BUYING on ARTIFICIAL DIPS
Jim Cook interviews Ted Butler / 12.31.2016
Cook: People that have been holding silver for several years are beginning to lose patience. What do you say to them?
Butler: The facts surrounding silver have never been more bullish.
Cook: Such as?
Butler: Over the last few years, enormous changes have recast and transformed the silver market.
Cook: Can we have an example?
Butler: In only a few years, JPMorgan has accumulated the largest hoard of silver in the history of the world.
Cook: How does that compare with the Hunt Brothers in 1980?
Butler: They have five to six times as much as did the Hunts, maybe more.
Cook: How do you prove that to people who doubt you?
Butler: I’ve been watching JPMorgan like a hawk for the past five years. In their COMEX warehouse, where the amounts they hold are made public, they have 80 million ounces. That’s almost as much as the Hunts had or Warren Buffett when he bought up silver in 1998.
Cook: Are they still adding?
Butler: Yes, every chance they get. They are the biggest stopper or receiver of silver deliveries on the COMEX. This month that could be 7½ million ounces. Also 3 million ounces were sold out of the SLV last week which I’m sure they took. They do it in such a way that it doesn’t have to be reported. They are masters of the game and they just keep adding without anybody knowing it but you, me and our readers.
Cook: Where are they keeping all this silver?
Butler: One place would be their London warehouse where they have pushed out all the other entities who used to store there. In addition, there is no shortage of warehouse space around the world. The beautiful thing about owning physical silver is that you don’t have to report it to anyone.
Cook: With all their buying, why doesn’t the price go up?
Butler: They are world champion manipulators. They maintain a large paper short position on the futures market that enables them to keep the price where they want it. It allows them to buy physical silver cheap which they’ve done masterfully.
Cook: How big is their short position?
Butler: Around 90 million ounces. They’ve been reducing it lately.
Cook: That’s a good sign.
Butler: Yes, but don’t get confused by this large short position. When you have 550 million ounces of physical silver, you’re still long 460 million ounces after you subtract the paper short.
Cook: You’re saying they use this short position to manipulate the market so they can buy silver cheaper? Isn’t that a possible violation of commodity law?
Butler: It absolutely is. As you know, I have bombarded the regulators with my newsletter and various correspondence pointing out this manipulation.
Cook: But they don’t move on it?
Butler: No. I’ve also sent hundreds of epistles to JPMorgan; their board, their lawyers and their chief executive accusing them in the strongest terms of wrongdoing. Every newsletter I write accuses them publicly.
Cook: What do they say to that?
Butler: I’ve never heard a word. Let’s face it, if you call a big financial entity crooked their lawyers are going to write you. If you keep it up, they will eventually sue you. I think the fact that they let my accusations ride proves I’m right.
Cook: When is silver going to overcome all this and the price break free?
Butler: When JPMorgan wants it to.
Cook: Are we close?
Butler: I think so. Here’s an analogy. Imagine silver as a poker game. The stakes are in the billions. JPMorgan is holding an ace, king high royal flush. It’s a lock so they can’t lose. Everybody else at the table has four of a kind or a full house. JPMorgan is in no hurry to win the pot. They are sitting back watching the raises and re-raises. They want to win as much as they can so they are patient.
Cook: How do we stay patient?
Butler: One of the biggest financial entities in the world is hoarding silver. They are your ally. If you own silver JPMorgan is your partner. You couldn’t have a better ally.
Cook: People don’t want to sit back and be patient anymore.
Butler: Why not? A price rise is inevitable. If you know you’re eventually going to make a lot of money you should be able to wait if necessary. With JPMorgan in the mix, you know you have a big win ahead. They go for the jugular so it’s going to be an enormous gain.
Cook: Could you give us an inkling as to when?
Butler: Soon I think. A number of things are happening in the futures market that are different. For example, the big hedge funds or managed-money traders have always gone short at these low price levels. For the first time they have not done so.
Cook: What’s it mean?
Butler: We could snap back much faster.
Cook: Anything else?
Butler: JPMorgan may not be the biggest short anymore.
Butler: I’m thinking JPMorgan may be setting the other shorts up for a double-cross. All that has to happen for a price explosion is for JPMorgan to do nothing. If they don’t go short again, we go up in a hurry. Remember, every time silver goes up $2.00 an ounce, they make a billion dollars.
Cook: If they don’t go short on the next rally, who will?
Butler: I can’t imagine substitute silver sellers stepping forward to replace them except at very high prices. As it stands now, eight commercial traders, many of them banks, hold a net short position of 85,000 contracts or 425 million ounces. There’s nobody to take their place at these low prices. JPMorgan figured all this out long ago and that’s one of the reasons they bought so much physical silver. There was no other way for them to cover without sending silver into orbit. You’re truly looking at the opportunity of a lifetime with silver. You just have to relax and let it play out.
Cook: Anything else you can tell us?
Butler: The big theme, as I see it, is JPMorgan becoming more aggressive in acquiring physical silver and gold while at the same time reducing its COMEX short position in each almost as aggressively. It’s hard to imagine a more bullish backdrop for futures prices.
PSEUDO MARKET MAKING
by Ted Butler / April 12, 2017
“An unusual confluence of seemingly unrelated factors may have created an opportunity to do something about the silver (and gold) manipulation. On Monday, April 10, two new officials assumed key roles with the Commodity Futures Trading Commission (CFTC) – a new director of the Enforcement Division and the first chief officer of the newly-created Market Intelligence Unit. The main mission of both departments is to uncover and terminate market fraud and manipulation, the same overall prime mission of the agency itself. There’s little wonder that price manipulation is the prime regulatory mission, since it is the most serious market crime possible; damaging even to those not directly involved in trading.
At the same time and as I discussed in Saturday’s review, the most recent Commitments of Traders (COT) Report for COMEX silver futures featured the largest ever concentrated short position by the four largest traders and a new record large total commercial net short position. As I have been intoning for years, nothing suggests a possible market manipulation being in place than a large concentrated position. This is not my opinion alone; I’ve basically learned this from the CFTC. The only reason the agency calculates and publishes concentration data in every regulated futures market weekly is because an extremely large concentrated position is the first tipoff of potential market manipulation.
A concentrated position is a large market position held by a small number of traders that could grow large enough to overly influence price. Think Hunt Bros. in silver or Mr. 5% in the Sumitomo copper manipulation, where a few buyers caused prices to be much higher than warranted by actual supply/demand fundamentals. While it’s easy for most to understand how a concentrated long position could result in a price considered to be artificially high, it’s harder for many to understand the concept of concentration on the short side, due to the nature of short selling being difficult for most to grasp.
Commodity law does not distinguish between an upward or downward price manipulation and the CFTC calculates and publishes concentration data on both the long side and short side of all regulated futures markets. The problem is that while the CFTC publishes the data that indicate that COMEX silver has the highest level of concentration ever seen on the short side of COMEX silver futures, thus providing the strongest possible evidence of a downward price manipulation, the agency refuses to do anything about it or even acknowledge it in any way.
But thanks to the unexpected confluence of events as described above, there may be an opportunity for you to pressure the regulators to address the concentrated short position in COMEX silver futures. And let me not beat around the bush – silver would be substantially higher in price were there to be no extreme concentrated short position. That’s a personal guarantee based upon simple market mechanics.
So, for anyone with an interest in higher silver prices or who is a believer that free markets, not controlled by large traders gaming the system, is the right way, then there is something you might consider doing. Now is an ideal time to raise these very important issues about concentration and manipulation in COMEX silver. The two officials most responsible for uncovering manipulation at the CFTC just started in this capacity on Monday and should be more open to the facts than otherwise. I can understand how many might feel that contacting these officials and others might be a waste of time, given the agency’s failed record over the years in this regard. Still, I’m not talking about any burdensome effort, just sending a few emails or letters to get straight answers to some very good questions.
I’ve already written to the two new officials (both by email and hard copy) and feel free to use what I sent. I would ask you not to improvise and include other issues, such as gold manipulation. Besides, nothing would impact gold prices more than having the silver manipulation terminated. The best approach is in being as specific and factual as possible so as to pin the agency down.
They may refuse to answer and one way of insuring maximum pressure is to write to them through your elected officials. Here’s the letter I wrote that you are free to copy. I’ll include pertinent emails address at the end.
April 10, 2017
Andrew B. Busch via Email
Chief Market Intelligence Officer
Director – Enforcement Division
Commodity Futures Trading Commission
1155 21st Street NW
Washington, DC 20581
Congratulations and best wishes on your appointments to key positions at the Commission at this critical time in market history.
I’m writing concerning a matter that the Commission has considered on a number of past occasions – allegations of a silver price manipulation on the Commodity Exchange, Inc. (COMEX). The reason the Commission has considered the issue of a silver price manipulation several times in the past is because the agency’s own public data and guidelines point strongly to such a manipulation. Never have the data been more convincing than what was just published Friday, in the Commission’s release of its weekly Commitments of Traders (COT) Report, for positions held as of April 4, 2017.
That report indicates that the concentrated net short position held by the four largest traders in COMEX silver futures hit an all-time extreme in numbers of contracts of 78,021, the equivalent of 390 million oz. of silver. The concentrated net short position of the eight largest traders was indicated at 104,978 contracts or the equivalent of nearly 525 million oz., or more than 60% of world annual mine production. No other commodity comes close to COMEX silver futures in terms of a larger concentrated short position when compared to real world production. On its face, the large concentrated short position in COMEX silver futures would appear to be an artificial price depressant.
As you know, the Commission monitors and publishes concentration data in all regulated futures markets as the prime front line defense against price manipulation. After all, it would be nearly impossible to manipulate any market without a concentrated position. But not only do COMEX silver futures stand out as having the largest concentrated short position of any commodity, in terms relative to real world production, consumption and existing inventories, the concentrated short position in COMEX silver futures is notable for other reasons.
For one reason, the big short traders do not appear to be engaged in any sort of legitimate hedging, since there are no signs they represent actual producers or hedgers of physical holdings. Separate agency data, contained in the monthly Bank Participation Report, indicate that the largest shorts are mostly domestic and foreign banks essentially operating as speculators, in a pseudo-market making capacity against other speculators. Publicly-owned mining companies are required to disclose any hedge activity and few, if any have disclosed any hedging in silver. The big short sellers in COMEX silver futures are financial firms, mostly banks, speculating against other big speculators and have no legitimate economic or hedging purpose in dealing in COMEX silver in the first place. As I’m sure you know, Congress allows futures trading for the purpose of encouraging legitimate hedging, not to encourage excessive speculation.
The largest COMEX silver short seller for the past nine years is JPMorgan. That has been the case ever since it acquired the failing investment bank Bear Stearns, the former largest COMEX silver short seller, according to Commission data and its correspondence with lawmakers. The special manipulative twist here is that since 2011, JPMorgan has engaged in an epic accumulation of physical silver at prices much lower than would have existed if the bank had not also been the largest silver short seller on the COMEX. In the recently completed COMEX March silver futures delivery period, JPMorgan stopped (accepted) 2689 contracts in its own proprietary trading account, plus another 739 contracts on behalf of a client(s), considerably more than the 1500 contracts allowed according to exchange regulations. This while JPMorgan was the largest short holder in COMEX silver futures. It is not possible to imagine a more compelling motive or intent for manipulation than to acquire a massive amount of any commodity at depressed prices, where the acquirer is responsible for the depressed prices.
Almost without fail, on every past occasion where the concentrated short position in COMEX silver futures reached extreme levels, it was only a matter of time before the price of silver gets rigged lower by these big shorts to induce speculative selling from traders operating on technical price signals. In fact, COT report data indicate that JPMorgan has never taken a loss, only profits on every silver short position it has added over the past nine years. Such results would not be possible in a market that wasn’t manipulated in price. In essence, speculators have taken over the price discovery process in silver because there are so few real hedgers trading on the COMEX, only speculating banks betting against other speculative traders. Even assuming the current extreme concentrated short position leads yet again to a sharp selloff in silver, there is another issue that goes to the core of regulatory concern.
In addition to the clear agency data pointing to a silver price manipulation, the presence of such a large and non-economic short position necessarily enhances the likelihood of disorderly market conditions once it becomes clear to enough market participants that unbacked concentrated short positions on the COMEX have been the reason why silver prices are so depressed.
I have communicated all this to the Commission, JPMorgan and the CME Group (owner-operator of the COMEX) for many years, with hardly any acknowledgement or rebuttal. I am hoping you will consider this matter differently and act to finally end the manipulation. I’m sure how you handle this matter will define your tenure. If I can be of any further assistance, please do not hesitate to call on me.
Andrew B. Busch – abusch [at] cftc.gov
James McDonald – jmcdonald [at] cftc.gov
Acting Chairman J. Christopher Giancarlo – cgiancarlo [at] cftc.gov
Commissioner Sharon Y. Bowen – sbowen [at] cftc.gov
Let me close by telling you that I am very thankful for the unique opportunity created by the new senior appointments at the CFTC, along with the simultaneous publication of the most concentrated data in silver shorting in history. I assure you that I am not holding my breath waiting for the CFTC to finally step up to the plate and do the right thing; not after 30 years of denial and obfuscation. I know full well that the agency’s denials up through today have only hardened it to maintain the façade that nothing is wrong in COMEX silver, despite glaring and growing evidence to the contrary. Still, it would be a waste not take advantage of an unexpected opportunity.”
PAPER SHORT PRICE SUPPRESSION
The Biggest Silver Haul In History
by Ted Butler / 5.9.2015
“As I’ve mentioned previously, JPMorgan is still stopping (taking) silver deliveries in its own house account. In the May COMEX futures contract, they’ve taken over three million ounces so far. It still looks like JPM will take another million ounces or so before the delivery period is over. This is in addition to the 7.5 million ounces the bank took in the March delivery period.
Another standout development in recent weeks has been the withdrawal of 5 million ounces from the big silver ETF, SLV. This large withdrawal would appear to be a big buyer converting shares into metal for the purpose of acquiring physical silver and avoiding the 5% ownership reporting requirement. I believe this is the work of JPMorgan and represents the mechanism by which the bank has amassed the bulk of the 350 million ounces I claim it has acquired over the past four years.
The U.S. Mint sold 783,500 Silver Eagles in just two days after going 4 or 5 days with no sales. Then the Mint reported a scant 50,000 additional coins sold over the next two days. This is precisely the erratic level of sales that indicates the presence of a big buyer. I can’t certify that the big buyer is JPMorgan, but everything I look at points to them.
The Canadian Royal Mint reported sales last week its 2014 sales of Silver Maple Leafs and the same pattern that has characterized the U.S. Mint was clearly revealed. Sales of silver coins hit a new record, with more than 29 million Silver Maple Leafs sold. The big buyer of Silver Eagles has also been accumulating Silver Maple Leafs. Over the past four years the big buyer has bought, at least 30 million ounces of Canadian Maple Leafs and 75 million U.S. Silver Eagles totaling more than 100 million ounces of silver in bullion coin sales alone. I’m convinced JPMorgan is the big buyer.
How in the world can JPMorgan eventually sell hundreds of millions of ounces of silver without flooding the market and causing prices to crash? This is what JPMorgan does as a regular part of their business – accumulate and then liquidate massive market positions before most people get out of bed every morning. It is second nature to them. In my opinion, this silver will be sold before most people realize they bought it in the first place. Buying 350 million ounces of silver was the hard part, selling it will be a snap.
The big buyer is exploiting a loophole in the law that requires the Mint to produce to whatever the demand might be. So JPMorgan artificially depresses prices via short sales on the COMEX and then requests that the US Mint sell it all the Silver Eagles it can produce. It doesn’t care if it is paying $2 over the spot price, JPM wants all the silver it can get its hands on. But what about selling the coins I claim JPMorgan has acquired? The coins will not be sold as coins, but melted into 1,000 ounces bars. In fact, some of the 100 million+ ounces of coins may have already been melted and cast into good delivery bars. Considering that the coins are the same purity as 1,000 ounces bars, melting is a simple and a low cost process.
At the end of 2007, when the price of silver was less than $15, but close to the highest price it had been in 25 years, Bear Stearns assumed the role of the biggest silver and gold short when these positions were transferred from AIG. From the end of 2007 to March 2008, the price of silver rose to $21 and gold rose from $800 to $1,000. Based upon the size of the short positions that Bear Stearns held the investment bank had to come up with more than $2 billion in margin money. Bear was unable to do so and the U.S. Government arranged for JPMorgan to take over Bear Stearns and its massive COMEX short positions in silver and gold.
With the cooperation from the federal government, JPMorgan was able to turn silver (and gold) prices sharply lower into year end 2008 and made well over one billion dollars as a result of falling metals prices. Thus, they were able to greatly reduce the short positions inherited from Bear Stearns. JPMorgan then repeated the process of selling short great additional quantities of COMEX short contracts on metals price rallies buying back those short positions when prices fell. JPMorgan’s profits from the short side of COMEX silver and gold, amounted to hundreds of millions and even billions.
This process was repeated by JPMorgan in COMEX silver until the fall of 2010, when silver began to rise in earnest due to a developing physical shortage that drove prices to nearly $50 by the end of April 2011. On the run up, it must have become clear to JPMorgan that a physical silver shortage was developing and for the bank to try to fight it with additional paper short sales would be futile. Therefore, two decisions were made; one, it would be necessary to create such a large break in silver prices so as to crush the momentum of the price rise and two, the developing physical shortage proved that silver was destined to blow sky high in time and JPMorgan should position itself accordingly. The big break in prices started on May 1, 2011 and broke the back of the silver price. Less visible is the evidence that JPMorgan began to acquire the biggest physical silver stockpile in history.
In little more than a month, as a result of the big break in silver prices starting on May 1, 2011, some 60 million ounces were liquidated from the big silver ETF, SLV, as a result of plain vanilla selling by investors who sold their shares in reaction to plunging prices. When net selling occurs in SLV, metal is automatically redeemed from the trust on a mechanical basis. The shares were sold and the metal was withdrawn from the trust as prescribed by the prospectus. That doesn’t mean the metal was dumped on the streets of London or ceased to exist. The metal fell into the ownership of someone and the most likely candidate was the entity that arranged for the selloff in the first place. The entity which stood to gain the most by the selloff was JPMorgan. They picked up their first 50-60 million ounces as a result of the May 2011 silver smack down.
Pressed for space to store the silver it planned to acquire, JPM opened its own COMEX warehouse in April 2011 and from zero ounces in 2011, that warehouse has turned into the biggest COMEX silver warehouse of all with nearly 55 million ounces on deposit. The start date proves intent by JPMorgan to acquire silver.
In 2012, JPMorgan physically transferred 100 million ounces of silver from its own custodial warehouse for SLV to the Brinks warehouse in London, leaving ample space in the former SLV warehouse to store 100 to 200 million ounces of silver that would come to be owned by JPMorgan and that would never require public disclosure. This is the most plausible explanation for why JPMorgan would move the silver to the Brinks warehouse. All the movements of metal out of SLV over the years, reeks of JPMorgan converting SLV shares to metal to be stored in its own warehouse in London on an undisclosed basis. An easy 200 million ounces can be accounted for in this manner.
The unusual and unprecedented turnover of physical silver in the COMEX-approved silver warehouses that began in April 2011 suggests to me that JPMorgan has been causing the movement in its quest to acquire physical silver. An easy 100 million ounces acquired by JPMorgan can be deduced from the more than 750 million ounces turned over in the COMEX warehouses over the past four years. How hard would it be for JPMorgan to “skim” 100 million ounces off a turnover of 750 million ounces?
The recent acceptance of more than 10 million ounces on COMEX futures deliveries and the physical movement of most of that metal into the JPM COMEX warehouse is a mere fraction of the total amount of silver JPMorgan has acquired over the past four years, but it is clearly the most transparent and may point to JPMorgan reaching the maximum amount of physical silver it intends to acquire, indicating we may be close to when the bank decides to let silver prices rise.
I’m using the number of 350 million ounces as what JPMorgan has acquired, but the real amount may be in excess of 500 million ounces. I’m being somewhat conservative in saying 350 million ounces because I’m worried that those who deny that JPM has acquired any physical silver heads might explode if the number is closer to half a billion ounces. I’m not looking for anyone to lose their minds, but to understand what these facts mean.”
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