JPMorgan Is the Latest Target on Goldman Sachs’ “Hit List”

13 | By Shah Gilani

This may be old news, but as far as history goes, a lot of us forget it.

And you know what happens then – we’re doomed to repeat it.

What I like about people forgetting history are the trading and investing opportunities that pop up when I can see the past coming back to haunt us before others do.

So, today I’m going to share the latest twist on some old news. If you want to make some money on it, stay tuned.

I’ll show you what I’m going to do, and I’ll let you know when I start doing it…

Bear Hunting

Here’s the history you may have forgotten.

The Too Big to Fail (TBTF) banks were all going strong in 2007. Then, in 2008, all of a sudden they weren’t.

In 2007, Bear Stearns was the seventh-largest global investment bank and securities trading company in the world. In July 2007, two of its hedge funds began having lots of trouble and ended up sinking like stones in the vast mortgage-pool black hole they were betting heavily on.

While a lot of people think that was the beginning of the end for Bear, it didn’t have to be.

Fast-forward to March 14, 2008. Bear Stearns was, by most accounts and legitimate accounting methods, totally insolvent. But the U.S. Federal Reserve agreed on that day to provide Bear a 28-day, $25 billion loan to get its act together.

The very next day the folks at the New York Fed said, “Never mind, we’re not helping you.” And one day after that, the New York Fed essentially funded with $29 billion JPMorgan Chase & Co. (NYSE: JPM)’s $2 a share buyout of Bear. For its part, JPM put up a whopping $1 billion and got all kinds of protection against any losses.

As far as TBTF goes, Bear’s stock was trading at $172 in January 2007 and at $93 in February 2008.

And a month later, JPMorgan Chase pays $2/share to buy all of Bear’s assets?

To be fair, a subsequent class-action suit forced JPM to raise its price to $10/share. Not out of generosity, but to minimize shareholder suits in the future.

The Second Victim

Fast-forward again to the fall of 2008, and like déjà vu all over again, Lehman Brothers followed Bear Stearns into the toilet. Only this time nobody was there to pick it up.

The fourth-largest investment bank in the United States died an ugly death.

The Lehman story is even more interesting than the Bear story. But this isn’t about stories.

The truth is that both Bear and Lehman were systematically exterminated.

They were both gang-tackled (I’d like to use another phrase here, but my publisher won’t let me) by their competitors to eliminate them from the shark tank that was getting crowded by them getting too big to compete easily against.

Who led this band of murderers? Goldman Sachs Group Inc. (NYSE: GS), of course.

There’s so much information out in the public domain that there’s no refuting it. The only thing that isn’t out there is a book that brings all the pieces together and tells the whole truth.

Former Goldman men were running the New York Federal Reserve and the U.S. Treasury. And a former Goldman man was guiding JPMorgan Chase’s backroom deals.

Now, Goldman is at it again.

Two Down…

This time Goldman is going after JPMorgan Chase. Its old partner in crime has become too big to compete against, and Goldman wants JPM dismantled.

JPMorgan Chase is too big and too strong to kill. So Goldman has jumped on a bandwagon of analysts who, for about a month now, have been suggesting JPMorgan would be a better deal for shareholders if it was broken up.

Goldman being Goldman, it waited for a couple of others to start singing the breakup song before it raised its voice above theirs. About a month ago, highly respected CLSA bank analyst Mike Mayo came out in a client report calling for JPMorgan Chase to be broken up to rid itself of the “conglomerate discount” its stock price is suffering from.

Then a Wells Fargo & Co. (NYSE: WFC) analyst said JPM might need as much as $45 billion a year in new capital, for several years, to meet the new “capital surcharge” rules all the big banks are facing.

But it was Goldman bank analyst Richard Ramsden who caught the most attention when he said last week that it’s time to break up JPMorgan Chase.

I’m not saying it’s time to short JPMorgan Chase because it’s now in trouble like Bear and Lehman were back in the late 2000s. JPM is not in trouble.

But JPM is trouble for Goldman.

Goldman bought credit default swaps on Bear and Lehman and shorted their stocks mercilessly. Goldman drove them into insolvency and out of business.

Two down and two to go.

Now we know Goldman wants to take out JPM, and no doubt GS will eventually attack Morgan Stanley (NYSE: MS).

That’s going to be a rumble in the jungle, and it’s going to be fun to watch.

Goldman Sachs is simply the best at what it does. Everything it does – good and evil.

I’m going to watch how Goldman’s new trade setup pans out. Because it’s a trade, you know.

It’s about Goldman Sachs making money while eliminating a competitor. That’s how it trades.

I’ll figure out the timing and how we can join in. And then I’ll show you how we’re going to play it.

13 Responses to JPMorgan Is the Latest Target on Goldman Sachs’ “Hit List”

  1. Mattski says:

    You GO, Shah! Goldman is too entrenched in everything related to this country’s money, especially the Treasury and the Federal Reserve. The only question is, how long ’til they set their sights on Wells Fargo? Or even bigger – Citi?

  2. Peter says:

    Perhaps its a case of your enemy is my enemy.
    JPM and MS need to stand shoulder to shoulder to fight off the common threat
    that is GS.
    Good luck with that !

  3. Ken Devey says:

    Hi. Wow what an interesting read. Well, it is a typical business strategy getting rid of the competition. I would not invest in any of them as it could come back on Goldman and they could be the target, I hope so.

  4. Gabriel says:

    Interesting, I’ve been hearing for the breakup for JPM but had no idea that GS wants to take JPM down.
    I thought they are both elite banks. Remember it was the ‘Great’ Joseph Morgan that helped setup the Fed.
    And in November I read an article that JPM is the biggest bank in the world with a total of $68.1 trillion on derivatives alone! That’s 5 times the US GDP!
    (Google: Independent JP Morgan trillion – for the link to the article, UK newspaper)

    And after reading Dr Kent Moors article on the huge short positions on oil that have been built-up over the past 3-4 years, I would guess that JPM will soon be unwinding some of their positions, if they have any. And I would guess so…

    The $240 billion market cap for JPM just disguises the fact that this bank has a helluva lot more money than people can even imagine.
    But I do not believe at all that GS wants to ‘kill’ JPM.
    They’re in this together and together they will rule.

  5. ARVIND says:

    Hi Shah,

    Nice and succinct summary of the forces at play. Thanks and look forward to your next insight on this interesting series of developments! Happy 2015!

  6. Ed Schaffer says:

    This article shows one exactly how the real “free and competitive” market is actually played out in the real world by the “big boys” or players. Thanks again for your crystal clear insight!

  7. philipo maffia says:

    ummm……remind me of somthing to do with shuffling deck chairs on the titanic….

    i propose any takeover would be a mutually beneficial deception for Goldmans and JPM s unfathomable accounts , a deception on the public and goverment.

  8. Jody Perry says:

    Sounds like Karma to me, and deja vu … From an excellent article on 23rd November 2008 explaining the GFC. Well worth a read. Websearch – Death-of-the-american-empire. (comments will not allow weblinks.)

    “…It all began in the early part of the 20th century. In 1907 J.P. Morgan, a private New York banker, published a rumour that a competing unnamed large bank was about to fail. It was a false charge but customers nonetheless raced to their banks to withdraw their money, in case it was their bank. As they pulled out their funds the banks lost their cash deposits and were forced to call in their loans. People now therefore had to pay back their mortgages to fill the banks with income, going bankrupt in the process. The 1907 panic resulted in a crash that prompted the creation of the Federal Reserve, a private banking cartel with the veneer of an independent government organisation. Effectively, it was a coup by elite bankers in order to control the industry.

    When signed into law in 1913, the Federal Reserve would loan and supply the nation’s money, but with interest. The more money it was able to print, the more ‘income’ for itself it generated. By its very nature the Federal Reserve would forever keep producing debt to stay alive. It was able to print America’s monetary supply at will, regulating its value. To control valuation however, inflation had to be kept in check.

    The Federal Reserve then doubled America’s money supply within five years, and in 1920 it called in a mass percentage of loans. Over five thousand banks collapsed overnight. One year later the Federal Reserve again increased the money supply by 62%, but in 1929 it again called the loans back in, en masse. This time, the crash of 1929 caused over sixteen thousand banks to fail and an 89% plunge on the stock market. The private and well-protected banks within the Federal Reserve system were able to snap up the failed banks at pennies on the dollar….”

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