CFTC Says Will Investigate U.S. Bank Role in COMEX Silver and Gold
The Wall Street Journal reports that CFTC Relents and Probes Silver Market to find out if there is anything nefarious behind the large COMEX silver and gold short positions built up by 2 or 3 U.S. Banks sometime between July and August and right before the monetary metals took a dizzying fall. Many people are not holding their breath, but this?could be an opportunity to once and for all set the record straight (or at least straighter) with respect to the commercial short activity in COMEX gold and silver. As I stated when I first discussed this issue (”Mr. Butler’s Naked Gun”), it is of paramount importance that the CFTC look into this matter regardless of considerations given how bad it looks on the surface (sort of like put options on airline stocks before 9-11).
That said, I do have a?few related observations to make (surprise, surprise). First, I think the use of the term “relents’ in the title of the WSJ article somewhat misses the point. The CFTC’s Division of Market Oversight?has made?a “special” investigation of the silver market on at least two prior occasions, the last one being rather comprehensive. This is in addition to its normal market oversight, which admittedly isn’t ideal at times. Still, the most recent special?investigation dealt with the key allegations leveled by Ted Butler, and while the conclusions were not supplemented?with names of large traders and?other internal data (as Mr. Butler would have liked), the arguments were properly laid out and presented a strong counter to Mr. Butler’s allegations. It was only a matter of time (and it was a rather short time) before the CFTC was going to launch an investigation of the present situation involving the 2 or 3 U.S. Banks that?are holding large short positions in COMEX silver and gold. One reason for?why I was fairly certain it would happen is that?not only the normal tinfoil hat crowd had urged the CFTC to quickly get?off its duff this time around?but also a number of people from various more-or-less credible corners of the silver market (including me).
Second, we need to view all this?in the bigger?scheme of things:?market regulators are facing?additional sensitivity and scrutiny as all the markets are going nuts with volatility, not just silver. For example, see the?CFTC Statement Regarding Today?s Trading in Crude Oil. Then of course there is?the politically-motivated intervention by the SEC on behalf of companies to protect them against the supposed evil ravages of short sellers. I haven’t yet addressed the ridiculous ban on short selling of 700+ financial stocks, but it is a perfect example of the knee-jerk nervousness the bureaucrats are now experiencing. Yet most market?analysts agree: a ban on short selling will do little to nothing in keeping the share prices of financial stocks from falling?to the level?they deserve to fall. On the other hand,?the ban does reduce liquidity and increase volatility.
Third, it is worth emphasizing that apparently the Division of Enforcement and not the Division of Market Oversight is leading this latest investigation into the COMEX silver market. The Enforcement Division reviews?specific allegations or?instances of illegal activity and market manipulation. It has police-like powers and?tends to?conduct an investigation like “cops and robbers”. Market Oversight is more like?academics studying an economic model.
Fourth, I’ll make?the not-so-bold?prediction that regardless the outcome of this Enforcement investigation, there will still be a bunch of dissatisfied people who will always continue to?believe the COMEX silver market is a den of thieves and deserves to be shut down once and for all. In the alternative, they would prefer the COMEX ban shorts just like the?SEC. (!!!)
Fifth, I thought the following?explanation of how the silver market works from Jeff Christian of CPM Group is a rather appropriate if not amusing juxtaposition here:
mms://media.kitco.com/kitco/CPM_Silver_2008-09-16.wmv.
Looks like the Fed just handed JPM, the big short, WMU to go with Bear.
Another million ounces, since yesterday. 222,000,000.
Mark, I assume your 222,000,000 number refers to the amount of silver purchased by the SLV Silver ETF. What source do you use to find out how many additional ounces were purchased? Just curious.
“One reason for why I was fairly certain it would happen is that not only the normal tinfoil hat crowd had urged the CFTC to quickly get off its duff this time around but also a number of people from various more-or-less credible corners of the silver market (including me).”
Ummm…good to hear that you are not one of “the normal tinfoil
hat crowd”… can you let us in on the the identity of those who
are of the “tinfoil hat crowd”?
Actual owners of shares of overpriced stocks have a better chance of retreving some value from what THEY own if shark sellers of what they DO NOT own are not allowed to grab most of the value before owners are able to do if the share price comes down. Note that a share price in an honest no short selling allowed market can fall only when an actual owner sells thus gaining value from his taking of risk.
Of course self servers like you believe that owners stupid enough to own an over priced stock deserve to have value stolen from them as punishment for their stupidy.
When a full time shark like you discovers an overpricedstock you could sell calls an/or buy puts. However those actions work much better when you can cause a big decline all on your own by selling what you do NOT own.
Also you would never work at an honest job of finding overpriced stock and informing owners, for fee, of why it is overpriced. Honest work is never as rewarding as fraud based work, so you choose the dishonest way of feeding yourself at the expense of others.
A pox on you and those like you that support selling what you should not have the right to do.
JohnSt: Let me answer that on Tom’s behalf. He means mainly Ted Butler and Jason Hommel, I guess he also means James Turk and all at GATA. The ‘credible’ analysts include himself, his homeboy Antal Fekete and dare I say this Jon Nadler, there are others in both camps but these are the main players I see. What I do find interesting and probably one of the more credible sources is Jeff Christian who recently came out with a short video denying the manipulation. I dont think Franklin Sanders thinks there’s one either (I could be wrong). As for David Morgan I think he is in the TinFoil hat crowd but keeps it hidden well.
John#2″ Thanks for the info! So, it seems that anyone who suggests
manipulation of the silver markets is a “tinfoil hat”. It does seem
however, given the financial events of recent months, that
there is less and less confidence in what had generally been seen
as above reproach institutions. It would seem that the “tinfoil hat”
is coming into style…indeed, it may be all the rage in coming
months.
Aluminum foil is a staple item on supermarket shelves…just where
does one go to buy a roll of genuine tinfoil?
‘A tin foil hat is a piece of headgear made from one or more sheets of tin foil, aluminium foil or similar material. People wear the hats in the belief that they act to shield the brain from such influences as electromagnetic fields, or against alien interference, mind control and mind reading. The idea of wearing a tin foil hat for protection from such threats has become a popular stereotype and term of derision. The phrase serves as a byword for paranoia and is often used to characterize conspiracy theorists.’
The belief that a tin foil hat can significantly reduce the intensity of incident radio frequency (RF) radiation on the wearer’s brain is not completely without a basis in scientific fact. A well constructed tin foil enclosure would approximate a Faraday cage, reducing the amount of radiofrequency electromagnetic radiation entering from outside
John#2: Maybe its Kondratiev waves rather than the electronic
variety which are stimulating the brains of the “paronoic”?
Or maybe its cellphone use…hmmm, there is silver in every
cellphone. Cellphone sillver sends off “waves”, enters the
users brain…presto! The brain is manipulated, a kind of
silver manipulation. Gads, pretty sneaky!
Seems like some opportunity here. Tinfoil hats all seem to be
of the homemade variety. Given the rising demand for these
metalic mind shields…maybe we can set up a plant here
and start cranking them out. Given that silver is the best
known electrical conductor and perhaps the best electromagnetic
wave attenuater…silver hats might be the thing for the Gucci crowd.
Problem is, allthough they say Ag is plentiful, damned if you
can actually get any! I guess the Gucci crown will have to wait,
silverhats are out. Tinfoil will have to do for the well to do.
Maybe aluminum foil for the peons.
I can haz tinfoil hat? made of silver?
Faraday Hat, FTW!
The $ is printing the right shoulder. A technician would say, as soon as next week, we could see a big drop.
On the other hand, the Big Short, JPM, just picked up a lot of cheap money, courtesy of the Fed. Last time they did that, 3/17/08, the $ was at a tipping point, and they helped save it, We’ve learned from Ted Butler, that the Big Short will take manipulative positions to get their way.
I am curious to see how this plays out. Anything good for the Big Short, is bad for silver.
JohnSt: All of us here know precisely who they are (thanks for the editorial, though, John#2)! Sorry, I don’t mean any personal offense, I just like to push buttons.
Robert Wahl: I personally have never sold a share of stock short in my whole life so your comments are completely out of line and ridiculous. As for short selling in general, there is a valid role for it in the marketplace and it has nothing to do with manipulation, it has to do with pricing efficiency. There is more fraud from the long side in just a single month in the stock markets than fraud from the short side that has taken place in the entire history of the stock markets. Let me point out that the ban on short selling did not prevent WAMU from going under, nor the share prices of several other banks from tanking in the past few days. Nor did it keep the DOW or the markets in general from remaining weak in the face of real reasons why they should remain weak. A ban on short selling is simply a pander to people like you who should be rounded up and forcibly sterilized instead so the future world of investing can be free of stupidity.
silverax;
You and other supporters of selling what you do not have and can not produce have no respect for private property and honest prices. Owners of private property are suppose to be sovereign over what they own. If you advocate selling what is not owned you are advocating fraud and violation of a property owners rights. Your arguments about the relative fraud in the entire history of the stock markets are without merit and typical of defenders of false logic. You are also ignoring the need for honest prices for a functioning market. You also know nothing about the “China Syndrome” market collapse of Oct 1987. Idiot advocates posing as watchdogs over Bull frauds to fatten their own nest are a disgrace. I note you have no comment about shorts extracting value at the expense of owners. The absense of argument against the underlying logic of anti-short selling carries the day for my position.
silverax;
Your final sentence is a typical Nazi type wish from evil people. By the way I have 3 sons, 1 daughter, 9 grandchildren and 2 great grantchildren who understand logic and history and know about evil idiots like you. Your wish is not only evil but to late!
There is currently a conspiracy theory circulating on the net that some large financial institutions are failing and that there is a run on the banks. There is a conspiracy theory out there that our new leader Pat Paulson won’t be entertaining any dissent or any court intervention based on constitutional grounds to his plan to take over America.
Mr Silveraxis, where can I buy a .9999 silver foil hat? I can’t seem to find much silver in any of the stores I visit so I’ll wear the hat proudly. Must be a conspiracy to make Jon Nadler appear to be an idiot and Hommel, Butler, Gata, Embry, Morgan, Puplava, McEwan, Coxe, and over 100 others that if I were pressed for the names could list here look like geniuses.
tin hat wearing folks and non tin hat wearing folks,
why is it that whenever the commitment of traders commerical catagory and their respective net short position is discussed is the FORWARDS market for silver completely left out. For that matter why is there never any discussion on metal LEASING. what the hell?
And lastly my question to 15 year old Robert Wahl,
How do you know that ‘they’ do not have silver exposures?
Robert Wahl: You should stop before I really start laying into you. How stupid can you be to expect that you can come here, call me a fraud, dishonest, cast a pox, etc. and not get the reaction you deserve?
Michael Randallbard: I don’t base my own thinking on what others have to say. I don’t care what the names you list think/believe, I take a look at the market myself, use logic, intelligence and common sense and come up with my own answer that integrates what I see into the best framework. It might not be correct, but at least I don’t hide under anybody’s skirt and that includes Nadler.
flexon: Because those discussing COT usually don’t understand the entire market so they just talk about the part–often small and not very consequential–that they do (claim to) understand.
As usual with idiots like silverax and flexon, they never oppose with facts or logic any claim but only sling mud hoping that somethin sticks. I admit to error on your word that you have never sold short youself. That is the only claim of mine you have opposed. The pox stands and stealing value from those who own is dishonest even when legal. Advocating is as bad as doing.
Robert Wahl: In order to “oppose with facts or logic” one must first have something to oppose. You have provided nothing but an emotional appeal to side with “asset owners” as if that was a group that cannot be separated into smaller constituents. Short sellers have nothing against asset owners, they seek to make money as a result of assets returning to their true underlying value. Short sellers arguably help keep asset prices from being overvalued, which allows value investors to invest in the first place. Thus, all value investors (unless they are hypocrites) want short sellers to do their thing. By contrast, the typical “follow the crowd” lemming investor should not want short sellers to do their thing. I wonder which group you fall in? Finally, imagine if short selling were possible in the U.S. housing market: perhaps things would never have gotten so out of control and maybe there wouldn’t have been such a huge bubble.