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Warnings Ignored: Ted Butler

Posted by: Brian Boutilier

Tagged in: Untagged 

Brian Boutilier

Warnings Ignored

By: Theodore Butler


-- Posted 4 September, 2009 | Share this article| Discuss This Article - Comments: 22 Source: SilverSeek.com

Trouble with you is the trouble with me,
Got two good eyes but you still don’t see.

Trouble ahead, trouble behind,
And you know that notion just crossed my mind.

Casey Jones   

Grateful Dead

 

A remarkable story recently appeared in a leading Chinese business publication that threatens to upend the world of commodities. It seems that the government of China may be preparing the way for state-owned investment funds to walk away or default on OTC commodity derivatives contracts held with foreign banks if those contracts cause loss to the funds. A good discussion of this issue can be found here, along with links to the original story and a related Reuters article.

Even more amazing is that the obligatory follow-up story, in which the threat of default is invariably denied, actually confirms that China is seriously considering defaulting on selected OTC commodity derivatives contracts. Click here. If there is going to be a default by China in select OTC commodity derivatives, silver is a prime candidate.

What makes the China story so remarkable to me is that it ties together and confirms much of the silver analyses I have published over the years. In addition, it points to the extraordinary situation that presently exists in silver,  not just from an investment and regulatory perspective, but also from a view that impacts the strategic interests of nations, including, but not limited to, the US and China. As always, I ask you to decide for yourself based upon the facts and my speculation.

Here are the facts. There is an unusually large concentrated net short position in COMEX silver futures held by 4 or fewer traders, documented by CFTC data. There is no unusually large concentrated position on the long side. Other CFTC data indicate the concentrated silver short position is largely held by one or two US banks, at times reaching 25% of world production. This degree of concentration is unprecedented and not seen in any other commodity. Correspondence from the CFTC to elected officials identifies JPMorgan as the prime holder of the short position, with Morgan having inherited the position in its takeover of Bear Stearns. Requests to the CEO of JPMorgan to deny it holds the large silver short position on the COMEX have gone unanswered.

For years, the CFTC has investigated my allegations of manipulation in silver, and in 2004 and 2008, they denied such a manipulation exists. It is thought they will comment soon on the third investigation, begun a year ago. In none of the three investigations have they contacted me, although I was the impetus behind each investigation. Over the past five years, the silver short position has grown more concentrated. About six years ago, based upon input from my friend and mentor, Izzy Friedman, I first speculated that China was the big short behind the COMEX silver short position. Other articles followed on China and this theme. http://www.investmentrarities.com/ted_butler_comentary/07-08-03.html 

More recently, in December 2007, I publicly and privately warned the CFTC and Commissioner Bart Chilton of what a disaster it would be if the foreign backers to the short position in COMEX silver decided to walk away from their obligations. http://www.investmentrarities.com/ted_butler_comentary/12-10-07.html  In that letter, I wrote;

”…these giant foreign silver shorts represent a grave and unique danger to our country, not just because they hold a controlling position in COMEX silver futures, but also because of the nature of that position.

In its own words, the New York Mercantile Exchange, Inc., (which owns the COMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals. As such, the NYMEX/COMEX is a financial institution important to the interests of our country. The highest regulatory attention should be placed on anything that threatened its existence. The 4 large foreign silver shorts represent such a threat.

If and when these four large traders decide they have had enough of the short side of silver, instead of covering their short positions or delivering actual silver, they could declare force majeure and simply walk away and leave the regulators and NYMEX clearing members holding the bag. Since they are outside the jurisdiction of the Commission, there is, currently, little to prevent this.”

I don’t know how I could have been clearer in my warning. I don’t know how the stories coming from China could highlight those dangers any clearer. Not only is the concentrated short position clearly manipulative to the price of silver, the danger of a default has never loomed larger. Perhaps the recent price action is reflecting that growing awareness. In spite of this clear warning, the CFTC concluded, in May 2008, that there was nothing wrong in silver.

It is important to put the current situation into proper perspective. Here’s my take. Sometime around ten years ago, the now-disgraced derivatives powerhouse AIG, through their China connections, convinced certain state-owned companies of that country to enter into massive OTC short contracts on silver. China’s growing share of silver refining production was the cover story. The real purpose, however, was to give AIG backing for selling short silver contracts on the COMEX for the purpose of hoodwinking the technical funds into and out of paper positions on the COMEX. This worked like clockwork for years. Pressure from me and many readers, through then-New York Attorney General Eliot Spitzer quietly forced AIG to abandon and transfer their COMEX silver (and probably gold) short position to Bear Stearns, another large clearing firm, like AIG. The Chinese OTC silver short position was assumed by Bear Stearns as a counter-party and Bear Stearns then continued the COMEX manipulation and fleecing of the technical funds and other speculative traders.

The frequent complaints to the CFTC about the outsized short position and obvious manipulative trading activities on the COMEX were rebuffed by the Commission because Bear Stearns, like AIG before them, could show on paper that they had existing OTC offsets with China that “backed” the COMEX short positions. As has been shown in other financial scandals, like the Madoff swindle, bureaucrat regulators are often no match for well-connected and persuasive Wall Street power brokers.

When Bear Stearns collapsed in March 2008 (incidentally at the then-highest price for silver in decades - $21), there was no one willing to take over their giant COMEX silver short position and the offsetting Chinese OTC contracts. Enter JPMorgan Chase. Remember, this was a time of great stress to the financial system and all efforts were directed to quickly fixing problems that arose. The giant silver short position at Bear Stearns was one such problem. With federal government guarantees against loss and criminal prosecution, JPMorgan did assume the role of master of the silver market. All this was revealed in subsequent Bank Participation Reports and in correspondence from the CFTC to various lawmakers. Since that time, JPMorgan has managed the giant silver short position. My speculation includes that Morgan has quietly offset its COMEX short position over the past year and a half with other unsuspecting parties in the OTC market.

What does this all mean and where do we go from here? Get ready for great and growing price volatility. I’ll have specific market comments for subscribers over the next couple of days, once the new COT and Bank Participation Reports are released.(at www.butlerresearch.com)  But this much is clear – the long anticipated default of the massive OTC silver derivatives position by China appears to be at hand. It’s hard to imagine a more profound event.  All at once, the backing and excuse for the concentrated short position on the COMEX is exposed for the fraud it has always been. No longer can the CFTC pretend that the COMEX silver short position is backed by anything legitimate. Not when China, itself, is saying it may default. So many game changes have emerged in silver over the past few months that it is hard to appreciate them all. These recent announcements by China concerning its future intentions on select OTC commodity derivatives could be the most important of all.

I still have great faith that the new chairman of the CFTC, Gary Gensler, has every intention of doing the right thing and will adjust and enforce legitimate speculative position limits in COMEX silver. The new reports out of China make it more imperative that he do so quickly. The threat from China that it may default on contracts that back the concentrated COMEX short position raises the stakes immensely. Unlike his predecessors, and for the good of the country and market integrity, Chairman Gensler must not ignore these warnings.

Note to subscribers – because of the potential regulatory significance of this issue, I am putting this article out in the public domain. I’ll have specific market comments available over the weekend.



COT Silver Report

Posted by: Brian Boutilier

Tagged in: Untagged 

Brian Boutilier
COT Silver Report - Septemer 4, 2009

 

 


-- Posted 4 September, 2009 | Share this article | Discuss This Article - Comments: 5 Source: SilverSeek.com 

Silver Cot Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

42,244

7,815

14,692

27,994

76,050

84,930

98,557

6,577

1,278

-436

-326

5,012

5,815

5,854

Traders

75

36

31

32

36

126

86

 

Small Speculators

 


 

 

Long

Short

Open Interest

Bullish

 

 

21,741

8,114

106,671

79.62%

 

 

-683

-722

5,132

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Silver Report - Positions as of

Tuesday, September 01, 2009

 

Silver Cot Report - Futures & Options Combined

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

42,611

5,096

36,434

33,334

85,622

112,380

127,152

6,103

928

-1,306

-1,213

4,020

3,584

3,642

Traders

79

42

51

35

39

142

106

 

Small Speculators

 


 

 

Long

Short

Open Interest

Bullish

 

 

25,250

10,478

137,630

81.65%

 

 

-749

-806

2,836

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Silver Report - Positions as of

Tuesday, September 01, 2009



SEC charges Briner in alleged pump-and-dump

Posted by: Chad McNamara

Tagged in: Untagged 

Chad McNamara
SEC charges Briner in alleged pump-and-dump
2009-09-02 14:21 ET - Street Wire

by Mike Caswell
The U.S. Securities and Exchange Commission has filed civil fraud charges against Vancouver lawyer John Briner and others for the alleged pump-and-dump of Golden Apple Oil and Gas Inc., a pink sheets listing. The regulator claims that Golden Apple issued shares in repeated unregistered offerings. The company then published false and misleading news releases, which allowed those receiving shares in the offerings to sell their stock at a profit, the SEC says.
The complaint, filed on Sept. 1, 2009, in the Southern District of New York, names as defendants Mr. Briner and Golden Apple, as well as Toronto resident Jay Budd and a private Arizona company, Ethos Investments Inc. The SEC claims the scheme began in the fall of 2004, when Mr. Briner arranged an illegal offering of five million shares of a Golden Apple predecessor, CDI Developments Inc. The offering gave Mr. Briner control of 100 per cent of the company's tradable stock, according to the complaint. He distributed those shares to two private companies that he controlled, Nexus Capital Holdings Inc. and Tripartite Holdings LLC, and later to other persons, the complaint states.
The SEC claims that Mr. Briner then began artificially inflating the company's price. Starting on May 3, 2005, he allegedly traded shares between accounts he controlled at U.S. and Canadian brokerages, with the first trade at 10 cents. (All figures are in U.S. dollars.)
As the stock climbed to $3.70 on June 17, 2005, the company began issuing false and misleading news releases touting its business, the SEC says. Its first business was providing home warranties. In a Sept. 2, 2005, news release, the company claimed that it was in "an exciting position" with a high-volume partner, and that it could generate over $1-million of revenue in its first year. The SEC says the revenue figure was false, or at least misleading. The company failed to disclose that its plan was premised on having sold 400 warranties by September, 2005, but as of Sept. 2, 2005, it had sold fewer than 10. Of these, three were complimentary warranties provided to Mr. Budd and another party.
On Oct. 13, 2005, only six weeks after repeating its claim that it would realize strong growth from the home mortgage industry, the company switched businesses, becoming an oil and gas issuer instead. Once again, Golden Apple issued a number of false and misleading news releases about its oil and gas deals, the SEC said. The company claimed that it was acquiring a significant oil and gas property in Canada, and that it would be starting a drill program. In reality, the company did not have the money or permits to drill, the SEC says.
The complaint also states that the company failed to disclose it would have to issue 30 million shares to buy the oil and gas property, and it continued to list its outstanding shares as 25 million after announcing the purported deal. The stock, which was rolled back 1:50 on Sept. 6, 2005, went to a high of $1.46 on Jan. 31, 2006. It last traded for 0.01 of a penny.
While publishing these false and misleading news releases, the company continued to issue millions of shares in illegal offerings, the SEC says. According to the complaint, Mr. Briner and Mr. Budd manufactured fraudulent backdated promissory notes to justify issuing the stock. Each of the fictitious notes contained names and dates that did not match the corporate history of Golden Apple, and the purported debts did not appear on the company's financial statements, the SEC claims. The people who allegedly received the shares were closely affiliated with Mr. Budd, and at least some of the proceeds from selling the shares were ultimately deposited to accounts owned by Mr. Budd or his family, the SEC says.
The SEC also says that Golden Apple directly issued shares to companies controlled by Mr. Budd and Mr. Briner without proper registration. On Aug. 5, 2005, Golden Apple allegedly issued five million shares to Ethos Investments, which Mr. Budd controlled. Ethos then sold those shares, and made $3.1-million, the complaint states. In addition, Mr. Briner allegedly received unrestricted Golden Apple shares in November, 2005, in the name of Briner Group. The SEC says he sold those shares for unspecified proceeds.
The regulator is seeking permanent injunctions preventing future violations, disgorgement of profits, civil penalties, and officer and director bans for Mr. Briner and Mr. Budd.
Other Briner companies
The Golden Apple case is the first time that the SEC has filed any charges against Mr. Briner, who has been a Vancouver securities lawyer since at least 2004. In 2007, the regulator suspended two spam stocks that had links to him. There were no allegations of any wrongdoing against Mr. Briner at that time.
The suspensions included Irwin Resources Inc., an OTC Bulletin Board company. At the time, Mr. Briner was president of Global Developments Inc., a company that invested in several start-ups, including Irwin Resources. It purchased a $685,000 convertible debenture in Irwin in November, 2006. The SEC also halted another Global Developments investment, Red Truck Entertainment Inc., as part of Operation Spamalot. Global Developments had bought 2.1 million Red Truck shares in February, 2006, and 2.8 million in June, 2006.
Mr. Briner resigned from Global Developments in April, 2007, citing bad press and negative comments in Internet forums.
More recently, Mr. Briner is a backer of Denarii Resources Inc., an OTC Bulletin Board company with a molybdenum property in British Columbia. He and his family hold 43.5 per cent of the company's shares.

Autumn Silver Rally

Posted by: Brian Boutilier

Tagged in: Untagged 

Brian Boutilier

Big Autumn Silver Rally

Adam Hamilton, Zeal Intelligence LLC, Zeal LLC


-- Posted 21 August, 2009 | Share this article| Discuss This Article - Comments: 1 Source: SilverSeek.com

Silver’s fundamentals offer plenty of reasons to be bullish in the coming years.  Relentlessly growing global investment demand coupled with reduced production is a recipe for much higher prices.  With something like 3/4ths of all the silver mined globally being merely a byproduct, primarily of base metals, supplies will remain constrained.  Investors will have to compete in a tiny market for this scarce metal.

 

While silver’s long-term bullish case is well-known among its investors, this volatile metal also has incredible near-term potential.  In the coming months, silver is likely to witness exceptional gains.  Unfortunately, the driver of this potential big autumn silver rally is not widely discussed.  Thus many investors and speculators still sidelined since the panic risk missing out on this rare opportunity.

 

And ironically, the stock panic created the silver anomaly that led to this opportunity.  Silver has a long history of following gold.  Silver traders watch gold for trading cues, so gold action dominates silver psychology.  Thus silver typically trades in lockstep with gold.  But during the panic, the extreme fear spawned by the brutal stock-market selloff spilled into silver.  It forced silver to decouple from gold and plummet far deeper than gold warranted.

 

I started telling our subscribers about this anomaly and trading it last October.  Already it has proven a very successful strategy.  One new long-term silver-stock investment we added then, because of this anomaly, is already up 160%!  While silver itself fell under $9 in the heart of the panic, it has averaged $14 in the past month.  And the panic anomaly driving these gains still hasn’t been fully resolved yet.  There is more to come.

 

This whole panic episode, and silver’s near-term upside potential, is best understood in terms of the Silver/Gold Ratio.  SGR analysis simply divides the daily silver close by the daily gold close and charts the result over time.  It is very illuminating.  I first wrote about this publicly, after our subscribers had deployed positions, back in early February.  But a lot more investors are interested in silver today than back then.

 

So if you’ve been hiding out, following the ostrich strategy of cowering in zero-yielding cash instead of multiplying your capital in these once-in-a-lifetime post-panic opportunities, you really need to consider the SGR’s implications for silver.  And if you’re already trading this SGR anomaly, keep your capital deployed and watch your gains grow.  Although unwinding gradually, the SGR anomaly hasn’t even come close to being fully unwound yet.  But it will.

 

This SGR reversion’s potential silver impact is easiest to understand if we start in the normal years preceding last autumn’s crazy stock panic.  This first chart compares silver with gold over the last 5 years or so.  The 44 months between January 2005 and August 2008 are the control period, showing silver’s natural and normal behavior.  And the 4 months between September to December 2008 encompass the panic period where the SGR anomaly erupted.

 

 

In the years before the panic, silver’s very tight correlation with gold was readily evident.  Silver surged when gold was strong and fell when gold was weak.  Silver’s daily price action mirrored and amplified gold’s nearly perfectly.  Over this 44-month baseline time frame, 94.7% of silver’s daily price action could be statistically explained by gold’s own.  Gold action drove silver sentiment, and hence silver prices.

 

But late last summer, silver started decoupling from gold.  There had been minor decouplings before of course, but they were far smaller and only lasted for days to a couple weeks on the outside.  The silver decoupling witnessed as the panic unfolded was utterly unprecedented in its magnitude and duration.  Gold was indeed weak, but silver plummeted far faster and deeper than the gold selling warranted.

 

If you want to understand exactly why gold was weak during the stock panic, read my recent essay on the stock markets driving gold.  In a nutshell, bond-market followed by stock-market selling led to flight capital flooding into the US dollar to buy short-term US Treasuries.  This safe-haven trade drove the biggest and fastest US dollar rally ever witnessed.  Gold futures traders saw the dollar skyrocketing and dumped gold.  And as gold fell, silver traders got really scared.  Their fears were greatly exacerbated by the stock panic.

 

Scared traders are emotional traders, so silver was sold far more aggressively than yet seen in this secular bull.  Before this surreal fear bubble, silver averaged $18 in July 2008.  By November 2008 in the heart of the stock panic, silver averaged less than $10.  At worst, silver lost a mindboggling 53% of its value in just over 4 months!  It was an epic bloodbath that understandably broke the will of many silver investors to go on.

 

But although the massive panic-driven dollar rally hit gold too, gold’s selloff was trivial compared to silver’s.  At worst at its panic lows, gold hit a 14-month low.  But silver just kept on falling and falling, spiraling ever lower.  At its own panic nadir, silver had plunged to levels last seen 34 months earlier!  Silver does amplify gold’s moves, but the degree of this panic selloff was still utterly ridiculous.  It defied all logic and reason.

 

Over that September-to-December panic span, silver’s r-square with gold plunged to 52.5%.  In other words, only half of silver’s daily price action was statistically explainable by gold’s own.  In light of silver’s ironclad past relationship with gold, this was madness.  No one had ever seen anything like it before.  Not only was silver going way overboard in amplifying gold’s selloff, but gold was nearly eclipsed as the primary driver of silver sentiment.

 

Provocatively, the stock markets were usurping the silver helm.  In October and November in the bowels of the panic, silver hit new panic lows on 6 separate trading days.  Fully 4 of them happened to be days the S&P 500 (SPX) hit new panic lows as well.  Incredibly none of silver’s new lows happened on days where gold hit new lows!  And even though gold bottomed in mid-November, silver didn’t bottom until over a week later on the very day the SPX hit its own panic low.

 

The idea of the stock markets driving silver seems odd now, but within the extreme fear and stress of the panic it sort of made sense.  Unlike gold which is usually perceived as a stable investment and safe haven, silver is primarily viewed as a speculation.  It is a hyper-volatile metal heavily dependent on the whims of speculative preference.  And during the panic, speculators were so scared that the universal appetite for speculation went negative.  Speculators wanted out of all risky assets, in any market.

 

So being highly-speculative over the short term even in the best of times, silver really bore the brunt of the anti-speculation bias in the worst of times.  Traders wanted out immediately, at any price.  It was this panic sentiment that directly led to the silver anomaly we are still trading today.  Weak gold, coupled with extreme general fear driven by the plummeting stock markets, ripped the previously-bullish silver sentiment to shreds.

 

But the thing that makes an anomaly an anomaly is its short-lived nature.  The more extreme the psychology that drives prices out of whack, the quicker it will burn itself out and the anomaly will start to revert back towards normalcy.  Indeed we’ve seen silver do this since the panic ended.  This metal has soared from under $10 to over $14 on balance, recovering in a nice uptrend.

 

But this reversion isn’t over yet.  Note that after the panic gold quickly regained its pre-panic levels between roughly $875 and $975, and it’s been trading there for most of 2009.  Meanwhile, silver is nowhere close to its own pre-panic levels running between $17 to $19.  But it’s gradually getting closer to reestablishing its decades-old relationship with gold.  So far this year, silver’s r-square with gold has climbed back up to 81.5%.

 

Although this first chart is certainly adequate to make the case that silver is way undervalued relative to gold today, it is far less precise than a true silver/gold ratio chart.  So as I’ve done periodically since February, this next chart updates the progress of the SGR.  The SGR in blue is superimposed over the silver price in red.

 

Since the SGR-proper yields an unwieldy small decimal (like 0.01464), I prefer to invert the SGR to wrap my mind around it.  The inverse of the actual SGR yields 68.3, which makes more sense (it is technically the gold/silver ratio, but viewed from the silver side).  Instead of thinking silver is worth 0.01464 ounces of gold, it is easier to think in terms of it taking 68.3 ounces of silver to equal an ounce of gold.  Thus, the SGR axis below is inverted so this measure rises when silver is outperforming gold and vice versa.

 

 

The sheer magnitude and ridiculousness of the Great Stock Panic of 2008’s impact on silver is crystal clear when viewed through the lens of the SGR.  In the 44 normal months before the extreme abnormality of the stock panic, the SGR averaged 54.9.  And this mean was based on a fairly tight trading range between 65 and 45 with no extreme outliers skewing it.  This 55 number should be familiar to investors.

 

If you do any deep research into silver miners and gold miners, they often report “equivalent” numbers.  A primary silver miner will convert its gold byproduct to silver-equivalent ounces while a primary gold miner does the opposite.  One metal is rendered in the cash equivalent of the other.  In wading through countless SEC quarterly reports over the years, I’ve found the number used for this calculation is almost always 55.  In the industry, an ounce of silver has long been considered to be worth 1/55th of an ounce of gold.

 

But during the stock panic, speculative zeal reversed so rapidly and radically that the SGR plummeted to unbelievable depths.  Within months after breaking below its secular support which had held rock-solid for years, the SGR had plummeted to 84!  An ounce of silver was worth just 1/84th of an ounce of gold.  This was the lowest SGR witnessed over this entire secular bull by far.

 

During the 4 months ending December that encompassed the stock panic, the SGR averaged 75.8.  This was just silly, it made no sense and only persisted for even that long because silver traders were so darned scared.  At Zeal we started aggressively buying and recommending elite silver stocks, and the silver ETF, during this panic timeframe because there was no way silver could stay so depressed relative to gold prices.

 

These trades have proven very profitable since.  The SGR has been recovering since the panic and is in a nice uptrend.  But as you can see, the SGR still has a long ways to go yet before silver regains some semblance of normalcy relative to gold.  But make no mistake, it will happen.  Since the early 1970s when gold was freed to trade in the States again, silver’s relationship with gold has been strong and unwavering.

 

You can spin a variety of scenarios for this SGR mean reversion.  The most conservative one is simply to assume that gold remains stable in its post-panic trading range as it has for many months now and the SGR simply reverts to its pre-panic average of 55.  Over the past month, gold has averaged just under $950 on close.  Gold staying flat and an average SGR implies that silver will normalize to $17.25 or so, 25% above its levels of this week.

 

But the SGR mean reversion probably won’t stop at 55 and gold probably won’t stay flat, so the near-term bullish case for silver is far more compelling depending on the assumptions you make.  Note above that the SGR’s secular support was rising steadily for years before the stock panic.  If that line is extended to today, it hits 49 or so.  A 49 SGR at $950 gold implies about $19.50, 40% higher from here.

 

And psychology in the financial markets seldom stops conveniently at the midpoint, it is like a pendulum.  If you pull a pendulum a long way in one direction, and let it go, will it stop dead center?  Certainly not, its momentum will keep carrying it well past center in the opposite direction until its energy is dissipated by nearly reaching the opposite extreme.  Silver saw extreme fear in the panic, among the worst it’s ever seen.  Give the magnitude of this anomaly, I suspect psychology will overshoot well into greed before it normalizes.

 

So the SGR could, at least temporarily when traders get excited, soar far under 55.  How far?  Make a guess.  It depends on how precious-metals psychology unfolds, on how quickly discouraged silver investors return, and a myriad of other inherently unpredictable factors.  But take some SGR well under 55, the temporary overshoot, divide a $950 gold price by it, and you get some seriously exciting silver targets.

 

On top of all this, gold isn’t likely to stay flat either.  All these SGR-reversion silver targets get higher as the gold price they are based on rises.  Thanks to the Fed’s record monetary growth during and since the panic, big inflation is coming.  Few things drive new gold investment like an inflation scare, and we are going to see a doozy of one sooner or later here.  And gold’s innate supply and demand fundamentals, including declining mine production despite high prices, remain very bullish with or without inflation.

 

All this is exciting for silver, but it doesn’t offer clues on timing.  But other factors are coming into play that I suspect will lead to a substantial acceleration of this in-progress and inevitable SGR reversion in the coming months.  Silver has incredible potential for one of its biggest autumn rallies ever witnessed.  Investors and speculators long this metal and its elite producers would see huge gains in such a scenario.

 

Silver ultimately follows gold, so nothing will get traders as excited about silver as quickly as a major gold rally.  Provocatively, we are just entering the seasonally-strongest time of the year for gold prices.  On average between 2000 and 2008 prior to the panic, gold rallied 14% between August and February.  Off of a $950 average gold price, a similar move this year would carry gold above $1075.  Gold decisively over $1000, highly likely soon technically, would ignite all kinds of buying in the tiny silver market.

 

In addition, remember that the stock panic’s universal dampening of the appetite for speculation was what led to silver’s panic anomaly.  Back in January I did a historical study showing that the biggest up years ever witnessed in stock-market history tend to immediately follow the biggest down years.  2008’s 38.5% loss was the S&P 500’s worst year ever.  So in January I said we should expect a 25% to 50% gain in the US stock markets in calendar 2009.  It was a very heretical and controversial bet back then.

 

But with the SPX up 10% year-to-date now, 25%+ SPX gains this year seem more plausible to far more investors.  And if the SPX is to achieve even 25% this year, let alone 50%, it has a lot of rallying to do between now and year-end.  If general stocks rally big this autumn, which is likely, the universal appetite for speculation will soar and cash will flood in off the sidelines.  Silver, among the most speculative of all commodities, will be a major beneficiary of any speculation renaissance.

 

With a big autumn silver rally very likely, some wonder how to play it.  One of the best ways is in elite silver stocks.  While the SLV silver ETF will match silver’s gains, silver stocks have the potential to multiply them.  Back in March we started gathering data on all the primary silver stocks trading in the US and Canada.  Our initial screens turned up nearly 100.  But amazingly, the total market capitalization of this entire population was under $7b!  It is higher now of course, but still vanishingly small compared to every other sector.  For comparison, in late March the HUI gold stocks were worth $144b and the SPX $7218b.

 

So if any capital at all bids on silver stocks during the coming silver rally, their prices have to soar.  They are just too small to absorb significant buying.  So which silver stocks are the best to own, the highest-potential?  We spent several months earlier this year painstakingly narrowing down the universe of primary silver stocks to our favorite dozen.  We believe they have the best fundamentals and greatest potential of all the silver stocks.

 

In June, my business partner Scott Wright profiled each of these elite silver companies in depth in a comprehensive and fascinating 33-page report.  Priced at only $95 for the fruits of hundreds of hours of world-class silver-stock research, it is a steal.  Buy your copy today and get deployed in elite silver stocks before silver leaves without you!

 

We also publish an acclaimed monthly newsletter, Zeal Intelligence.  It analyzes the financial markets including silver with the goal of growing our capital through successful speculation and investment.  In it I discuss what is going on in the markets, why, and how we can capitalize on it through real-world trades.  With the coming autumn looking to be incredibly exciting, now is the perfect time to subscribe.

 

The bottom line is silver remains way too cheap relative to gold.  The extreme fear generated by the stock panic dragged silver down into an unsustainable anomaly.  Since the panic ended, silver has indeed been gradually regaining ground relative to gold.  But despite the progress in this normalization, this anomaly hasn’t even come close to fully unwinding yet.  But it will, which implies much higher silver prices ahead.

 

And other factors are likely to drive an acceleration in silver’s recovery in the coming months.  Gold itself looks very bullish, and growing mainstream inflation fears could rapidly spark big investment demand.  Nothing will entice sidelined silver traders back in faster than a major gold rally over $1000.  And the general stock markets are likely to rally into year-end too, fostering a renaissance in speculation.  Of course silver is one of the premier commodities speculations.

 

Adam Hamilton, CPA

 

August 21, 2009


The Voice of the People T Butler

Posted by: Brian Boutilier

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Brian Boutilier

The Voice Of The People

By: Theodore Butler
 


-- Posted 25 August, 2009 | Share this article | Discuss This Article - Comments: 3 Source: SilverSeek.com 

Here’s another new regulatory development. (As previously explained, it is my intent to publish regulatory developments in the public domain, while reserving proprietary market research for subscribers to www.butlerresearch.com)

In “Special Notice,” http://news.silverseek.com/TedButler/1250014324.php, written two weeks ago, I disclosed that the public comment period for the open hearings held by the CFTC on position limits was ending a day later. I provided the comments that I had submitted and suggested that if you were so inclined you might comment as well. GATA then picked up my article and urged its members to write to the Commission as well.

The CFTC has now published the comments of those who wrote to them on this issue. You can read your own comments and those of all the others who wrote in. But set aside some time, as there were quite a few comments, roughly 400 in all.http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/energyhearingcomments.pdf  Most importantly, again by rough count, 90% of the comments (360+) referenced the concentrated COMEX short position in silver (and gold).  I’d like to explain why this is so significant.

In the three full days of the open hearings and the hundreds, if not thousands, of pages of documents supporting the testimony, and in all the questions asked and answered, never was there any mention of the concentrated short position in COMEX silver. Yet 90% of the public comments sent in by ordinary citizens and investors dealt with this singular issue. I find this extraordinary. I think it proves that the public is remarkably well-informed on this issue and is seeking specific answers and remedies.

Yes, I did suggest readers write in, but please read my article; I did not pound the table that people must write in. (In fact, I only wrote in myself, at the last moment, because I had privately written to the Commission a week or so earlier, telling them that there were no instructions on their site for how to provide public comments. After they then did give the instructions, to their credit, I felt an obligation to comment). GATA was more forceful in asking its members to write, also to their credit. But any suggestion that this was solely an organized “get out the vote” affair to push a private agenda is nonsense. No one twisted anyone’s arm to write in. Those who wrote in were clearly independent thinkers and investors deeply concerned with a very specific and legitimate issue – manipulation in the silver market. They needed little encouragement.

Those that wrote in are on a special “Honor Roll” in my mind, deserving of a lot more than a gold star. I know there would have been many more, had there not been, quite literally, less than 24 hours to do so. (My fault, as I should have posted the info earlier). Also on the Honor Roll are the hundreds more that wrote to the Commission about this very issue in the months preceding the hearings. There is no way to consider this effort as other than as grassroots in nature and democracy at work.

As I have written repeatedly, I have great hope and confidence that the new chairman of the CFTC, Gary Gensler, will rise to the occasion and do the right thing. The right thing is to reduce the speculative position limits in COMEX silver to no more than 1500 contracts and throw out the phony hedge exemptions of the financial aggregators on the short side pretending to be legitimate hedgers. Or please explain openly why this should not be done.

I know I am in a very distinct minority in my expectations of Chairman Gensler and the Commission doing the right thing. Time will tell if my hope is misplaced. In the meantime, those that did voice their opinion on this issue have done a wonderful thing for us all. You have provided the public support necessary for Chairman Gensler and the Commission to confront this issue head on. The public record now shows where you stand on this issue. You have told the Commission, in the clearest possible terms, to fix the position limit problem in silver or explain why there is no problem.

To Chairman Gensler and the Commission I would respectfully submit that it is time to deal with this issue. I know you value your responsibility to uphold the law and to serve the legitimate needs and wishes of the public. I know you want to guard against fraud, abuse and manipulation. All of those who have written to you on silver, either in these public comments or separately, believe there is a crime in progress in the silver (and gold) market and are counting on you to either fix it or explain why not. To my knowledge, no one has ever written to you asking you to raise the position limits in silver or to allow the big concentrated shorts to sell more silver short. The highest calling for a public servant is to heed the voice of the people when that voice is asking something reasonable and proper.


-- Posted 25 August, 2009 | Share this article | Discuss This Article - Comments: 3

 



Open Lawyer's Letter to CTFC Commissioner

Posted by: Brian Boutilier

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Brian Boutilier
Open Lawyer's Letter to Bart Chilton, CFTC Commissioner

By: Avery B. Goodman


-- Posted 6 June, 2008 | Share this article| Discuss This Article - Comments: Source: SilverSeek.com

A. B. Goodman Law Firm, Ltd.        

Attorney & Counselor at Law

AVERY GOODMAN, ESQ.

--------------------------------------

--------------------------------------

--------------------------------------

Contact Information Redacted

 

June 2, 2008

 

The Honorable Bart Chilton

Commissioner

US Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st St, NW

Washington, DC 20581

 

Re:     Silver futures manipulation & the failure by CFTC staff to adequately investigate.

 

Dear Mr. Chilton:

 

          I am writing to you because you have established a reputation as a man who wants to clean up the futures market. 

 

In a report, dated May 13, 2008, CFTC staff allegedly “investigated” the functioning of the silver futures market. Their conclusion was that it is functioning properly.  Unfortunately, the investigation was woefully flawed.  Staff failed to inquire into the most basic issues.  They didn’t ask for warehouse receipts, didn’t inspect alleged warehouses, didn’t count the bars of silver, and, in fact, didn’t do any accounting at all, with respect to the alleged silver that is supposed to cover derivative dealer futures contracts. 

 

Because the amount of silver futures, allegedly “promised” for delivery far exceeds the entire world’s supply of deliverable silver, looking into this was of critical importance.  As a result of the inadequate investigation by CFTC staff, we still don’t know whether there are primary stockpiles of silver covering long futures contracts, and/or what secondary stockpiles cover the puts and calls that are, in turn, alleged to “cover” these base contracts.  Instead, staff issued a report that merely speculated that, “maybe”, “somewhere”, there “might” be sufficient silver to satisfy the contracts.  The critical question is where?  That has not been answered at all.

 

One cannot legitimately say that a liability is “covered” when one does not know where the commodity to “cover” is located.  If dealers know how to find more silver than is known to exist, why can’t CFTC use its existing statutory authority to demand that information?  The report is one of the sloppiest pieces of work I have ever seen in all the 24 years I have practiced law. On page 8 of the CFTC report, it states, for example:

 

“The Commission's guidance on speculative position limits focuses primarily on the spot month because, in our experience, physical delivery futures markets, such as silver, are most susceptible to threats of manipulation during the spot month.” 

 

Yet, if silver futures contracts are being adequately covered, as they must be, according to CFTC regulations, how can a simple demand for physical delivery “manipulate” a market in the spot month?  Dealers should be able to easily deliver whatever silver is demanded. The silver should be easily deliverable from adequate stockpiles, required by law.

 

Let us digress, for a moment, and examine a short history of the futures market,  how it should be operating, and how it actually operates. When futures markets were first conceived, Wall Street banks were not the dominant writers of futures contracts, and almost never would be in the short positions. Banks provided cash liquidity, and held a majority of long positions.  Market participants who actually produce or hold large quantities of a particular commodity in the ordinary course of business, such as farmers, miners, refiners, wholesalers, etc., held the “short positions.”  This allowed them to hedge against a price decrease for their goods.  This provided liquidity and business stability for the producers, whose businesses in agriculture and mining were often very risky.  Now, however, trading futures contracts has become a game of speculators and banks.  The futures system has morphed into a legalized casino, with banks as casino operators, taking directional bets from speculators, which are sometimes other banks.  All of them are gambling on the prices of commodities. That is not what the futures market was meant to be.

 

Commodity Futures Trading Commission (CFTC) regulations are quite clear, although they are not enforced.  In theory at least, a dealer is obligated to maintain adequate cover.  Unlike the London futures contracts, COMEX contracts put on a pretense to actual delivery upon request.  This is part of what causes the spot market to look to the American futures markets, and not the European ones, for so-called “price discovery.”  The fiction of delivery creates an illusion that participants are dealing in real silver.  But, before we get more deeply into that fact, let me point out that 17 CFR 31.8

states:

 

"...(a)(1) Each leverage transaction merchant must at all times maintain cover of at least 90 percent of the amount of physical commodities subject to open long leverage contracts entered into with leverage customers, and must at all times also maintain cover of at least 90 percent of the amount of physical commodities subject to open short leverage contracts entered into with leverage customers..."

 

So, each futures contract should represent real units of real silver. The contracts, in fact, make that promise.  The problem is that, in the real world, it doesn’t work that way.  The promise is false.  CFTC Regulation 1.3(z), 17 CFR 1.3(z) provides that dealers are exempt from position limits.  However, it does provide they are exempt from having to cover their contracts. They are granted an “exemption” because they are supposed to be “hedging” existing supplies of silver. Yet, one cannot “hedge” against something that doesn’t exist.  It is obviously a lot cheaper for an entity, like a bank, which normally would hold no grains or metals, to avoid the expense of keeping cover stockpiles required by law. But, doing so corrupts the system.  That is the problem.

 

Let us take a moment to examine the facts.  The specifications of COMEX silver futures contracts can be found on the NYMEX website[i], and they are crystal clear.  In summary, one contract requires eventual delivery of exactly 5,000 troy ounces of silver.  One metric ton equals 32,150.746 troy ounces.  Total COMEX warehouse stockpiles are 133,755,900 troy ounces, or approximately 4160.27 metric tons of silver. Total reserves held by SLV (iShares silver ETF) are 192,569,101 troy ounces or 5,989.57 metric ton. [ii]  According to the prospectus of iShares Silver Trust, however, no metal may be swapped, loaned or otherwise committed to 3rd parties.  The other known major source of hoarded silver bullion is in the vaults of dealers, mostly in Europe.  They need this metal to meet their own obligations because a lot of them buy and sell the metal physically.  All known European dealer silver amounts only to a total of another 300,000,000 troy ounces at most.  China and India may have very large hoards of silver, but mostly in the form of jewelry and coins, owned by individuals, who would not willingly pledge or part with it.  Americans also have silver necklaces, coins, and silverware sets, but how many have contracts with COMEX dealers to deliver family silver for meltdown, upon demand?  How about the government stockpile?  Not a chance.  All remaining U.S. government silver was turned over to the U.S. Mint for coinage, years ago.  It is rationing silver eagle coins. 

 

          Let's look at the notional amount of silver futures.  This information can be found at the Commodity Futures Trading Commission website.[iii]    As of May 13, 2008, COMEX derivatives dealers wrote a total of 122,802 long contracts for future delivery of silver.  As of May 20, 2008, these numbers increased to a total of 125,838 long contracts.  On May 15, 2007, in contrast, 108,698 contracts were written.   There were a number of months, in 2007, during which up to 189,000 contracts were written.  All of these contracts are supposed to be 90% covered by stockpiles of physical metal, or derivatives like puts and calls that, in turn, are covered by physical stockpiles.  None of these numbers, incidentally, include the options contracts, themselves.  If we included the options, they which would exponentially multiple the total notional claim on the world’s silver supply, and, also, the liability for what silver metal must be delivered. 

 

          Each COMEX silver contract promises 5,000 troy ounces.  So, COMEX derivatives dealers promised to deliver 614,010,000 troy ounces of silver on May 20, 2008.  This appears, on the face of things, at least, to be impossible.   COMEX stockpiles amount to only 133,755,900 troy ounces.  That is enough to cover about 26,600 contracts.  To cover the remaining contracts, dealers would have to find unknown warehouses filled with the white metal.  If these warehouses exist, why haven’t they been identified by the CFTC?  Instead, CFTC states in its report that “unknown” hoards of silver may exist, but doesn’t bother to tell us where.  Logic tells us that derivatives dealers could not beg, borrow or steal 90% of their silver delivery promises, because they would have to come up with 552.61 million troy ounces, and that is logically impossible.  As previously stated, during certain months in 2007, the number of contracts was 50% higher than now. I probably don’t need to point out that, in such a month, derivatives dealers would require 150% as much silver as we have already discussed in order to fulfill their contractual promises.

 

          Silver is a precious world resource that we are quickly running out of, as a result of price suppression caused by the creation of fake quantities by the COMEX futures market.  The 2008 U.S. Geological Survey states that the world's total proven reserve of silver is only 270,000 tons.  That means 15.57 years left on earth at current mining rates.   The consumption level, of course, is rising fast, so the number of years will end up being much shorter than that.  Maximum exploitable silver is only 570,000 tons (32.87 years), and this is only exploitable if the price for base metals, from which the silver is extracted, rises high enough.  After mining reserves are exhausted, only recycled and hoarded metal will be left.  The Survey further notes that most future silver mine production will be the byproduct of base metal production.  Thus, only a vast increase in the price of silver, into hundreds of dollars per ounce, may stimulate production beyond the listed reserves.  Absent this, we have just shy of about 16 years worth of minable silver left in the ground.  Unlike oil reserves, which continually seem to increase, year by year, the total silver reserves have not materially changed in at least the last 10 years. 

 

          Total 2008 mine production is projected to be 557.4 million ounces, up 4.1% or 23.7 million ounces from last year, according to the definitive CPM Group's Silver Yearbook 2008.[iv]  Total silver fabrication demand is projected to rise modestly by 2.2% to 740.2 million ounces in 2008.[v]  Demand for silver use in jewelry and silverware is projected to rise 4.6% to a total of 273.5 million ounces in 2008.[vi]  Silver use for electronics and batteries is forecast to rise to 125.8 million in 2008, up 5.3% from current levels.[vii]  Silver used for mirrors, brazing alloys, anti-bacterial medication, solders, biocides, and superconductors and other similar applications is expected to rise around 3% to 167.7 million ounces in 2008.[viii]  Investors are forecast to be net buyers of 74.9 million ounces of silver this year.[ix]   No significant sales of silver from government inventories are anticipated this year.[x]  With nano-silver based catalytic converters for diesel engines on the way, a legally mandated substitution of copper in use for wood preservatives by the EU and the USA to happen within 5 years, silver-zinc batteries (with 40% greater energy storage compared to lithium-ion technology) now being marketed for mass market electronics use, silver based nano-conductive RFID ink production exploding, and a number of other new industrial silver uses on the way, the demand is likely to increase by several thousand metric tons per year, from 2008 onward.  The known sources of supply are wholly inadequate to meet this demand.

 

          But, let’s focus on 2008.  This year, adding up the numbers, new mining supply will be 557,400,000 troy ounces, or 17,337.08 metric tons.  In contrast, demand is 1,382,100,000 troy ounces, or 42,988.12 metric tons.  That would mean a deficit of 824,700,000 troy ounces or 25,651.04 metric tons.  However, part of this deficit can and will be met by recycled silver.  According to the Fortis 2008 Silver Book (which I view as somewhat less accurate than CPM), recycling of used silver form former use in photographic, coin, jewelry and other uses, will amount to 13,558 metric tons.  That still leaves a net deficit of -12,093.04 metric tons, in 2008.  The Fortis people, based on all their numbers, somehow calculate a surplus in virtually every year since 2000, including 2008.  That, of course, is logically impossible, because if there were a surplus, the price would not have gone up by about 4 xs during that time period.  So, by using the numbers from CPM, combined with those of Fortis, we probably get a more accurate idea of the true situation.  Given the deficit, or at least the fact that there is unlikely to be any surplus, where will COMEX based derivatives dealers get silver to back up their pledges of future delivery?

 

          In short, COMEX futures contracts are little more than fake silver supplies, that allow derivatives dealers to operate a “casino”, and have the net effect of suppressing market prices. Aside from the inherent problem of creating fictitious stockpiles, the risk that these fake supplies are being used to consciously control the price of the real metal is also very real.  By writing a few thousand extra contracts, just before maturity, dealers could act in unison to spook investors, at opportune times, quickly bringing down prices, and insuring that the “house” never loses the card game.  This is because the spot market looks to the allegedly “physically delivered” New York futures market for price discovery.  Beyond that, short run manipulation like this, can have very serious long term effects.  At minimum, it can add a large measure of volatility to prices.  This can cause conservative investors to shy away from investing in the metal, and that depresses the price in the long term, increases demand, and quickly depletes world supply of a very critical industrial metal.  That is exactly what is happening.

 

Since 90% of the contracts cannot be delivered, CFTC should stop simply looking the other way, and require COMEX dealers to admit that their futures contracts are cash-settled paper instruments.  That would go a long way to resolving the problem.  The COMEX casino would shrink down to a market size similar to the London Futures Exchange.  Now, however, because that has not been done, COMEX dominates the spot price. Because of its huge size, and an illusion of physical delivery, it has persuasive authority.  Cash-settled paper, with no pretext about delivery, would have little or no persuasive authority, and that is the way it should be, because, in truth, that is all that the COMEX contracts really are.

 

Given the hard facts, the probability that COMEX derivatives dealers are in widespread violation is very high.  For example, in November 2007, a class action was settled against Morgan Stanley for millions of dollars in damages.  The complaint stated that Morgan Stanley, one of the biggest and most respected investment banks in the world, had committed fraud by charging customers for buying silver that it never bothered to buy.[xi]  Yet, CFTC staff has completely ignored this issue.

 

In light of these facts, I hope that you will spearhead a drive by the Commissioners to require staff to reopen this investigation, and complete it in a proper manner.  They must inquire into, and obtaining detailed information about the sources of alleged stockpile “cover” for COMEX silver futures contracts.

 

If you have any questions, concerns or thoughts you would like to discuss, please do not hesitate to call or write.

 

Very truly yours,

-----------------------------------  (Signature Redacted)

Avery B. Goodman

 

ABG/wp

 

Enclosures


Silver Rising

Posted by: Brian Boutilier

Tagged in: Untagged 

Brian Boutilier

Silver is making a move on this fine monday morning.  My good mood is seeping through not because of my coffee, but the metal of my character.  I bought silver in the dips last week.  I bought bullion and coins to be specific.  I will happily give away USD for real metal.  Why silver, why now?  I'll be brief.  

Perhaps festival  in India is having an effect, so immediate demand is trending higher.  Perhaps scraps sale have lessened.  Are you kidding me. Thats what it takes to drive up spot silver, India, scrap?  This is SILVER!  Now I find that amusing.  I must digress.  

We will react to India's jewelry consumption as a market driver, but not industrial uses. Electronics, medical uses, solar panels and even clothing are consuming silver at an alarming rate.   I recently read  a Richard Daughty article that our above ground silver stores have gone from 2.2 Billion Oz to 300 million in the recent past.  In a laissez-faire market shouldn't silver be rocketing up if silver demand is higher and supply is lower?  Tyaa,  sure. But there's more to the equation, or more accurately, more fingers in the pie.

Silver  ETFs for one are distorting the picture.  These paper giants cannot possibly all be backing their holdings with bullion, or silver would be higher still. Who else would benefit from manipulating silver?  Banks don't generally like missing trends, if fact they are in the business of creating and manipulating them.  It was the central banks in Mexico that squelched a move to the silver standard there.  Why would they do that?  It must be that their stock piles were already sold off, so they would not benefit from the move.  Nothing else makes sense.  

To recap, stockpiles are down in Mexico, and very likely in other countries (assumption).  The markets have be artificially depressed by the COMEX and other banks (their shorting is well document of late).  ETFs are not helping because little to no silver is being taken off the table, or simply moving from one holding place to another.  I will give them that.   Industrial uses are on the rise, and yet silver production is not keeping pace.  

Silver gurus have been calling for this scenario for years.  My head is sceptical having been burned on silver trends in the past.  My gut says buy more silver. The illusion of silver being in endless supply and of little use is breaking up.  Why buy silver now?   In a decade or two, jewelry and coins may be all that's left!


Silver Market Update

Posted by: Brian Boutilier

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Brian Boutilier
Silver Market Update


 
By: Clive Maund
 

 


-- Posted 23 August, 2009 | Share this article | Discuss This Article - Comments: 0 Source: SilverSeek.com 

There has been an ususual divergence between silver and gold over the past few weeks - gold's COT structure has improved while silver's has continued to deteriorate, against a background of a technical picture that looks considerably weaker than that for gold.

 

 

Unless silver's COT structure improves considerably in the near future and/or it breaks out above the important resistance around the $16 level, we will continue to view it as rangebound between the support and resistance shown on our 3-year chart following the break of the uptrend in force from last October.

While it can be argued that silver still has some catching up to do relative to gold following its devastating plunge last year, the fact remains that it has considerable resistance to overcome before it can break out to new highs, in marked contrast to gold, which has no resistance at all to overcome against many currencies, which is a reason why gold, and the better gold stocks, are generally preferred at this time.

 

 

The current increasingly bearish Silver COT picture is certainly a worry not just for silver bulls but also for gold bulls as well, and is a reason why, although we are now positioning ourselves for a gold breakout to new highs soon, we are open to the possibility that it may be preceded by a brief but violent shakeout which is why our long positions are protected by cheap Put options. Such a shakeout may be the "ambush" that we have suspected may take place for some time, which would enable the Big Money protagonists to achieve the double whammy of not only shaking the "little guy" out of his positions and mopping up his holdings, but covering their shorts and reversing positions ahead of "the big one".



Walking the Walk. T Butler

Posted by: Brian Boutilier

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Brian Boutilier
Walking the Walk

By: Theodore Butler
 


-- Posted 20 August, 2009 | Share this article | Discuss This Article - Comments: 1 Source: SilverSeek.com 

Here is a regulatory development update. Yesterday, the Commodity Futures Trading Commission issued a statement that it was pulling the exemption from position limits from two entities trading wheat, corn and soybean futures. The exemptions were previously granted back in 2006, via “no-action” letters.

http://www.cftc.gov/newsroom/generalpressreleases/2009/pr5695-09.html

One of the entities denied a continuing exemption was DB Commodity Services LLC, the trading arm for the Deutsche Bank-sponsored DBA agricultural commodity ETF. The fund will now have to reduce its positions in those markets to no more than the Federally-mandated maximum speculative position limits. Thus, the CFTC appears on its way to fulfilling what it had said it was going to do in official statements and during the recent public hearings on position limits. Talking the talk has now become walking the walk.

Bravo to Chairman Gary Gensler, who had this to say in the announcement:

“I believe that position limits should be consistently applied and vigorously enforced,” CFTC Chairman Gary Gensler said. “Position limits promote market integrity by guarding against concentrated positions.”

I believe Chairman Gensler “gets it” when it comes to this issue. I believe he will do what he says he will do about position limits. If he will take on Deutsche Bank, a financial powerhouse and no pushover, I believe he will let no one stand above the law. All that remains to be seen is if he will apply the principles he articulates to the short side of the silver market. I hope and believe that he will.

For additional information on gold and silver – www.butlerresearch.com



Follow on Letter on short selling PMs.

Posted by: Brian Boutilier

Tagged in: Untagged 

Brian Boutilier

This is a follow- on letter to Chairman Shapiro on the UP tick Rule and short selling being investigate by congress.  This was written by Steadfast, a senior contributor on Silverseek.  Boot

 

Subject: In support of the "above bid short selling rule."

I hear that you are still soliciting commentary on the matter of the Uptick Rule (above bid rule) and short selling. Illegal short selling persists in Precious Metals and physical PM investors are being unduly punished for simply owning that which is REAL. While the central banks run the market rampant with unchecked numbers of naked short paper commodities contracts, that are mostly based off of the promise of AIR. These fake Paper commodities must be reigned in by the same limits placed on ALL OTHER commodities in our market place.

I have no problem with legitimate short sellers. But the Naked short selling committed by our own American Banks, despite the fact it is considered illegal, is simply wrong and negligent. We need see true justice reinstate integrity to North American financial markets, which can only be done by the enforcement of rules that allow what is most REAL (Gold/Silver) to be allowed to find it's REAL price in the free market. Meanwhile, the paper PMs must become much more limited in their numbers to end their manipulation and influence over free market. Making it possible for the market to flow un-manipulated is not only natural and practical but fair and Just too.

The time has come for you and your men to take action. The frequency trading, front running, quasi-derivatives, insider trading and wanton naked short selling in PMs makes a mockery of our markets, of your office, and of your direct authority. Would you like to look back at your life, after the damage that the growing silver and gold bubble will make, when it goes super nova, on the financial landscape of our nation, and say to yourself, "I could have done so much more to stop this, and I didn't do it."

Chairman Shapiro, I realize it takes time to get up to speed on the issues confronting your organization. But, Please hurry, time is not on our side. What You chose to do over these next few weeks will have consequences over the future of our great nation and over the lives of our future generations.

Thank you for listening, 

Now get to it! Defend us!

Become the hero you where born to be!

Best Regards, 
Steadfast (edited for my privacy)

His Email address.
CHAIRMANOFFICE@SEC.GOV


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