GATA consultant documents link between suppression of gold and interest rates


JP Morgan market value
dwarfed by smaller rivals'

By Mary Kelleher

NEW YORK, Oct. 21 (Reuters) -- J.P. Morgan
Chase & Co. Inc. is one of the biggest banks
in the United States, but you wouldn't
necessarily know that by its stock market

Shares of J.P. Morgan Chase, which ranks only
behind Citigroup Inc. by assets, have fallen
so much as the bank wrestles with loan and
trading losses that J.P. Morgan now is worth
about $5 billion less than smaller rival Bank
One Corp. in terms of market capitalization.

The weakness in J.P. Morgan Chase's stock and
drop in its market price tag have helped fuel
rumors once unthinkable -- that Chicago-based
Bank One, No. 6 in terms of assets, might buy
J.P. Morgan Chase instead of the reverse.

"It's shocking," Fred Cummings, an analyst at
McDonald Investments, said of the disparity
between the banks' market capitalizations.
"But that just shows you the market has lost
confidence in (J.P. Morgan's) management team
and they don't know how true that book value
is at J.P. Morgan."

Meanwhile, Bank One has prospered, though
analysts do not think it is strong enough to
digest a bank of J.P. Morgan's size. Under
the steadying hand of Chief Executive Jamie
Dimon, Bank One recovered from customer
service woes at its First USA credit card arm
and just posted a 9 percent rise in third
quarter profits to $823 million, or 70 cents
a share. Higher credit card balances, deposit
growth and cost controls helped.

"Jamie's perceived as a good turnaround
player," Cummings said, though he noted Bank
One's price-to-earnings ratio of about 12
times earnings was about in line with others.
Bank One "has gone through a major
turnaround. They don't have these same
balance sheet issues at this point in the

J.P. Morgan Chase's market worth now is about
$40 billion, compared with Bank One's roughly
$45 billion capitalization. J.P. Morgan
Chase's value also lags Wachovia Corp.'s at a
bout $48 billion; Wells Fargo & Co. at about
$86 billion; and Bank of America Corp. at
$105 billion.

"It's been there for a while -- a few
months," UBS Warburg analyst Diane Glossman
said of J.P. Morgan Chase's market
capitalization. "But it is pretty astonishing
on the face of it if you just dial the clock
back a year ago."

When Chase Manhattan bought J.P. Morgan at
the end of December 2000, the deal was
heralded as the creation of a financial
services powerhouse rivaling Citigroup. But
since then J.P. Morgan Chase has seen its
profits slump in the market downturn because
of investment losses, bad loans to
telecommunications and cable companies, and
misplaced trading bets.

Part of the blame goes to moribund capital
markets in a flagging U.S. economy, analysts

"Most of J.P. Morgan's problems are just the
bad market environment," Reilly Tierney, an
analyst at Fox-Pitt, Kelton said. "Even if
you brought in (former U.S. Treasury
Secretary) Bob Rubin and (Citigroup CEO)
Sandy Weill to be co-CEOs of J.P. Morgan,
they're not going to turn around the capital

Still, J.P. Morgan's stock tumbled 48 percent
in the first three quarters this year,
underperforming the Standard & Poor's
financial stock index, which fell about 22
percent then.

The bank's profits sank 91 percent in the
third quarter to $40 million, or a penny a
share, and it said it would cut about 2,200
investment banking jobs. J.P. Morgan already
let Wall Street down last month when it
warned third-quarter results would be well
below second-quarter levels.

The bank also has faced fire for off-balance
sheet transactions it set up for bankrupt
energy trader Enron Corp., further damaging
its stock price. J.P. Morgan Chase Chief
Executive William Harrison, one of the
merger's architects, is under pressure to
reverse the slide or risk losing his job,
analysts have said.

* * *

Morgan Stock Up on Rumor

By Mary Kelleher

NEW YORK (Reuters) -- J.P. Morgan Chase & Co.
Inc.'s stock surged on Monday on speculation
that Bank One Corp. would buy the bank, which
is struggling in a weak market. But analysts
doubted the deal would happen.

"There is this takeover rumor on the stock,"
analyst Reilly Tierney of Fox-Pitt, Kelton
said. "I think it's improbable ... Whoever
buys J.P. Morgan is going to have to have a
lot of capital to recapitalize J.P. Morgan,
to address the balance sheet issues that
clearly hang over the stock."

J.P. Morgan shares gained 6.9 percent, or
$1.30, to $20.27, while Bank One's shares
were up 20 cents to close at $39.08 in on the
New York Stock Exchange.

A J.P. Morgan spokeswoman declined to comment
on rumors. A Bank One spokeswoman also said
it was against the bank's policy to comment
on rumors.

Chicago-based Bank One is smaller than J.P.
Morgan, which is the No. 2 U.S. banking
company by assets, but its market
capitalization is larger at about $45
billion. J.P. Morgan Chase's market
capitalization is about $40 billion, after
concerns about unpaid corporate loans and its
involvement with bankrupt energy trader Enron
Corp. hit its stock price.

But while Bank One Chief Executive James
"Jamie" Dimon, a protege of Citigroup CEO
Sanford "Sandy" Weill, has expressed an
interest in expanding credit card, money
management, retail and possibly investment
banking units, analysts said J.P. Morgan
Chase's loan books would be too risky for
Bank One. Bank One has been reducing the size
of its corporate loan book, after deciding
the business was too risky and unprofitable.

"Historically, Jamie Dimon, along with Sandy
Weill, they've been bottom fishers, and J.P.
Morgan's clearly attractively valued," said
Fred Cummings, an analyst at McDonald
Investments. "But I would bet against it
because of the risk profile of J.P. Morgan's
balance sheet in large corporate.

"J.P. Morgan is wrestling with weak trading
results and losses on soured loans to
telecommunications and cable companies. Its
third-quarter profits fell 91 percent to $40
million, or a penny a share, and it said it
would cut about 2,200 additional jobs
following previous staff reductions.

"Whenever a company is as challenged as J.P.
Morgan is right now with respect to its
financial performance, that's when stories
like this surface," said Brock Vandervliet,
an analyst at Lehman Brothers. "So from that
perspective, it's not surprising."Bank One
has fared better in the slow economy and
stock market slump. It posted a 9 percent
rise in third-quarter profits to $823
million, or 70 cents a share, helped by
higher balances in its vast credit card
business, deposit growth and cost controls.

Still, many of J.P. Morgan Chase's troubles
stem from a stock market slump that has hurt
most banks and made many leery of expanding
capital market operations, as a purchase of
J.P. Morgan would do, Tierney said.