JPM may sell or spin off physical commodities business

[pmbug]

JPMorgan Chase & Co. (JPM) said it may sell or spin off its physical commodities business, three days after a congressional hearing examined whether banks are using their ownership of raw materials to manipulate markets.
...

http://www.bloomberg.com/news/2013-...ll-or-spin-off-physical-commodities-unit.html

 

[Unbeatable]

I don't really understand the implications of it.

As I understand it they're continuing to vault gold etc.
But never know this could this be their gold default moment?

They sell their Physical Commodity business to Joe Bloggs for $1, then people stand for delivery but there's no gold. Then JPM says it's not our problem anymore we sold the company, sue Joe.

It seemed strange that they would actually have a senate hearing that looked at their manipulation of the markets. Maybe they did that on purpose so that when they announce on a Friday evening that they're exiting the physical commodities business, people thinks it related to the hearing and not that they have no gold.

 

[pmbug]

Tin foil hat explanation: rats fleeing a sinking ship

More obvious explanation: JPM wants to divest business that attracts govco oversight/criticism or that won't be profitable going forward because the game is over.

 

[dontdeBasemebro]

It could be a bit of both too.

 

[swissaustrian]

Third explanation: Basel III, Dodd Frank and other capital requirements. I know from sources at a Swiss tbtfb that they`re incentivising customers to get out of unallocated metals accounts (gold, silver, even copper and aluminium), because the accounts are claims against the banks which are holding the quantity in form of hedged futures contracts. Basel III and other regulations have raised the risk weighting of commodity holdings on bank balance sheets. They`re actually telling customers to go to allocated accounts if they`re not willing to sell. My guess is that JPM is going to have to comply with similar capital requirements.

----

Fourth explanation: Physical commodity markets are shifting their center of gravity to China. Demand in the US and Europe is weak. JPMs commodity business in the US is probably experiencing margin compressions as pmbug said.

 

[Potemkin]

At first I thought they're gona short-sell something. It would bring prices down.

 

[Unbeatable]

I see just before JPM announced this, SRSrocco did an article -

Is JP Morgan getting nervous about its silver inventories?

Apparently there were a lot of unusual activities including large amounts of silver removed from the Comex last week and large transfers made from Scotia to JP Morgan.

. In three days, Scotia Mocatta transferred 1.8 million oz of silver from its registered inventories to JP Morgan’s eligible inventories. I find this quite interesting because JP Morgan has a substantial amount of silver in its eligible inventories of over 20 million oz.

Furthermore, a total of 2.7 million oz of silver were withdrawn from the Comex (net of transfers) and Scotia Mocatta saw its registered silver inventories decline by nearly 20%.

I actually believe something is AMISS and there is probably something STRANGE taking place in JP Morgan’s silver warehouse. I wish I could shed more light, but at least I can reveal what is taking place and we will have to see how this unfolds in the future

Interesting that he picked up on this just before the announcement but how it all relates I'm not sure.

http://srsroccoreport.com/is-jp-mor...getting-nervous-about-its-silver-inventories/

 

[DSAbug]

I think it's probably going to be spun out but JPM will maintain some semblance of control. Having the ability to say there is an arms length relationship takes most of the pressure off.

 

[Aubuy]

I wonder which board Bernanke will end up "joining" as a "consultant" when he "retires". JP Morgan or Goldman Sachs?

 

[pmbug]

Why limit himself to just one?