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Mr. Hommel:
I’m looking for a silver expert to talk with
about a story I’m working on.
Basically, the CFTC has been getting complaints that
the silver futures market has been unfairly skewed to the downside. The
commission says there’s no evidence for this, and I’m hoping you
can help me with some insight into what the other side of this argument might
be.
If you have a second to chat about your thoughts on
this, please give me a call.
Thanks,
Matt Whittaker
Commodities reporter, metals
Dow Jones Newswires
Mr. Whittaker:
Thank you. I'm probably one of the few world
experts on silver, including Ted Butler of butlerresearch.com, David Morgan
of silver-investor.com, and Jeffrey Christian of CPM Group. Of all
those men, I have a much larger market reach than they do, as my newsletter
goes out to about 80,000 email readers now, and my readers keep me informed
of many things. But the other experts are certain to know more than me
in some areas. Jeff Christian is biased in favor
of futures contracts, and I'm biased against.
So, the CFTC says that there is no evidence that the
silver futures market has moved silver prices to the downside?
If you are willfully
blind, or complicit in the manipulation, you won't see anything, or you will
say that.
Here is my proof that there has been manipulation,
especially recently.
1. First proof:
Over nineteen major coin shops around the world ran
out of silver as the price fell from $21 to $16, as I documented here: http://silverstockreport.com/ssrarchive.htm
from March 19th to
April 2, and there are many reports even now that it will take a month or
longer to get silver! Some of the big name shops included the Canadian
Mint, the U.S. Mint, the Perth Mint, Kitco, Amark who is Johnson Matthey's
number one silver distributor to the public, and Johnson Matthey
is the largest silver refiner in the U.S. Other major online
dealers popular with investors who ran out included Tulving,
NWT Mint, CNI Numismatics, APMEX, bulliondirect.com and more.
How can the price go down, when there is no silver
to buy?
2. Second proof:
On May 14, 2004, the CFTC wrote a report to deny
allegations of manipulation in the futures market,
see: www.cftc.gov/files/opa/press04/opasilverletter.pdf
They continue to refer to this letter today. The
author of the letter, Michael Gorham, director of the CFTC, resigned from the
CFTC 3 weeks after writing the letter.
Shockingly, this letter admits the existence of
fraud and manipulation in the silver futures market!
How so? They admit that no manipulation to the
downside could exist as long as investors have "unrestricted
access" to buy silver, but they admit that there are position limits
that prevent that from taking place!
On p. 5, they write:
"Because there is unrestricted access to the
market, many knowledgeable and well-capitalized traders would readily buy any
silver offered at artificially low prices. The buying by these
traders--buying that the alleged manipulators would have no way of
preventing--would quickly cause the price to rise to its appropriate
level."
However, on p. 8, they contradict that by stating:
"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."
In other words, they admit on page 8 that limits
exist that prevent large investors from buying silver as they suggest they
could do on page 5!
In other words, they are so twisted, that they
believe it is a manipulation to buy physical silver!
3. Third proof:
The actual position limits are 1500 contracts per
trader. However, these limits do not apply to the traders on the short
side, only the long side. The positions on the short side are too
large, and concentrated among too few traders. The 8 or less traders have controlled up to 83% of the market, as
recently exposed by Ted Butler, in recent weeks; and this represents over 200
days of world silver production, or over about 50,000 contracts. Concentration
is the ultimate evidence of manipulation, and it is ignored.
4. Fourth proof:
The very nature of silver itself is that it is not a
promise, it is payment in full. All kinds of paper promises are by
nature, a substitute for silver and gold, and hence a manipulation, because
their very existence creates a substitute demand for something other than
physical silver and gold. Thus, even paper money itself, and T-Bills,
Bonds, CD's, savings accounts, are all manipulations that suppress the price
of silver. Monetary demand, or investment demand for silver, is as low
as it could ever be, since no nation on earth uses silver as money. This
reduced demand suppresses the price of silver.
The size of the world paper money market and bond
markets probably exceeds $100 trillion, which is $100,000 billion.
The size of the silver market is about 600 million
ounces produced each year, and about 75 million ounces purchased by investors
each year. At $20/oz., this suggests that the investment demand for
silver is only $1.5 billion per year.
Thus, the size of the silver market is about 1
dollar out of 100,000.
In conclusion, I believe I,
and now you, have stumbled onto the Achilles’ heel of the world's
financial system. I'm somewhat skeptical that
dow jones would let you
expose this story to the world. I'd suspect that your story will get
buried.
Jason
Hommel
Silver Stock Report
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