For all those
who watched the historic CFTC meeting December 16th on position
limits, no, your eyes didn’t deceive you – the meeting ended
strangely and abruptly. No vote was taken on the staff’s proposal and
you should be scratching your head at what actually transpired. As strange as
the sudden adjournment to the most important meeting in CFTC history might
be, there was a wealth of knowledge and confirmation to be drawn from
it. This meeting was perhaps the most
significant and positive development towards ending the long-term silver
manipulation that I have witnessed in my 25 year involvement. Silver investors should come away from
this meeting with a strong conviction of how things will turn out.
I know there
are deep differences between the five commissioners on the matter of position
limits, even though such limits are now mandated by law. I know that the CME
Group (COMEX and NYMEX) is pulling out all stops to prevent, delay and water
down any position limits that may be enacted. But I also know that there is
one glaring truth that accounts for the dissention and turmoil revealed at
the meeting. This is all about
silver and its manipulation. If it weren’t for silver, this meeting and
the issue of position limits would be a non-event. There is no current
concentration problem in any other commodity.
Because of the
fact that silver has been manipulated in price and position limits would
terminate that manipulation, the CME and JPMorgan want to derail any move
towards these limits. Keep this
fact in mind, as it is the central issue. When it comes to market regulation and
silver the CME Group does not do the right thing. They are only interested in
their bottom line and the devil with everyone else. However, the CME is designated
as a self-regulatory organization by law, which means they have special
responsibilities as a front line defense against market wrongdoing.
This is an
issue in which the public has spoken loud and clear and it is downright
un-American to solicit public opinion and then to ignore that opinion. My sense is that the CFTC is trying to
be as accommodative to the CME exchange as possible, in order to ease the way
into new position limits, as required by law. Instead, the CME turned
increasingly hostile to any change in position limits. My advice to the CFTC
is to stop trying to reason with the CME and take the proper measures to end
the silver crime in progress.
Commissioner
Bart Chilton, much to his credit, made a number of recent statements that
gave me great encouragement. He has confirmed that a single entity controlled
35% to 40% of the short side of COMEX silver earlier this year. (He didn’t identify JPMorgan as
the entity, because he is precluded by law from doing so.) Chilton also
indicated that he thought a 1500 contract limit for silver to be reasonable.
But it was
something that Chilton said in a speech two days before the meeting that
rocked me. In essence, Chilton proposed that any time a trader hits the
proposed position limit and is holding a hedge exemption from position limits
the agency would closely review the details of the underlying swaps that
allowed the exemption. Importantly, Chairman Gensler
ratified Chilton’s approach at the hearing and directed the staff to
initiate this approach immediately. The
chairman’s exact words
were, “Make it so.”
Why was I
rocked? Because I thought the agency was already doing this. Then it dawned
on me that verifying whether the OTC swaps position that allowed JPMorgan to
hold the obscenely concentrated COMEX short position was handled by the CME
as part of their role as a SRO (self-regulatory organization). The CFTC never
got to examine the details of what swaps justified JPMorgan’s
concentrated silver short position, just the CME. In an instant, I knew how the silver
scam was allowed to continue this long. The exchange decided what OTC swaps
were legitimate, not the CFTC. But with Chilton’s Position Points
approach, it would now be the agency doing the verification. Talk about a game
changer.
I have to
speculate on what I think the CFTC will find when they examine
JPMorgan’s swap book. Mine
is not a new speculation, but one I had written about before in many article,
starting more than 7 years ago. When the CFTC opens JPMorgan’s swap
book, I believe they will find it littered with Chinese names. Here’s
an article from a year ago that also contains links to earlier articles on
this theme http://news.silverseek.com/TedButler/1252075929.php
JPMorgan must
have some reason to justify the big concentrated COMEX silver short position.
If they claim that they are long silver OTC swap positions as an offset to
their COMEX short position, it becomes critical that the CFTC inquire who is
holding the short side of the OTC silver swaps. My belief is that it will be
Chinese interests on the short side of the swap. Such a finding will lead the
CFTC to conclude that it is really China
holding the concentrated silver short position and they are using JPMorgan
and the CME Group as their dupes to carry out the silver manipulation. This
wouldn’t absolve JPMorgan or the CME for enabling China
to manipulate silver, but actually make it worse. A foreign super power and
clear rival to US national interests being aided and abetted in the serious
market crime of manipulation in the price of a vital world commodity by
leading US financial firms is almost too outrageous to contemplate. Yet that is exactly what
I think has occurred.
I did not pick
interests in China out of the thin air.
As the largest producer of silver in the world (mining plus refining),
it would sound plausible for them to be short (but never to the extent it has
reached on their surrogate COMEX position held by JPM). More importantly, rogue traders from
China have had a regular habit of betting on the short side of world
commodities that their country consumes with a ravenous appetite, although
that would not appear to make sense.
Two examples that come to mind are disastrous bets on the short side
of oil and copper five or six years ago.
It made no
sense for Chinese traders to have bet the short side big in oil or
copper. Yet it happened. Just because it makes no sense for
someone from China to have bet big on the short side of silver doesn’t
mean it couldn’t happen.
Let’s face it – someone is and has been short on silver,
all the way up from the single digits.
It will go down as the single dumbest trade in history when all is
said and done, taking the title away from Barrick
Gold and Anglo Ashanti for their dumb short gold trades.
If my premise
is correct, not only has the CME looked the other way when examining the
offsetting OTC swaps of JPMorgan, it means that they also looked the other
way when Bear Stearns held the big concentrated COMEX silver short position and AIG Trading
before them. In other words, the CME got into a long term habit of looking
the other way. It also explains why they are so opposed to any legitimate
reform of the concentrated silver short position. What makes manipulation the most
serious market crime possible is because it distorts the law of supply and
demand and misallocates capital resources. Were it
not for the long-term silver manipulation and the distortion of the price, we
would not be on the verge of a physical shortage.
Theodore Butler
Butlerresearch.com
This article was released to subscribers on December 17. For
subscription information please go to www.butlerresearch.com
Theodore Butler is an independent Silver Analyst who has been
publishing unique precious metals commentaries on the internet since 1996. He
offers a subscription
service with once or twice weekly commentaries including detailed analysis of
the Commitment of Traders Report, regulatory developments, supply/demand
considerations, and topics of interest to investors in precious metals, with
an emphasis on silver. Always
outside the box. You can subscribe to his
service by clicking here.
|