of course. Physical reserves will be mandatory for ETF trading. Ain't that coming up?

[greyforest]

copper bubble here we come

[boutons_deux]

ehhhhh which would only happen with an economic rebound


Well, oil is nearly $90 (it was $35 when oilmen moved into the WH in 2001) in middle of a historic depression in industrial and other countries.

Supply/demand argument, just another joke, as it was when oil hit $140/barrel.

Commodity prices is all about traders gaming the system, and in secret.

http://en.wikipedia.org/wiki/File:Copper_Price_History_USD.png


http://upload.wikimedia.org/wikipedia/commons/8/87/Oil_Prices_1861_2007.svg

[Winehole23]

Commodity prices is all about traders gaming the system, and in secret.The big trading desks are formidable indeed, but I doubt the de-linkage from market fundamentals is quite so complete as you are suggesting.

As usual, you take a completely uncontroversial observation and ruin its persuasiveness by grotesque exaggeration. You can't help it, can you?

[boutons_deux]

Explain to us how oil was $140/barrel with the world in a recession, heading for a depression and liquidity freeze a couple months later, and the Saudis saying they had plenty of oil to sell that wasn't selling.

[Winehole23]

I thought speculation had something to do with it.

[Winehole23]

Saying so was controversial at the time. A couple of years on, it is more hackneyed.

[boutons_deux]

"was controversial at the time"

Thank you, I was saying it then. Welcome to my bandwagon

[Winehole23]

http://www.tarheelfanblog.com/wp-content/uploads/2010/11/BAndwagon.jpg

[Parker2112]

"was controversial at the time"

Thank you, I was saying it then. Welcome to my bandwagon


http://www.tarheelfanblog.com/wp-content/uploads/2010/11/BAndwagon.jpg

:lol

[boutons_deux]

that's a great picture of the ST academic debating club

[TDMVPDPOY]

shouldnt we be moving frmo coppper to fibre optic?

[boutons_deux]

fibre's great for data, no so great for power transmission.

make me an inductor or transformer with fibre. :)

[CosmicCowboy]

Copper is also a currency hedge. With the Dollar and the Euro sucking copper is a basic hedge play since India/China/Malasia are still kicking ass. They don't HAVE to buy gold/silver but they need copper.

[RandomGuy]

ALL that glisters is not gold, as the old saying rightly affirms—because at the moment, copper is shining too. Last week the price of gold surged past $1,400 an ounce, but for pure performance copper is the clear recent winner. Since the middle of the year the price of gold has risen by a decent 13%; copper, on the other hand, has soared by 35%. Stocks of copper at the London Metal Exchange (LME) are down to 8 days of global consumption; add in holdings at Shanghai’s exchange and producer stocks and it creeps up to close to a fortnight.

On December 3rd rumours circulated that JPMorgan bought up warrants for more than 50% of the LME’s copper stocks, probably in readiness to launch a physically backed exchange-traded fund (ETF), a popular investment vehicle for gold that is now set to spread to a wide variety of base metals. The race to launch copper ETFs is swiftest because it is the metal in shortest supply. China’s mammoth demand for copper—it sucks up 40% of world supplies—has not been matched by fresh supplies. New copper deposits are thin on the ground. As older mines get deeper and the choicest parts of deposits become exhausted, ore grades have declined. In all, there has been very little net growth in supplies for several years.

Plumbers are steadily switching from copper pipes to plastic ones; and the Chinese have found a way of substituting the metal with cheaper aluminium in air-conditioning units. Despite this, demand for other uses is still set to outstrip supply, and prices to rise, in the next couple of years or so. This makes copper alluring to the investor—hence the slew of ETFs backed by physical copper that are set to be launched. BlackRock, Deutsche Bank and ETF Securities hope to join JPMorgan in offering investors exposure to physical copper. This too is sure to push prices higher as the funds take copper off the market at a time of tight supply. If regulators can be persuaded to set aside their objections and allow these ETFs to trade, copper, currently trading at over $8,750 a tonne could be pushed up beyond $10,000 according to RBS, a bank.

Other are not so sure. Investors, who can already invest in copper through the futures market, may not want the reassurance of holding physical supplies. Unlike gold it is far too bulky to be of use for slipping a couple of bars into a case and making a dash for the border. Its bulkiness means it costs more to store. But even if investors aren’t keen on copper ETFs the laws of supply and demand are set to push prices higher anyway. For now, that is. Those same laws have started to prompt investment in developing new copper mines and expanding existing ones. From 2012, as this extra supply comes on to the market, the metal may begin to lose its lustre.


http://www.economist.com/blogs/newsbook/2010/12/copper

[Wild Cobra]

no, betting on a critical, expensive commodity becoming more expensive, restricted supply in face of constant/increasing demand.
One problem with that thought. It may bring the immediate price of copper up, but they are stuck holding it if they want the price to stay up. I see this as a potential loss rather than gain for them. With a rise in copper prices, more mining operations may start up, reducing the supply/demand pricing back to nominal levels. Now when they unload, it will likely be at a loss as the market is seeing an excess of product vs. demand.

Good investors don't put all their eggs in one basket, or buy such a high amount of commodities unless the nature commodity price will rise on it's own.

Supply and demand rules.

[Wild Cobra]

copper bubble here we come
And who will lose when it bursts?

Can anyone say JP Morgan?

[CosmicCowboy]

I wonder how high it will get? I've got a few thousand pounds of #2 copper scrap I have been saving...

[Wild Cobra]

shouldnt we be moving frmo coppper to fibre optic?
No kidding.

Why would anyone want to have such a large supply of copper as assets? I wonder if they know of a new technology requiring a large amount of copper. That's the only thing I can fathom making this a profitable deal.

[Wild Cobra]

I wonder how high it will get? I've got a few thousand pounds of #2 copper scrap I have been saving...
How do the ratings work? Never learned, but I have been saving 1982 and older pennies, since they are worth more than a penny.

[CosmicCowboy]

No kidding.

Why would anyone want to have such a large supply of copper as assets? I wonder if they know of a new technology requiring a large amount of copper. That's the only thing I can fathom making this a profitable deal.

Uhhh...you know how a wind generator works?

[Wild Cobra]

Copper is also a currency hedge. With the Dollar and the Euro sucking copper is a basic hedge play since India/China/Malasia are still kicking ass. They don't HAVE to buy gold/silver but they need copper.
Yes, I agree, but not when you cause an artificial rice in price by buying a substantial share of a reserve.

[Wild Cobra]

[-snipped article-]

http://www.economist.com/blogs/newsbook/2010/12/copper

That makes sense, but I still don't see it playing that way. I see more mines started anyway, and this as a probable loss for JPM. Part of me hopes I'm wrong.

[Winehole23]

that's a great picture of the ST academic debating clubIt's not very academic, and mighty little debate happens. Posters mostly talk past one another.



( the pic echoes "bandwagon")

[Wild Cobra]

Uhhh...you know how a wind generator works?
It's still a small chunk of the copper reserves.

[CosmicCowboy]

It's still a small chunk of the copper reserves.

Electric motors, generators, electrical transmission, contacts on SD chips, solar panels, wires, cables, etc...nothing is going to replace copper anytime soon...

[Wild Cobra]

Electric motors, generators, electrical transmission, contacts on SD chips, solar panels, wires, cables, etc...nothing is going to replace copper anytime soon...
True, but copper isn't so rare that more mines wont be built to cover demand as the price slightly increases. I just don't see it being a win for them. Yes, I could be wrong. Time will tell.

[CosmicCowboy]

True, but copper isn't so rare that more mines wont be built to cover demand as the price slightly increases. I just don't see it being a win for them. Yes, I could be wrong. Time will tell.

It's a hit and run. Make 10% in a month and it's a 120% annualized return.

[Wild Cobra]

It's a hit and run. Make 10% in a month and it's a 120% annualized return.
It could still backfire if they hold most of it and the price drops.

[ElNono]

And who will lose when it bursts?
Can anyone say JP Morgan?

Who lost when the housing market bubble burst? JP Morgan?

[ElNono]

I thought the political class made clear enough that JPMorgan is too big to fail...

[CosmicCowboy]

I'm pretty confident they did their homework on risk/reward. JPMorgan/Chase are also thinking globally and this may give them somewhat of an advantage in competing with BOA in China.

[CosmicCowboy]

Who lost when the housing market bubble burst? JP Morgan?

JP Morgan was eaten by Goldman with the collusion of the fed in a blind short squeeze. Then the Fed arranged the shotgun wedding between the corpse of JP Morgan and Chase.

[ElNono]

JP Morgan was eaten by Goldman with the collusion of the fed in a blind short squeeze. Then the Fed arranged the shotgun wedding between the corpse of JP Morgan and Chase.

And us taxpayers paid for the honeymoon...

[RandomGuy]

That makes sense, but I still don't see it playing that way. I see more mines started anyway, and this as a probable loss for JPM. Part of me hopes I'm wrong.

You are. Don't lose hope on that. :p:

More mines will be started, but remember this is a finite resource and current mines deplete and need to be replaced. Remember to increase amount of new supplies requires that you find new sources faster than you use old ones up.

China and India are sucking up vast quantities of stuff, and that demand grows exponentially each year. 1.1*1.1*1.1*1.1*1.1*1.1*1.1*1.1*1.1*1.1=2.59.... Ten years of 10% growth adds up. At that rate, all things held equal, you double underlying demand every 7 years.

Although we are starting to see the glimmers of inflation in China, and that will act to crimp things somewhat.

I don't expect to see the torrid growth of China's economy continue indefinitely. They are getting too old too fast and, as we have noted, are going to be really sick from the nasty pollution. I give it another 10 years of solid growth, then they will start to slow down at an accelerating pace.

[RandomGuy]

a blind short squeeze.

ewww, leave your first date out of this. TMI.




:p:

[Wild Cobra]

You are. Don't lose hope on that. :p:

More mines will be started, but remember this is a finite resource and current mines deplete and need to be replaced. Remember to increase amount of new supplies requires that you find new sources faster than you use old ones up.

China and India are sucking up vast quantities of stuff, and that demand grows exponentially each year. 1.1*1.1*1.1*1.1*1.1*1.1*1.1*1.1*1.1*1.1=2.59.... Ten years of 10% growth adds up. At that rate, all things held equal, you double underlying demand every 7 years.

Although we are starting to see the glimmers of inflation in China, and that will act to crimp things somewhat.

I don't expect to see the torrid growth of China's economy continue indefinitely. They are getting too old too fast and, as we have noted, are going to be really sick from the nasty pollution. I give it another 10 years of solid growth, then they will start to slow down at an accelerating pace.
I only wish you would use your same logic into considering who needs to curtail their soot emissions. China's use of fossil fuels has been increasing something like 18% annual. Put that into your compound percentage formulation.

I get what you're saying. I don't just believe copper is as rare as claimed. i think this whole this is being hyped.

[Wild Cobra]

You are a believer in peak oil. How about peak copper?


Demand for copper, the only other metal Graedel has studied, shows no sign of levelling off, and based on 2006 figures for per capita consumption he calculates that by 2100 global demand for copper will outstrip the amount extractable from the ground.
That's still a long way off, so I don't see a strain making the price rise much, happening.

World's 5th largest gold, copper reserves found in Pakistan (http://www.science.org.au/nova/newscientist/027ns_005.htm?id=mg19426051.200&print=true)

[RandomGuy]

I only wish you would use your same logic into considering who needs to curtail their soot emissions. China's use of fossil fuels has been increasing something like 18% annual. Put that into your compound percentage formulation.

I get what you're saying. I don't just believe copper is as rare as claimed. i think this whole this is being hyped.

Copper isn't all *that* rare, you are entirely correct.

Fossil fuel usage in China is accelerating as they change their lifestyles, i.e. electricity and cars, faster than their economy grows.

China desperately needs to curtail their soot emissions, their economy depends on it, if nothing other than the smog and health risks, not to mention acid rain and the like.

http://www.chinaenvironmentallaw.com/wp-content/uploads/2008/07/coal-miner.jpg
Chinese coal miner.

[RandomGuy]

You are a believer in peak oil. How about peak copper?

That's still a long way off, so I don't see a strain making the price rise much, happening.

World's 5th largest gold, copper reserves found in Pakistan (http://www.science.org.au/nova/newscientist/027ns_005.htm?id=mg19426051.200&print=true)

As has been explained to you previously, long before the point where projected demand exceeds supply, you get disproportionate price increases.

The price is the intersection between supply and demand CURVES. You seem to be trapped in thinking of things in straight lines. It is possible to not have the price point move much in the shallow end of a curve, then move up markedly with much smaller demand increases towards the top, depending on the shape of the curve.

http://upload.wikimedia.org/wikipedia/commons/thumb/7/7a/Supply-and-demand.svg/240px-Supply-and-demand.svg.png

The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

[Wild Cobra]

As has been explained to you previously, long before the point where projected demand exceeds supply, you get disproportionate price increases.

The price is the intersection between supply and demand CURVES. You seem to be trapped in thinking of things in straight lines. It is possible to not have the price point move much in the shallow end of a curve, then move up markedly with much smaller demand increases towards the top, depending on the shape of the curve.

http://upload.wikimedia.org/wikipedia/commons/thumb/7/7a/Supply-and-demand.svg/240px-Supply-and-demand.svg.png
LOL...

We are still talking small changes, and trust me. Investors will look for more resources knowing the demand is increasing. Now that we have a known two year tax system, investors will start investing again. there will be lots of capital available now for new ventures since capital gains taxes are remaining log, and not in fear of increasing for another 2 years.

I have to laugh, because you will use known mathematical models when it suits your needs, but disregard the same effect they don't. Do you realize you are a hypocrite in these manners? Do you realize how the cap and trade fits your supply and demand pricing, and not being a small change, it will be very costly? Do you realize the same known theory proves out as the Laffer curve, in economics?

Thanks for the laugh.

[Wild Cobra]

They could easily be buying into a market already run up, and ready to burst. They did real well predicting housing...

http://4.bp.blogspot.com/_vsQ_G2OOspQ/S6-J-F32xaI/AAAAAAAABp0/2aJYb5UqOc4/s1600/HG-1700-Copper-Long-Term-Chart-1970-2010.png

[Wild Cobra]

This one is real promising:

http://upload.wikimedia.org/wikipedia/commons/1/1e/Historical_copper_price.png

[Wild Cobra]

Nothing spectacular here:

http://www.alanwire.com/images/copday.png

[Wild Cobra]

I read some things that in essence say that copper has not increased in production capacity because it doesn't respond to short term changes. There is still plenty of production capacity, and the profit is in smelting. Not mining. Increases in production capacity only follow foreseen need, which we have with Asia growing as it is. I still see this as a very risky investment. Too much money to allocate into one basket.

[Winehole23]

According to rampant rumors, Morgan has a huge (possibly multi-trillion dollar) short position in silver. Not sure if that relates, but I thought I'd throw it in there.



"JPMorgan acts as an agent for the Federal Reserve; they act to halt the rise of gold and silver against the US dollar. JPMorgan is insulated from potential losses [on their short positions] by the Fed and/or the US taxpayer," Maguire said.


In the gold pits, Maguire sees HSBC betting against the precious metal's price without having any skin in the game in the form of a naked short.



"HSBC conducts an ongoing manipulative concentrated naked short position in gold. Silver is much easier to manipulate due to its much smaller [market] size," Maguire added.
http://www.nypost.com/p/news/business/metal_are_in_the_pits_2arTlGNbMK7mb1uJeVHb0O#ixzz1 815fLr5J



By selling massive amounts of paper silver in the futures market, JPM has been able to suppress the price of the precious metal. It is believed that these short positions are naked (i.e. they are not backed by any physical silver). In fact, reports indicate that JPM is short more paper silver than physically exists in the world.



An article by Max Keiser which appeared in the Guardian (http://www.guardian.co.uk/commentisfree/2010/dec/02/jp-morgan-silver-short-selling-crash) on December 2, 2010 claims that the size of the short position is 3.3 billion ounces of silver.



In recent days, rumors have been swirling on the internet that JPM's massive short position is about to blow up in their face in the form of an almighty short squeeze and potential COMEX default as large traders demand physical delivery of silver that COMEX does not have in their vaults.



J.P. Morgan is currently under investigation by the CFTC for allegedly manipulating the price of silver. The investigation into the bank can be traced back to November 2009 when London metals trader and whistleblower Andrew Maguire contacted the CFTC to report market manipulation prior to it actually occurring.



Maguire had been told by J.P. Morgan commodity traders that the bank was manipulating the price of silver and subsequently reported this to the CFTC. He also gave the CFTC two days' notice about an impending silver manipulation that would take place around the Nonfarm payrolls number on February 5, 2010.



The manipulation played out EXACTLY as Maguire had predicted. You can find the emails between Maguire and Ramirez here (http://www.kingworldnews.com/kingworldnews/G+_Articles/Entries/2010/3/30_A_LONDON_TRADER_WALKS_THE_CFTC_THROUGH_A_SILVER _MANIPULATION_IN_ADVANCEBy_Andrew_Maguire.html). Shortly after this information came to light, the whistleblower was involved (http://www.nypost.com/p/news/business/jpmorgan_chase_story_in_uk_DsMN4PnXFoQG5KdevIsQ7N) in a bizarre hit and run accident in London which caused him and his wife to be hospitalized.



The price of silver has absolutely exploded in recent months as these reports have surfaced and it is clear that blood is in the water. The predator (J.P. Morgan) has now become the prey. Every tick higher in the price of silver brings more pressure on the bank to cover their short position. This in turn puts more upward pressure on the silver price.


Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/12/06/benzinga668905.DTL#ixzz1816Fs8nM

[Winehole23]

Here it is:



Another report indicates that JPM may really be on the ropes with their short silver position and are attempting to hedge themselves by buying $1.5 billion worth of copper. According to the Telegraph, (http://www.telegraph.co.uk/finance/newsbysector/industry/8180304/JP-Morgan-revealed-as-mystery-trader-that-bought-1bn-worth-of-copper-on-LME.html) the bank has bought "between 50% and 80%" of the 350,000 tonnes in reserve at the London Metal Exchange.



bb

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/12/06/benzinga668905.DTL#ixzz1817VA8xo

[TeyshaBlue]

Wow. Ponzi writ in silver and copper.

[RandomGuy]

According to rampant rumors, Morgan has a huge (possibly multi-trillion dollar) short position in silver. Not sure if that relates, but I thought I'd throw it in there.


http://www.nypost.com/p/news/business/metal_are_in_the_pits_2arTlGNbMK7mb1uJeVHb0O#ixzz1 815fLr5J




Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/12/06/benzinga668905.DTL#ixzz1816Fs8nM



http://seekingalpha.com/article/241152-jp-morgan-and-the-massive-silver-short-the-greatest-story-ever-told

If it smells to fanstastic to be true...

The guy pushing hardest regarding this rumor, astonishly enough, stands to benefit a great deal if people rush out and follow his exhortations.

Not that that is any logical reason to disbelieve him from the outset, but one should, as the guy linked above did, subject such claims to some pretty close scrutiny.

I have a hard time believing any sane CEO would sign off on a $1.5tn derivitaves deal these days. Smells like... bullshit.

[RandomGuy]

LOL...

We are still talking small changes, and trust me. Investors will look for more resources knowing the demand is increasing. Now that we have a known two year tax system, investors will start investing again. there will be lots of capital available now for new ventures since capital gains taxes are remaining log [low?], and not in fear of increasing for another 2 years.

I have to laugh, because you will use known mathematical models when it suits your needs, but disregard the same effect they don't. Do you realize you are a hypocrite in these manners? Do you realize how the cap and trade fits your supply and demand pricing, and not being a small change, it will be very costly? Do you realize the same known theory proves out as the Laffer curve, in economics?

Thanks for the laugh.

I realize all of these things.

Per usual, you take all these different parts, run it through your ideological blinders, then pat yourself on the back about how smart you are in reaching a decision backed by all the information that made it through those blinders.

As I have said before, this is the reason I am very hesitant to assign your conclusions on climate science any real weight.

I can clearly see how stilted your conclusions are, because of how you subordinate everything to your ideological stance, however "sciencey" you dress them up.

[RandomGuy]

You are a believer in peak oil. How about peak copper?

That's still a long way off, so I don't see a strain making the price rise much, happening.

World's 5th largest gold, copper reserves found in Pakistan (http://www.science.org.au/nova/newscientist/027ns_005.htm?id=mg19426051.200&print=true)

"peak copper"?

Copper, although we talk about "consumption" is not consumed in turning it into products. It merely changes form, and can be recycled, a main difference between that and fossil fuels.

I see some steady rises, but nothing really catastrophic here.

As you rightfully noted that new mines are not entered into on the basis of short-term swings. The big ones are multibillion dollar affairs, and you don't pull that kind of trigger without some solid guarantee of cash flows.

[boutons_deux]

As with peak oil or any mineral commodity, it's not only supply that peaks, it's the ability/willingness of the market to cover the profits added to much higher extraction costs, even for an abundant supply, after the low hanging fruit is all taken (eg, oil in lower 48 pushing extraction to Alaska, deep waters, and tar sands).

[Winehole23]

I have a hard time believing any sane CEO would sign off on a $1.5tn derivitaves deal these days. Smells like... bullshit.One might have said the very same thing about all the broker-dealers and megabanks regarding MBSs three or four years ago. There's ample precedent for it, and a perverse incentive is now in place: JP Morgan is TBTF, and they know it.

If Morgan makes a bad bet, the public will backstop them. AGAIN.

(Slightly, OT: The CFTC investigation of JP Morgan sure isn't bullshit. They seem to be taking Mr.Maguire's accusations seriously enough. )

[MannyIsGod]

One might have said the very same thing about all the broker-dealers and megabanks regarding MBSs three or four years ago. There's ample precedent for it, and a perverse incentive is now in place: JP Morgan is TBTF, and they know it.

If Morgan makes a bad bet, the public will backstop them. AGAIN.

(Slightly, OT: The CFTC investigation of JP Morgan sure isn't bullshit. They seem to be taking Mr.Maguire's accusations seriously enough. )

Hard to argue with this logic.

[Wild Cobra]

I realize all of these things.

Per usual, you take all these different parts, run it through your ideological blinders, then pat yourself on the back about how smart you are in reaching a decision backed by all the information that made it through those blinders.

As I have said before, this is the reason I am very hesitant to assign your conclusions on climate science any real weight.

I can clearly see how stilted your conclusions are, because of how you subordinate everything to your ideological stance, however "sciencey" you dress them up.
No, you have me wrong. If you recall, I have posted in the past how metals would be good investments, and since they were not gaining like gold because of momentum, probably a better choice. Though I didn't say so, I meant all transitional metals (http://en.wikipedia.org/wiki/Transitional_metal). My outlook on this is that it is late in the game for copper. It doesn't have the same supply and demand disparity as gold, and buying such a high percentage of it I believe will be disastrous.

Now also remember I did say I could be wrong about this. I am firm on my Global Warming views however, so you are comparing apples with bananas.

[Wild Cobra]

As you rightfully noted that new mines are not entered into on the basis of short-term swings. The big ones are multibillion dollar affairs, and you don't pull that kind of trigger without some solid guarantee of cash flows.
And with the clear outlook that copper needs will increase, new mines will be made as necessary. It will not have the same supply and demand effect on pricing as gold does. It is a commodity that I think we will likely never run short on because of future technologies reducing the volumes needed.

[RandomGuy]

One might have said the very same thing about all the broker-dealers and megabanks regarding MBSs three or four years ago. There's ample precedent for it, and a perverse incentive is now in place: JP Morgan is TBTF, and they know it.

If Morgan makes a bad bet, the public will backstop them. AGAIN.

(Slightly, OT: The CFTC investigation of JP Morgan sure isn't bullshit. They seem to be taking Mr.Maguire's accusations seriously enough. )

I wouldn't be surprised if there were *something* going on here, but part of the problem is that the guy pushing this theory seems to be basing his figures on very thin indirect evidence.

As for TBTF, I am all there with you. I think we need to fix that shit and fast.

I think the second that one of these firms comes close to failing, you let it fall, then wipe out all the equity, make the bondholders suck up 1/2 the rest of the loss, and THEN step in to backstop any remaining losses. Any un-reserved default swaps issued by the entity get made into worthless paper as well. If you want to sell insurance, you gotta have reserves, period.

[RandomGuy]

And with the clear outlook that copper needs will increase, new mines will be made as necessary. It will not have the same supply and demand effect on pricing as gold does. It is a commodity that I think we will likely never run short on because of future technologies reducing the volumes needed.

... and they do so partly in response to the price of the commodity. This is what OPEC and other cartels call "demand destruction", and why they try to hold prices low to discourage such things.

I have no doubt that new supply will come online, I have lots of doubt that it will come online faster than demand will spike. BRIC countries have a lot of room to absorb supplies.

We'll see of course.

[Wild Cobra]

... and they do so partly in response to the price of the commodity. This is what OPEC and other cartels call "demand destruction", and why they try to hold prices low to discourage such things.

I have no doubt that new supply will come online, I have lots of doubt that it will come online faster than demand will spike. BRIC countries have a lot of room to absorb supplies.

We'll see of course.
I would agree they would make money if they didn't purchase such a large share of the copper. As it stands, they hold too much to unload if they need to, which would plummet the price where they would take a serious loss.

[Winehole23]

Copper demand is likely to outstrip supply this year by an estimated 455,000 metric tons, Barclays Capital says. Copper inventories at the LME have been declining since February.

Consumption is growing rapidly in China, Brazil and the U.S. And the creation of ETFs to hold physical metal is helping drive demand. On Tuesday, ETF Securities, a London-based provider, said its newly announced copper-backed ETF has added about 850.5 tons of copper, up 43%, to reach 1,445.5 tons.

Last month, the LME reported that a single holder owned more than 50% of the exchange's copper. People familiar with the matter at the time said J.P. Morgan was the holder.

On Tuesday, the LME reported that a single holder now has as much as 90% of the stockpiles, without naming the firm. The LME reports data two days in arrears, so the position increased on Friday.

In the aluminum market, about 70% of the LME metal is locked up, MF Global base metals analyst Edward Meir said during LME Week in London in October.

LME aluminum stocks currently total about 4.3 million metric tons.
As one example, Swiss commodity trading firm Glencore International AG bought about 1.6 million tons of the metal from United Co. Rusal Ltd. earlier this year, market participants said at the time. Glencore then turned around and presold the metal. So even though the aluminum is sitting in LME warehouses, visible to all traders, it is effectively locked up.
These sorts of deals have skewed physical trading in these metals, as other consumers have paid higher premiums to get hold of stocks, even though the metal appeared available in warehouses.

Holding ready-for-delivery metals on an exchange isn't a cheap undertaking for traders, who are responsible for paying insurance, storage and financing costs. And "the end game is to find somebody to buy something you have already bought for a higher price," Mr. Threkeld says.
The recent boom in metal prices has enabled traders to purchase the physical metal, sell a futures contract at a much higher price and still make a profit after paying for storage and insurance.
http://online.wsj.com/article/SB10001424052748704118504576034083436931412.html?m od=WSJ_hp_LEFTTopStories

[Winehole23]

http://www.marketwatch.com/story/cftcs-chilton-sees-silver-manipulation-efforts-2010-10-26

[Winehole23]

A federal futures regulator said Tuesday he believes there have been numerous attempts to fraudulently influence silver market prices, and he urged the agency to prosecute those who may have violated commodities laws.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission, made his comments Tuesday at the start of a public meeting where the agency will be proposing new rules to strengthen its anti-fraud and anti-manipulation powers.

[Wild Cobra]

Now if they recognize the abused in the stock market as well, maybe they will return the "uptick" rule.

[Wild Cobra]

Correct me if I'm wrong, but hasn't copper lost almost 20% value since this thread ended?

[InRareForm]

Only the taxpayers lose

[Wild Cobra]

Copper is down even farther since the start of this thread and post #68.

[boutons_deux]

Copper is down even farther since the start of this thread and post #68.

due to "free market" supply/demand, or due to commodities speculators gaming the commodities markets?

[CosmicCowboy]

Copper is down even farther since the start of this thread and post #68.

It's no big conspiracy. Construction in China which uses 40% of the worlds copper production has gone in the shitter.

[baseline bum]

It's no big conspiracy. Construction in China which uses 40% of the worlds copper production has gone in the shitter.

:lol China

trs_udhjWqc

[Winehole23]

A separate report released Thursday by the U.S. Senate Permanent Subcommittee on Investigations detailed how banks such as Goldman Sachs, Morgan Stanley and JPMorgan purchases metals warehouses, crude oil tankers and other physical commodities, and used those business to "gain unfair advantages and influence markets," according to the Guardian (http://www.theguardian.com/business/2014/nov/20/senate-report-fed-oversee-banks-commodities). U.S. lawmakers claim such commodity hoarding by big banks jeopardized firms and the financial system.


The report (http://www.hsgac.senate.gov/subcommittees/investigations/media/subcommittee-finds-wall-street-commodities-actions-add-risk-to-economy-businesses-consumers) charged the banks with engaging in "many billions of dollars of risky commodity activies, owning or controlling, not only vast inventories of physical commodities like crude oil, jet fuel, heating oil, natural gas, copper, aluminum and uranium, but also related businesses, including power plants, coal mines, natural gas facilities, and oil and gas pipelines."


It also found the banks to have benefited from lower borrowing costs and lower capital to debt ratios compared to nonbank companies, and some of the companies "used or contemplated using physical commodity activities that had the effect or potential effect of manipulating or influencing commodity prices."http://www.hngn.com/articles/50472/20141122/obama-administration-shielded-banks-from-criminal-prosecution-admits-top-fed-official.htm

[Winehole23]

related thread: http://www.spurstalk.com/forums/showthread.php?t=229144

[Winehole23]

missed this one from last fall

no criminal penalties, naturally, just fines.


JPMorgan Chase & Co. (JPMorgan), a New York, New York-based global banking and financial services firm, has entered into a resolution with the Department of Justice to resolve criminal charges related to two distinct schemes to defraud: the first involving tens of thousands of episodes of unlawful trading in the markets for precious metals futures contracts, and the second involving thousands of episodes of unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.


JPMorgan entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of Connecticut charging the company with two counts of wire fraud. Under the terms of the DPA, JPMorgan will pay over $920 million in a criminal monetary penalty, criminal disgorgement, and victim compensation, with the criminal monetary penalty credited against payments made to the Commodity Futures Trading Commission (CFTC) under a separate agreement with the CFTC being announced today and with part of the criminal disgorgement credited against payments made to the Securities Exchange Commission (SEC) under a separate agreement with the SEC being announced today.


“For over eight years, traders on JP Morgan’s precious metals and U.S. Treasuries desks engaged in separate schemes to defraud other market participants that involved thousands of instances of unlawful trading meant to enhance profits and avoid losses,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “Today’s resolution — which includes a significant criminal monetary penalty, compensation for victims, and requires JP Morgan to disgorge its unlawful gains — reflects the nature and seriousness of the bank’s offenses and represents a milestone in the department’s ongoing efforts to ensure the integrity of public markets critical to our financial system.”

“JPMorgan engaged in two separate years-long market manipulation schemes,” said U.S. Attorney John H. Durham of the District of Connecticut. “Not only will the company pay a substantial financial penalty and return money to victims, but this agreement requires JPMorgan to self-report violations of the federal anti-fraud laws and cooperate in any future criminal investigations. I thank the FBI for its dedication in investigating these deceptive trading practices and other sophisticated financial crimes.”


“For nearly a decade, a significant number of JP Morgan traders and sales personnel openly disregarded U.S. laws that serve to protect against illegal activity in the marketplace,” said Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Today's deferred prosecution agreement, in which JP Morgan Chase and Co. agreed to pay nearly one billion dollars in penalties and victim compensation, is a stark reminder to others that allegations of this nature will be aggressively investigated and pursued.”

https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees-pay-920-million-connection-schemes-defraud-precious-metals-and-us

[Winehole23]

As one example, Swiss commodity trading firm Glencore International AG bought about 1.6 million tons of the metal from United Co. Rusal Ltd. earlier this year, market participants said at the time. Glencore then turned around and presold the metal. So even though the aluminum is sitting in LME warehouses, visible to all traders, it is effectively locked up.

These sorts of deals have skewed physical trading in these metals, as other consumers have paid higher premiums to get hold of stocks, even though the metal appeared available in warehouses.


Holding ready-for-delivery metals on an exchange isn't a cheap undertaking for traders, who are responsible for paying insurance, storage and financing costs. And "the end game is to find somebody to buy something you have already bought for a higher price," Mr. Threkeld says.

The recent boom in metal prices has enabled traders to purchase the physical metal, sell a futures contract at a much higher price and still make a profit after paying for storage and insurance.

http://online.wsj.com/article/SB10001424052748704118504576034083436931412.html?m od=WSJ_hp_LEFTTopStories
Actual guilty plea from Glencore, this seldom happens, usually it's a pitty-pat fine.

1529219113842794496

[Winehole23]

looks like someone got over on JP Morgan


https://pbs.twimg.com/media/FrsUO9mWwAEOhCb?format=jpg&name=small