Term sheet
To prospectus dated December 1, 2005,
prospectus supplement dated December 1, 2005 and
product supplement no. 156-I dated November 5, 2008

  Term Sheet
Product Supplement No. 156-I
Registration Statement No. 333-130051
Dated November 7, 2008; Rule 433

     

Structured 
Investments 

      JPMorgan Chase & Co.
$
Head-Start Buffered Equity Knock-Out Notes Linked to the S&P 500® Index due November 30, 2010

General

Key Terms

Index:

The S&P 500® Index (“SPX”) (the “Index”)

Upside Leverage Factor:

One (1). There is no upside return enhancement.

Payment at Maturity:

If a Knock-Out Event has occurred, your payment at maturity will be equal to $1,000 x the Knock-Out Rate. Under these circumstances, your payment at maturity per $1,000 principal amount note will be equal to $1,080 only.

If a Knock-Out Event has not occurred and the Ending Index Level (i) is greater than the Initial Index Level or (ii) is equal to or less than the Initial Index Level by not more than the Head-Start Percentage, you will receive at maturity a cash payment per $1,000 principal amount note that provides you with a return on your investment equal to the sum of the Head-Start Percentage and the Index Return. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:

$1,000 + {$1,000 x [Head-Start Percentage + Index Return]}

If a Knock-Out Event has not occurred and the Ending Index Level is less than the Initial Index Level by more than the Head-Start Percentage, but by not more than the buffer amount, you will receive at maturity a cash payment of $1,000 per $1,000 principal amount note.

If a Knock-Out Event has not occurred and the Ending Index Level is less than the Initial Index Level by more than the buffer amount, for every 1% decline of the Index beyond the buffer amount, you will lose an amount equal to 1% of the principal amount of your notes, and your payment at maturity per $1,000 principal amount note will be calculated as follows:

$1,000 + [$1,000 x (Index Return + Buffer Amount)]

If a Knock-Out Event has not occurred and the Ending Index Level is less than the Initial Index Level by more than 30%, you could lose up to $700 per $1,000 principal amount note.

Because the Knock-Out Level will not be less than 145% or greater than 150% 0f the Initial Index Level and the Head-Start Percentage is 10%, the maximum payment at maturity per $1,000 principal amount note will not be less than $1,550 or greater than $1,600.

Knock-Out Event:

A Knock-Out Event occurs if, on any trading day during the Monitoring Period, the Index closing level is greater than the Knock-Out Level.

Knock-Out Level

The actual Knock-Out Level will be determined on the pricing date and will not be less than 145% or greater than 150% of the Initial Index Level.

Knock-Out Rate:

8%

Index Return:

Ending Index Level – Initial Index Level
              Initial Index Level

Initial Index Level:

The Index closing level on the pricing date, which is expected to be November 24, 2008.

Ending Index Level:

The Index closing level on the Observation Date.

Monitoring Period:

The period from the pricing date to and including the Observation Date.

Buffer Amount:

30%, which results in a minimum payment of $300 per $1,000 principal amount note.

Head-Start Percentage:

10%

Observation Date:

November 24, 2010

Maturity Date:

November 30, 2010

CUSIP:

48123LVE1

Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Payment at Maturity” in the accompanying product supplement no. 156-I.

Investing in the Head-Start Buffered Equity Knock-Out Notes involves a number of risks. See “Risk Factors” beginning on page PS-6 of the accompanying product supplement no. 156-I and “Selected Risk Considerations” beginning on page TS-1 of this term sheet.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this term sheet or the accompanying prospectus supplements and prospectus. Any representation to the contrary is a criminal offense.


 

Price to Public (1)

Fees and Commissions (2)

Proceeds to Us


Per note

$

$

$


Total

$

$

$


(1) The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates.
(2) If the notes priced today, and assuming a Knock-Out Level of 145%, J.P. Morgan Securities Inc., which we refer to as JPMSI, acting as agent for JPMorgan Chase & Co., would receive a commission of approximately $28.50 per $1,000 principal amount note and may use a portion of that commission to allow selling concessions to other dealers of approximately $2.00 per $1,000 principal amount note. This commission includes the projected profits that our affiliates expect to realize in consideration for assuming risks inherent in hedging our obligations under the notes.  The other dealers, in their sole discretion, may forgo some or all of their selling concessions. The actual commission received by JPMSI may be more or less than $28.50 and will depend on market conditions on the pricing date. In no event will the commission received by JPMSI, which includes concessions that may be allowed to other dealers, exceed $30.00 per $1,000 principal amount note. See “Underwriting” beginning on page PS-29 of the accompanying product supplement no. 156-I.

The notes are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.

JPMorgan

November 7, 2008


Additional Terms Specific to the Notes

JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this term sheet relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer participating in this offering will arrange to send you the prospectus, each prospectus supplement, product supplement no. 156-I and this term sheet if you so request by calling toll-free 866-535-9248.

You may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any offer to purchase the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.

You should read this term sheet together with the prospectus dated December 1, 2005, as supplemented by the prospectus supplement dated October 12, 2006 relating to our Series E medium-term notes of which these notes are a part, and the more detailed information contained in product supplement no. 156-I dated November 5, 2008. This term sheet, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Risk Factors” in the accompanying product supplement no. 156-I, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.

You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):

Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the “Company,” “we,” “us” or “our” refers to JPMorgan Chase & Co.

Selected Purchase Considerations


JPMorgan Structured Investments —
Head-Start Buffered Equity Knock-Out Notes Linked to the S&P 500® Index

 TS-1
ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income that is subject to an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this notice.
Subject to certain assumptions and representations received from us, the discussion in the preceding paragraph, when read in combination with the section entitled “Certain U.S. Federal Income Tax Consequences” in the accompanying product supplement, constitutes the full opinion of Davis Polk & Wardwell regarding the material U.S. federal income tax treatment of owning and disposing of the notes.

Selected Risk Considerations

An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Index or any of the equity securities composing the Index. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. 156-I dated November 5, 2008.


JPMorgan Structured Investments —
Head-Start Buffered Equity Knock-Out Notes Linked to the S&P 500® Index

 TS-2

What Is the Total Return on the Notes at Maturity Assuming a Range of Performance for the Index?

The following table illustrates the hypothetical total return at maturity on the notes. The “total return” as used in this term sheet is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. The hypothetical total returns set forth below assume an Initial Index Level of 900 and a Knock-Out Level of 1305 (which is equal to 145% of the assumed Initial Index Level) and reflects a Head-Start Percentage of 10% and a buffer amount of 30%. The actual Knock-Out Level will be set on the pricing date and will not be less than 145% or greater than 150%. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.


Ending Index
Level

Index Return

Note Total Return
if Knock-Out Event
Has Not Occurred
(1)

Note Total
Return if Knock-
Out Event Has
Occurred (2)


1620.00

80.00%

N/A

8.00%

1530.00

70.00%

N/A

8.00%

1440.00

60.00%

N/A

8.00%

1350.00

50.00%

N/A

8.00%

1305.90

45.10%

N/A

8.00%

1305.00

45.00%

55.00%

8.00%

1170.00

30.00%

40.00%

8.00%

1080.00

20.00%

30.00%

8.00%

990.00

10.00%

20.00%

8.00%

945.00

5.00%

15.00%

8.00%

900.00

0.00%

10.00%

8.00%

877.50

-2.50%

7.50%

8.00%

855.00

-5.00%

5.00%

8.00%

810.00

-10.00%

0.00%

8.00%

720.00

-20.00%

0.00%

8.00%

630.00

-30.00%

0.00%

8.00%

540.00

-40.00%

-10.00%

8.00%

450.00

-50.00%

-20.00%

8.00%

360.00

-60.00%

-30.00%

8.00%

270.00

-70.00%

-40.00%

8.00%

180.00

-80.00%

-50.00%

8.00%

90.00

-90.00%

-60.00%

8.00%

0.00

-100.00%

-70.00%

8.00%


(1)

The Index closing level is less than or equal to 1305 on each trading day during the Monitoring Period.
(2) The Index closing level is greater than 1305 on at least one trading day during the Monitoring Period.

Hypothetical Examples of Amounts Payable at Maturity

The following examples illustrate how the total returns set forth in the table above are calculated.

Example 1: The Index closing level increases from the Initial Index Level of 900 to an Ending Index Level of 945 and the Index closing level did not exceed the Knock-Out Level of 1305 on any trading day during the Monitoring Period. Because (i) the Ending Index Level of 945 is greater than the Initial Index Level of 900 and (ii) a Knock-Out Event has not occurred, the investor receives a payment at maturity of $1,150 per $1,000 principal amount note, calculated as follows:

$1,000 + [$1,000 x (10% + 5%)] = $1,150

Example 2: The Index closing Level decreases from the Initial Index Level of 900 to an Ending Index Level of 877.50, and the Index closing level did not exceed the Knock-Out Level of 1305 on any trading day during the Monitoring Period. Although the Index Return is negative, because (i) the Ending Index Level of 877.50 is less than the Initial Index Level of 900 by not more than the Head-Start Percentage of 10% and (ii) a Knock-Out Event has not occurred, the investor receives a payment at maturity of $1,075 per $1,000 principal amount note, calculated as follows:

$1,000 + [$1,000 x (10% + -2.5%)] = $1,075

Example 3: The Index closing Level decreases from the Initial Index Level of 900 to an Ending Index Level of 630, and the Index closing level did not exceed the Knock-Out Level of 1305 on any trading day during the Monitoring Period. Although the Index Return is negative, because (i) the Ending Index Level of 630 is less than the Initial Index Level of 900 by not more than the buffer amount of 30% and (ii) a Knock-Out Event has not occurred, the investor receives a payment at maturity of $1,000 per $1,000 principal amount note.

Example 4: The Index closing level increases from the Initial Index Level of 900 to an Ending Index Level of 990 and the Index closing level exceeded the Knock-Out Level of 1305 on at least one trading day during the Monitoring Period. Even though the Ending Index Level of 990 is greater than the Initial Index Level of 900 by 10%, because a Knock-Out Event has occurred, the investor receives a fixed payment at maturity of $1,080 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x 8%) = $1,080 


JPMorgan Structured Investments —
Head-Start Buffered Equity Knock-Out Notes Linked to the S&P 500® Index

 TS-3

Example 5: The Index closing level decreases from the Initial Index Level of 900 to an Ending Index Level of 540, and the Index closing level exceeded the Knock-Out Level of 1305 on at least one trading day during the Monitoring Period. Even though the Ending Index Level of 540 is less than the Initial Index Level of 900 by more than the buffer amount of 30%, because a Knock-Out Event has occurred, the investor receives a fixed payment at maturity of $1,080 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x 8%) = $1,080 

Example 6: The Index closing Level decreases from the Initial Index Level of 900 to an Ending Index Level of 540, and the Index closing level did not exceed the Knock-Out Level of 1305 on any trading day during the Monitoring Period. Because (i) the Ending Index Level of 540 is less than the Initial Index Level of 900 by more than the buffer amount of 30% and (ii) a Knock-Out Event has not occurred, the investor receives a payment at maturity of $900 per $1,000 principal amount note, calculated as follows:

$1,000 + [$1,000 x (-40% + 30%)] = $900

Example 7: The Index closing Level decreases from the Initial Index Level of 900 to an Ending Index Level of 0, and the Index closing level did not exceed the Knock-Out Level of 1305 on any trading day during the Monitoring Period. Because (i) the Ending Index Level of 0 is less than the Initial Index Level of 900 by more than the buffer amount of 30% and (ii) a Knock-Out Event has not occurred, the Index Return is negative and the investor receives a payment at maturity of $300 per $1,000 principal amount note, which reflects the principal protection provided by the buffer amount of 30%, calculated as follows:

$1,000 + [$1,000 x (-100% + 30%)] = $300 

Historical Information

The following graph sets forth the historical performance of the S&P 500® Index based on the weekly Index closing level from January 3, 2003 through October 31, 2008. The Index closing level on November 6, 2008 was 904.88. We obtained the Index closing levels below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg Financial Markets.

The historical levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the Index closing level on any trading day during the Monitoring Period or on the Observation Date. We cannot give you assurance that the performance of the Index will result in the return of any of your initial investment.


JPMorgan Structured Investments —
Head-Start Buffered Equity Knock-Out Notes Linked to the S&P 500® Index

 TS-4