JPMorgan to sell physical commodities business to Mercuria

cman

Finally. JPM exits the physical commodities trading business.

reuters.com/article/2014/03/19/us-jpmorgan-mercuria-idUSBREA2I0LG20140319

Whether the malaise in commodities (or lack of bubbly behavior) over the last year or two despite higher trading volumes and the increased scrutiny of regulators on investment banks regarding their commodity trading is correlation or causality is open to debate. But this kind of exit is a good thing for the markets and economy.

Never a good idea to let entities with unlimited access to cheap money corner a large proportion of specific commodities because it is ripe for manipulation.

scott

<----is still sitting in Glencore, Mercuria's largest competitor.

cman

scott said:

<----is still sitting in Glencore, Mercuria's largest competitor.</p>

Who is what? Complete sentence please.

scott

cman said:

scott said:

<----is still sitting in Glencore, Mercuria's largest competitor.</p>

Who is what? Complete sentence please.

I still am long Glencore (not particularly thrilled about its performance, but a long-term holding, nonetheless.) Glencore still remains a larger player than Mercuria, although Mercuria's purchase of JPM's commodity division certainly makes them a bigger player.

These companies (well, the one that's public, certainly) remain highly leveraged plays on commodities, not to mention hold significant physical assets in many cases.

Recommended reading: "King of Oil: The Secret Lives of Marc Rich", which would likely find a place on the bookshelf of Mr. Burns of "The Simpsons".

"Never a good idea to let entities with unlimited access to cheap money corner a large proportion of specific commodities because it is ripe for manipulation."

Right, but still cater to them. The only reason there was even something done about the banks physical commodities division is because companies that need aluminum raised a stink (http://www.zerohedge.com/article/goldman-jpm-have-now-become-commodity-cartel-they-recreate-de-beers-diamond-monopoly)* . If they hadn't, nothing would have likely been done. I'm sure banks will still laugh and lobby at congress and figure out some way to suck from the economy via control over needed commodities...

This has changed nothing about the "vampire squid" mentality of the large banks - it also shifts more control of commodity trading to secretive (ie, Glencore, Mercuria, Trafigura, etc. - Trafigura is also, like Glencore, a spin off of Marc Rich's original business) companies overseas.

* "Goldman, through its Metro International Trade Services unit, owns the biggest warehouse complex in the LME system, a series of 19 buildings in Detroit that house about a quarter of the aluminum stored in LME facilities. Coca-Cola and other consumers say that Metro in particular is allowing the minimum amount of aluminum allowed by the LME—1,500 metric tons a day—to leave its facilities, and that Metro could remove much more, erasing supply bottlenecks and lowering premiums for physical delivery in the process. Coca-Cola, which has complained to the LME, says it can take months to get the metal the company needs, even though warehouses are allowing aluminum to come in much more quickly. Warehouses, meantime, collect rent and other fees." It is not only Goldman's Metro operations, but includes JP Morgan's Henry Bath division, and naturally commodities behemoth Glencore, all of which are taking advantage of the LME's guidelines and rules which make the imposition of a pseudo-monopoly an easy task."