Bill Holter: Oops, My Bad! JP Morgue is Leveraged 350X !

“We are now totally set up for a complete collapse of everything financial.  I wrote 4 or maybe 5 years ago that “no one could be so stupid as to make the policies that we have” and concluded that the policies were put in place on purpose and were actually designed to tear the system apart and down.” – Quote

• Oops, My Bad! 
  by Bill Holter, http://blog.milesfranklin.com/ 
  Yesterday I wrote that JP Morgan is party to $70 trillion (with a “t”) of derivatives with $209 billion (with a “b”) of retained equity.  I said that they are levered “35-1.”  Sorry, I was wrong and several astute readers pointed this out to me.  Simple math mistake but when talking about this size of numbers “what’s a decimal point between friends?”  The true leverage is 350-1!  Yes, just a small oversight on my part and I apologize.
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  I apologize for the math mistake but what I’m truly sorry about is how BAD this really and truly is.  I said that JP Morgan could “lose” up to 3% or have 3% of their counterparties not perform in which case they would then lose all of their equity…my bad, the real number is “.3%.”  Yep, POINT THREE PERCENT is the margin of error on their derivatives book between what they call a “fortress balance sheet” and total loss of equity…as in going belly up and leaving nothing left at all for the sharks, barracudas or even the minnows!
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  Speaking of “nothing left,” so far for the month of October there have been 218,000 ounces of gold already “served” for delivery with another potential 223,000 ounces standing for delivery.  This works out to just less than 14 tons of gold while the “dealers” only have just less than 24 tons in inventory on hand.  October alone looks like it could take over 50% of gold in the registered category.  “But surely they will just re stock and everything will work out just fine”…we maybe…or not?  So far this year as far as I can tell, JP Morgan has had exactly ZERO ounces enter their dealer inventory and only 12,000 ounces enter their customer inventory. “Dealer” inventory has been decimated already this year and we haven’t even gotten to December.  Not because December is the end of the year, it is…but it is also traditionally THE biggest gold delivery month of the year.
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  Currently the December contract has open interest of 225,914 contracts open; this is 60% of total open interest which is now at just under 375,000 contracts so you can see how important December really is.  The December OI (Open Interest) represents over 22.5 million ounces or just over 700 tons.  Let me put this in perspective for you.  The dealers purportedly have 24 tons of gold, not counting what will be withdrawn in Oct., and December open interest is almost 30 times what the dealers have.  If you include customer gold in the equation, there is open interest currently of more than 3 times the TOTAL dealer and customer gold held at the COMEX…for just this one delivery month!  And yes I know that all of the open interest will not stand for delivery and will surely sink from here before first notice day…but by how much?  I also know that historically most metal that is delivered comes from the dealers and not customers meaning less gets reclassified to “registered” from “eligible” than gets straight delivered from the already registered side.  So…my point?  We haven’t even gotten through the delivery of Oct. Gold and the inventory already looks like it could be squeezed, December looks like the vaults could be emptied to the point of only cobwebs remaining in the vaults…
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