Morgan's commentary is headlined "Silver -- Is It Yours?"
May 31, 2008
Morgan's commentary is headlined "Silver -- Is It Yours?"
May 22, 2008
Silver Stock Report
by Jason Hommel, May 21, 2008
firstname.lastname@example.org Complaints; Premier Alan Carpenter
email@example.com Treasurer Eric S Ripper
firstname.lastname@example.org Department of Consumer and Employment Protection
email@example.com Department of the Attorney General
Customer.Service@dtf.wa.gov.au Department of Treasury and Finance
firstname.lastname@example.org Economic Regulation Authority
email@example.com Governor's Establishment
firstname.lastname@example.org Office of the Auditor General
email@example.com Western Australian Treasury Corporation
firstname.lastname@example.org Gold Corporation / Perth Mint
To various agencies of the government of Western Australia,
You may have a growing precious metals liability of over $880 million Australian dollars at the Perth Mint, which is backed by you, the government of Western Australia.
I have received about 30-50 complaints about the Perth Mint over the last few months from investors who have tried to purchase silver bullion coins, kilo bars, and 100 ounce bars and 1000 ounce bars who have had their orders refused, or delayed.
I have received these complaints because I have an email list of about 80,000 investors who are interested in the merits of buying silver or silver stocks; and I have refered many investors in Asia to the Perth Mint over the years.
The Perth Mint has a certificate program, and they hold up to $880 million Australian dollars worth of these certificates as a precious metals liability which is used for an operating pool of metal.
I don't understand how a Mint can have that much metal at their disposal to be used as an operating pool, yet can run out of metal for walk-in customers, and also have difficulty in redeeming metal for existing customers. It seems to me that the entire purpose of having an operating pool would be to satisfy such orders, yet they are reportedly having difficulty doing so.
I'm further concerned for the government of Western Australia, because my readers have sent to me two copies of two different emails from Nigel Moffett, the Treasurer and manager of the Perth Mint, who has said that investors in the certificates do not need to worry about the solvency of the Perth Mint, but rather the solvency of the government of Western Australia, which has a surplus of $2 billion/year. This seems to be a particularly alarming statement of over-reliance on a government bailout, and I suggest to you that if there is a problem, the sooner you discover it and deal with it, the cheaper it will be to fix it and to bail them out, especially in a market of rising precious metals prices.
Many of us experts in precious metals expect the prices of silver and gold to double perhaps within a year, and if so, the Perth Mint's liability will double, too, which can be particularly alarming if they do not have the metal, but have consumed it in wasteful operations expenses.
I would suggest that you pay particularly close attention to the following statements by the Perth Mint and AGR Matthey:
"The $880 million of precious metals deposited by Perth Mint Depository clients (note 17) was used in operations by Gold Corporation as inventory ($381 million - Note 8b) with the balance in the refining operations of AGR Matthey (Note 8a).
p. 81, bottom
"Treasury undertakes a leasing program to either lend or borrow precious metal within the terms of a lease agreement between AGR Matthey and approved counter parties."
As you investigate, I would warn you to not be swayed by slick excuses. Do not be swayed by statements that their precious metals liability is balanced by other liabilities of other entities who also may not have the silver or gold. Ask to see the precious metal that they are supposed to have in their vaults to be used in operations, and don't be deceived, as it can be very costly.
The size of the precious metals liability is particularly alarming to me, in light of the fact that total silver investment demand world wide for 2007 was estimated at 75 million ounces, or about $1.1 billion dollars by the CPM group.
Nobody has reported to me any problem in obtaining any gold, only silver.
But the real reason I'm writing is this:
Please let me know which government agency I should send any information to, and also, let me know so I can direct my readers to complain to the proper agency.
May 18, 2008
Attention GATA Army:
What would you do to take down the Gold Cabal? What would you sacrifice? How hard would you work if you KNEW that the culmination of your effort would end the long term manipulation of gold? As for me, I am very tired of fighting the Cabal, but I am also tired of watching all that I love about my country get washed out to sea by the Manmade Monsoon of Market Manipulation that is currently sloshing over the
LET’S FINISH THIS THING!
I’m going to say it flat out…SELL ALL YOUR GOLD INVESTMENTS NOW AND BUY PHYSICAL SILVER!...
Market analyst Bix Weir, a longtime GATA supporter, thinks the suppression of silver is more vulnerable to market forces right now than the gold market and so he offers a bold idea: Trade all your gold for silver. His commentary is headlined "Melt the Witch" and you can find it at GoldSeek's companion site, SilverSeek, HERE
May 17, 2008
Now it seems he could be sued by Internet P.M. seller/dealer Kitco because the "...libelous public allegations you published on the Internet on March 26, 2008 and April 1, 2008 have compromised these efforts and have resulted in financial damages. It is my intention to hold you responsible for the damages and loss to our reputation that these false and injurious statements and accusations have resulted in." as Kitco's President Bart D. Kitner puts it in his ultimatum email to Hommel.
This is turning out into a very fascinating dispute and you may read about it HERE.
May 16, 2008
Hommel also notes that the acting chairman of the CFTC is a member of the President's Working Group on Financial Markets. You may recall that this agency meets only in private and keeps no minutes available to the public. Until such agencies conduct their business accountably in public, their denials of impropriety have little credibility; indeed, they are laughable...
A Further Warning to the CFTC!
(I'm so glad I'm not one of the guys in charge of keeping fraud alive today!)
Silver Stock Report
by Jason Hommel, May 16th, 2008
To CFTC Acting Chairman Walt Lukken,
I commend you for your essay/speech of November 27, 2007, titled, "The Keys to Smart Regulation".
In that speech, you argue persuasively about your need to be forward-looking, and to take future risks into account, as you quote Wayne Gretzky who said, "A good hocky player plays where the puck is. A great hockey player plays where the puck is going to be."
Thus, instead of reacting to a crisis, you ought to be able to anticipate industry trends, and prevent any crisis from taking place.
The job of the CFTC is to prevent market manipulation and above all, market default, since a default is usually the end result of a manipulation, since manipulations tend to fail.
A default is to be avoided at all costs, since a default will call into question the integrity of the exchange and perhaps all U.S. financial markets, and could halt trade, which could lead to disastrous consequences for civilization itself that is so dependant upon trade to survive.
Further, you argue that in our increasingly globally competitive world with many futures markets springing up in diverse places, and many market participants originating in locations that may be outside the jurisdiction of the United States, you have particularly difficult challenges in today's interconnected world.
I understand that you want the U.S. futures markets to remain competitive, yet free from manipulative influences from international global financial terrorists.
These can be conflicting goals, since if you raise margin requirements to reduce the risk of default, our markets might not be the most competitive in terms of leverage gained for a given trading amount, and traders may go elsewhere into less regulated markets.
In the silver market, I understand this is particularly troublesome, since I know of many unregulated dealers who offer leverage programs on terms much worse than in the major futures markets, firms such as Monex, and Goldline.
Beyond protecting the futures markets from default, your job is to keep traders honest, and to keep the markets fair.
Further increasing the risk of default, the recent 2002 public offerings of CME stock which has acquired the recent and new NYMEX public offering, creates an additional challenge, since a layer of protection against market default has been removed given that stock holders are granted the benefit of limited liability. In the past, since the exchanges were privately held, the exchanges themselves were ultimately liable, the last ones liable, in the event that a brokerage house could not make good on a trader's trade, and now this protection seems to have been removed.
Since the futures exchanges went public, starting with the CME in late 2002, and later the NYMEX in late 2006, you must have felt that the CFTC was more exposed than ever, and at a higher risk of failing your duty to prevent a market default. But perhaps you were not so worried as CME stock has continued to rise to a market cap of $33 billion, as you noted in your essay. However, I believe the large market cap only provides an illusion of safety, and not real security.
I note that the mighty Bear Stearns went belly up in one day.
So, in sum, I would say that your uniquely difficult challenge is to keep the overall market honest, by keeping market participants honest. And that would include preventing market players from taking on positions and obligations that they cannot keep, and I would imagine that to be a very, very, difficult task.
One would think your job to be the equivalent of making sure that all home mortgage borrowers always pays their mortgage, or that all credit card borrowers always makes their payments; a truly impossible task.
I would think that your challenges become exponentially complex when you discover that a division of the CFTC under you, is found to be lying.
Recently, the Division of Market Oversight lied multiple times in their recent "Report on Large Short Trader Activity in the Silver Futures Market":
It appears they wrote this report because of what I, and others, have been saying, since they note the occasion of their report here:
"Recently, silver commentators and a group of investors that rely upon them have reasserted their allegations that the silver futures market is being manipulated downward by a small group of traders on the short side of the market."
Here is their big lie. On page 3, they reference Michael Gorham's 2004 report, and write:
"In terms of plausibility, the analysis noted that there is unrestricted access to the silver cash and futures markets. If prices of silver were in fact artificially low, there would be nothing to prevent a well-capitalized trader, or even many small traders, from entering the markets to buy cash silver or futures contracts at what they believe to be bargain prices. This openness of the markets tends to render the claim that silver futures prices had been manipulated downward for more than 20 years implausible. In this regard, there is no logical explanation as to what, during those 20 years, has prevented traders from buying cash silver or silver futures and thereby driving prices up to what those making the manipulation argument would regard as a reasonable price."
In truth, there is no "unrestricted access" to the futures market because there are position limits on traders.
They also lied again on page 3, when they wrote:
"In addition to the implausibility of a long-term manipulation, advocates of the manipulation argument have also failed to explain how the alleged manipulators have profited, or will profit, from such a manipulation."
I and the Gold Anti-Trust Action Committee (GATA.ORG) and many others have repeatedly said that the manipulation to keep gold and silver prices low helps keep the value of the dollar higher. By keeping silver and gold low, the Fed is able to print up to $350 billion in one day. Yet the annual investment demand for silver remains a mere $1 billion.
If paper money collapsed, and had to spend silver or gold to prop up failing markets, the Fed would no longer have the kind of power it has today.
Since you are a member of the President's Working Group on Financial Markets, surely you know this, and I just wanted my readers to know it, too.
I also write this to show why I don't expect you to act.
The profit motive of keeping a lid on silver and gold is clear, it keeps the fraud of the dollar alive, and the dollar printing business is very, very profitable.
I could further refute the many lies in the latest CFTC report, but why should I bother refuting their fraudulent response?
Perhaps it would be more productive if you were to review the reasons why the price of silver is poised to skyrocket upwards, instead?
1. The world is no longer using silver and gold as money, and thus the primary demand could not be lower.
2. The world started consuming silver in electronics after World War II, and has continued the pace of silver consumption of about 7 tenths of an ounce of silver per year, per person, in industrialized nations ever since, consuming perhaps over 25 billion ounces of silver.
3. With the rise of inflation beyond 20% per year, many people in the financial world are turning their attention once again to buying gold and silver.
4. With $14 trillion in M3, according to private sources, and with annual silver investment demand at barely $1 billion, and with 60-90% of the U.S. population concerned about inflation and the devaluation of the dollar, we are on the edge of a tidal wave of investment demand for silver.
Given these fundamentals, how can there not be a crisis and default in the silver futures market, as there has been in the past when silver certificates were no longer redeemed for silver in 1968?
The market regulators of the past were very smart. They simply wrote a law providing for the death penalty for anyone who was caught debasing the coinage.
According to the Coin Act of 1792, those who debased the currency, "or otherwise with a fraudulent intent" were to suffer the death penalty:
Penalty of Death for de-basing the coins. Section 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of the fine gold or fine silver therein contained, or shall be of less weight or value than the same out to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offenses, shall be deemed guilty of felony, and shall suffer death.
I don't think anyone at the U.S. Mint was ever put to death for making debased coinage in 1965, nor will they be likely suffer that for debasing the zinc penny to a steel one again.
But political winds could change to bring such a penalty back in fashion, especially if people are hurt severely by the CFTC's actions or lack of actions. I strongly suggest you do a little history research and see how the public treated officials in France after they debased the currency.
Consider that risk carefully. I'm making no threats. I believe in peaceful resolutions to all problems.
And if the pressures of doing your jobs is too overwhelming and you if you have trouble sleeping at night, perhaps you ought to resign, perhaps for "personal or health reasons" and let someone else take responsibility when the short positions blow up.
(And don't forget to buy silver with the cash if they offer you a severance package.)
May I remind you that Michael Gorham resigned 3 weeks after he penned his letter in May 14th, 2004, that the CFTC is continuing to quote today.
Perhaps he recognized his hypocrisy, that I pointed out just today, which I pointed out again above, that the only way there can be no manipulation is if the markets provide unrestricted access to all longs who could buy silver, but then again, there are many position limits in place that prevent just that.
Limits are evidence of shortages. Shortages are evidence of manipulations. Limits are thus proof of manipulation.
It took Michael Gorham just over a year to write that letter containing that hypocritical admission of manipulation by the existence of position limits, after I publicly rebuked the CFTC in my letters of January, 2003, before I began writing my Silver Stock Reports.
Many of my readers are wondering what they should do about the silver manipulation. All market manipulations are ultimately doomed to fail, and can only be temporary.
I offer three suggestions.
1. Buy silver, while you can, if you can find it. Buying silver is a peaceful action. Many dealers are still reporting delivery delays of over 1 month. Delivery delays are evidence of shortages. Many dealers are still short of silver, since they don't have any. Shortages are evidence of market manipulations, and price fixing of prices too low.
2. Do whatever you can to earn more money, so you can buy more silver. The manipulation of silver to below market prices is a gift. Take advantage of it while it lasts by buying the real thing. Don't be conned by the leverage offered by paper promises of silver that may not exist.
3. Tell other people about the gift of silver at below normal free market prices.
Personally, I have invested in physical silver, and mining stocks, because I do not trust the integrity of the futures markets, nor in the people who oversee them.
And I'm not complaining. I'm very happy with where silver has been.
By Jon A. Nones
15 May 2008 at 06:04 PM GMT-04:00
SEATTLE (ResourceInvestor.com) -- Much to the chagrin of silver enthusiasts who believe the price has been artificially held back, a second study in four years by the U.S. Commodity Futures Trading Commission (CFTC) revealed no evidence of manipulation in the silver futures market. Silver bugs now question the CFTC.
“The CFTC is criminally negligent. This is an agency that makes it so the big commercial banks can do whatever they want. The public has no faith in the CFTC or FRB anymore,” commented one RI reader.
During the past 25 years, the CFTC has received numerous complaints from silver investors like the one above alleging that the price of silver futures traded on the NYMEX has been manipulated downward. In 2004, the Commission responded to investors' concerns in an open letter that concluded that the existence of a long-term manipulation was not plausible....Please click HERE for the whole article.
May 15, 2008
(Silver is the Achilles heel of world finance!)
May 14, 2008
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.
Commodities reporter, metals
Dow Jones Newswires
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,
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.
May 14, 2008
As last week’s article predicted, there was some moderation in the true net concentrated position of the largest traders in the silver market, due to actual contract liquidation and the mechanical contract liquidation as a result of deliveries on the May contract. For those keeping score, the true percentage for the 8 largest traders of the entire COMEX silver futures market (after subtracting all spread positions) dropped to 79% from 83%. While I still believe that 83% will prove to be a high-water mark, 79% is just as outrageous for a concentration in any futures market.
Incidentally, the percentage of the entire market for COMEX gold futures (ex-spreads) held by the 8 largest traders was also 79% (up from 77% the week before). In both gold and silver, the true 79% concentration of the 8 largest short traders is some 50% greater than the reported concentration because the reported figure does not remove all spread transactions. I’m starting to think that only the regulators are fooled by this obvious ruse.
Beneath the surface, however, there were some unusual developments. In silver, the most notable development was that the raptors (the 9+ commercials, other than the 8 largest traders) appeared to take delivery of the majority of the first week’s silver deliveries. I hadn’t seen that before, and it does raise the question of why take delivery? Just about any answer to that question would appear to be bullish.
But it was in gold that the most notable developments occurred and also involved the gold raptors. For the first time I can recall, the 4 largest gold traders sold short a significant number of contracts (7,000) on a general price decline during the reporting week. (While gold prices finished flat Tuesday through Tuesday, three successive multi-month price lows were recorded during that period). This raised the big 4’s net short position to a record 180,000+ contracts
Never, in my memory, had the largest gold short traders sold on the downside. This does increase their determination to artificially depress prices. One of the standard lines from the CFTC has always been that the large short traders can’t be manipulating the price because they always buy on sell-offs. I’d like to see the Commission spin this development.
Even more interesting was that the gold raptors (the 9+ commercial traders) bought what the big 4 sold short. In fact, these raptors now hold a near record net long position, against the big 4’s record short position. Talk about a dichotomy - commercial against commercial. Since there is no precedent for this match-up, there is no historical track record to offer guidance on the resolution. But it does suggest we are at a critical point.
Also suggestive that we may be at some type of inflection point is how the market structure has evolved since the highs in gold and silver, both in price and extremes in the commercial net short positions, over the past couple of months.
In silver, on a subsequent peak to trough price decline of more than $5, the total commercial net short position declined about 18,000 contracts (90 million ounces) from the COT for positions held as of February 19. There were commensurate reductions in the concentrated net short positions of the 4 and 8 largest traders, although these concentrations are still obscenely high and provide clear evidence of a manipulative crime in progress. As previously reported, there was no liquidation at all in the big silver ETF, only increases in metal holdings. Near term volatility and today’s jam-job to the downside aside, it feels more and more to me that silver may explode shortly.
In gold, the situation is somewhat different. On a peak to trough price decline of $180, there was significant liquidation both in the total commercial net short position in COMEX futures of 70,000 contracts (7 million ounces), and in the big gold ETF of another 2.6 million ounces. Yet, in spite of such significant gold liquidation, the 4 largest shorts actually increased their net short position, as indicated above, to the largest amount ever. This highlights the issue of concentration in gold like never before. While some gold people appear to be awakening to this clear proof of manipulation, most still overlook it.
Finally, I have reached a critical point in deciding what to do next to attempt to terminate this ongoing manipulation. Many of you have written to me asking what can be done or offering suggestions on what to do. While I still believe that the CFTC may comment on this issue shortly, and I have held back awaiting those comments, I have less belief that there will be any substantive change from their past directives. I do hope I am wrong. Anticipating that the regulators will not move to terminate the clear crime in progress. I will shortly disclose my new attempt and ask for your help in its implementation. While there are no guarantees of success, I don’t think you will be disappointed.
(No one can safely predict the future and it’s possible that Israel Friedman’s Butler’s analysis will prove incorrect. Silver can go up, but silver can go down. It is up to you to read, analyze, and arrive at your own conclusions. Prudence requires we emphasize that precious metals may or may not prove to be suitable for your consideration.)