Kranzler on Silver market perversion

Jim H
By Jim H on Wed, Jun 24, 2015 - 1:13pm

Worth a read;

http://investmentresearchdynamics.com/comex-silver-is-the-most-corrupted...

The silver paper futures open interest is now officially over a 1 billion ozs., most of which represents a naked short position in silver.   Never in the history of the markets has any futures market been this extraordinarily disconnected from the amount of underlying physical commodity that is available to deliver against those contract open interest.

The only conclusion that can be drawn is that the Fed, Treasury and big banks are implementing the most extreme market manipulation exercise ever witnessed.  I shudder to think about what catastrophe is coming at us that they know about but we don’t – yet.

“James Mc,” a valuable daily contributor to Lemetroplecafe.com’s nightly “Midas” report commented last night on the Comex silver market in comparison to the CME lumber futures market:

Total North American lumber production for 2015 (est.) is 60 billion board feet. At an average of $400 mbf that translates into $24 billion dollars. Keep in mind this excludes the rest of the world’s lumber production, which could easily be double that amount. On the other hand total world silver mine production for 2014 was estimated by GFMS to be 877 million ounces. At $16 oz. that is a total of $14 billion. Silver OI is 45.45 times greater than lumber OI. with physical silver production being only a fraction of lumber production in dollars. Lumber futures O.I would have to be 100 times greater or more to compare to the outlandish oversized silver futures. Or, put another way lumber futures would have to reflect hedging 68 billion board feet, more than the entire year’s production for North America to be scaled to silver Any arguments for a higher silver O.I due to hedging for recycled and above ground silver supply are dwarfed by the stark reality of the above figures. To say the silver market is normal is like having referred to hurricane Katrina as a passing thunderstorm.

A long-time friend of mine who works with hedge funds in NYC thinks a Comex default is coming.  If that’s the case, it would make sense that JP Morgan, HSBC and Scotia – the primary Comex market-makers and Comex gold/silver vault custodians – are amassing a record level of naked-short interest in paper silver.

Why?  Because this serves the two purposes:

1)  these banks make enormous trading profits through their illegal manipulation of the gold and silver markets.  In fact, I don’t know about HSBC and Scotia, but in some past quarters JP Morgan’s commodities trading unit has been its only cash-profitable business segment.  I suspect this was largely from illegal trading profits in gold and silver futures trading.

2)  keeping the price of silver down via illegal manipulation enables these banks to accumulate physical silver at artificially low prices.  Obviously they know the truth about the real condition of the physical market. If you put on your “think like a criminal” hat, you would use the paper to push the price of silver down using paper – taking out trading gains on the market’s volatility – and you would be accumulating a massive hoard of physical silver because, once the Comex eventually defaults, both gold and silver will soar in price but silver will soar many multiples more than gold.

The Comex is headed for a default.  This means that the long side of the open interest will be settled in cash.  Of course, it takes a force majeure to trigger the cash settlement provision in the gold and silver contracts.  I can’t wait to see the nature of that force majeure event…

7 Comments

Jim H's picture
Jim H
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The Silver Short-side Bubble

A taste for you of what Craig Hemke is writing today;

Yesterday, as price was being smashed nearly 2.5% or 40¢, total Comex silver OI rose by another 4,909 contracts to close at 200,273. That's the first time in the history of the Comex that total OI has exceeded 200,000 contracts.

  • First of all, why now? Why is silver OI at record highs when price is at 5-year lows? And where are all the "bubble callers"? They were out in force four years ago with price in the $40s and total OI at 140,000. Why can't this current time be called a "short bubble"? It clearly is. I guess it's only a "bubble" when it fits the narrative you're trying to promote.
  • Let's do some math. There are 5,000 ounces of paper silver behind every Comex contract. Multiply 5,000 X 200,000 and you get a total Comex obligation of over 1,000,000,000 ounces of silver. Hmmm. Last year's global mine supply was just under 900,000,000 ounces and the TOTAL Comex vault shows holdings of 181,000,000 ounces. How is it even legal to print 200,000 contracts when there's only enough silver in the vaults to cover less than 40,000?
  • On the topic of mine supply, the WGC estimates total global gold mine supply at about 92,000,000 ounces. Total Comex gold OI at 430,978 represents 43,000,000 ounces or about 47% of total annual mine supply. In silver, as noted above the percentage is about 112% of total annual mine supply.

But hey.. it's just a lack of buyers, right?

 

http://www.tfmetalsreport.com/blog/6942/silver-short-bubble

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davefairtex
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silver shorts & managed money

JimH-

I have to agree, Managed Money has really loaded up short here, and I'd guess it was them once again the other day.  I don't know what got that particular bee in their bonnet, but its the most solidly short I've seen them in quite some time.

As always, once the buyers show up and start to push back - and we know silver isn't all that big a market so it won't take all that much money - the short covering by managed money will be something to behold.

My thought is that all this short selling has something to do with copper's hefty downtrend, and MM is betting on the correlation to copper holding (generally) true.

History suggests they tend to be very wrong at the turning points, and I think the turning point isn't so very far away.

But we might well test 15.25 before the buyers show up in force.  Once the commercial shorts have all covered and Managed Money is quite thoroughly short, I'd expect the buyers to show up after a big spike down, and then we'll be off to the races.  And those commercials will clean up again, as usual.  Ah, if only we had position limits.  But of course we don't.

As far as a near term COMEX default...care to make a friendly wager on a COMEX default happening, say, within the next month?  Maybe one shiny silver coin?  I could use another silver coin.  :-)

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sand_puppy
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Silver Shorts--Ted Butler is saying similar things

The Ultimate Confirmation
Theodore Butler | June 22, 2015 - 9:03am

I’ve embraced one central theme for the past 30 years – that the price of silver has been manipulated lower on the COMEX. For a good part of those three decades I’ve exerted an intense effort in analyzing the actual supply/demand fundamentals of silver, including production/consumption trends...

...

I write less about [the supply/demand issue] influence on the price. Why shouldn’t I? After all, I can’t remember an occasion over the past few years where the actual fundamentals had any effect on price; silver (and gold) prices are set on the COMEX when speculators adjust futures positions... That’s why I focus so closely on COMEX positioning.

....

I recently observed that JPMorgan and other members of the 4 largest short sellers on the COMEX had never taken a loss on any newly added short position in COMEX silver futures over the past seven years. ... The four big shorts in COMEX silver have a perfect trading record.

no one could achieve a perfect short term trading record in a free market; that would only be possible if the market was rigged.

How can the "Big 4 Commercial Traders" always make money on their short positions?

JPMorgan [and the other big 4 commercial traders]... sell as many new shorts as possible to eventually cause prices to cease rising and whenever the technical funds are finished buying as many COMEX silver contracts and then begin to sell, the big shorts, led by JPMorgan then grease the skids for lower prices and buy back the short contracts they sold short to the upside. It’s the perfect market scam..

And here is the catch:

[JPMorgan] used the continuously depressed price of silver to acquire the world’s largest position of physical silver, more than 350 million oz at last count.

At some point, JPM and the Big 4 Commercial Traders can stop suppressing and allow supply/demand forces for physical silver take over.  What happens then to the value of their physical hoard?

[JPM's 350 million ounces will rise in value] $350 million for each and every dollar that silver advances ... A ten dollar move will equal $3.5 billion for the bank; a one hundred dollar move comes to $35 billion. The math is pretty simple and strongly suggestive of sharply higher silver prices, given how much JPMorgan stands to make.

This strikes me as the ultimate scam.  But one that can only work if we do not understand that it is being done.  Like any confidence game, a scam doesn't work on those who understand it.  [Think of how cleverly Osama Bin Ladin destroyed WTC7 and why that means we must have our emails read and phones tapped?]   I wonder what public relations firm holds the contract to keep the public convinced that this is all a "crazy conspiracy theory?"

A scam of this magnitude could never happen without the participation of regulators and the media.  I am continuously amazed at the relentlessness and effectiveness of the methods used by the elite harvest wealth from the masses.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
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Posts: 2379
Thanks Dave.. I am not sure when Comex will default

Kranzler seems pretty sure it's sooner rather than later.. but of course we will see.  My track record for timing is terrible.. hence I will not bet.  I probably already owe you a Silver dollar and would be glad to pay up. 

Here is the latest from Kranzler on the subject;

http://investmentresearchdynamics.com/sot-39-market-update-is-the-comex-...

At this point it's all up to phys buyers... India is stepping up big time.. and records on US Eagle and Canada Maple production continue to be broken.  Imagine what would happen if Western investors actually were to wake up and smell the rotting fiat paper.   

davefairtex's picture
davefairtex
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ted butler

Wow, sand puppy, what an awesome article from Ted Butler.  I honestly can't disagree with most of what he says, mainly because the data backs him up so well.

I do not believe that the big banks can manipulate the trend in the long run, but in the short run, I believe they play the market like a fiddle, and I also agree with his observations that bottoms usually only occur when the commercial shorts cover, and the tops happen when the commercials load up short.  The evidence for this is overwhelming.

The technique appears to be especially effective in a downtrend.  The fact that silver is so well correlated to commodities, and copper, oil, and the rest of the commodities have been in a steady downtrend has given JPM & crew the freedom to short at will, since traders follow the overall trend, and any buyers are therefore nervous and easily frightened out of positions.  It also allows them to accumulate silver cheaply, at what is presumably at or near "the low."

I also agree with the flawless trading record.  They really profit from a weak market.  I don't know why the managed money bothers to play, but they do.

The one place I'd object to his analysis is during the 2011 silver rally.  During that time, the commercials were wrong a couple of times and had to cover on the way up, in late 2010 and early 2011, and once more approaching the top.  Their technique doesn't do as well in a 'disorderly ascent' - when there is a buying panic that overwhelms their ability to play the cycle.  They don't have infinite power, at least as far as I can see anyway.

So in essence, I believe when the market turns, the banks will go with the flow and continue to manipulate the market all the way up.  They won't be capping the gains from a trend standpoint, they'll just be skimming the cream at the peaks and valleys of the cycle as the market moves higher.

If we had position limits, that fixes the problem.  Sadly, we do not.

Oh- JimH - I would hope the COMEX default happens soon as well, but it has been predicted so often, a la "boy who cried wolf", that I have more than a touch of COMEX Default fatigue.  :-)

 

Incidentally, I'd like to thank the member that brought the whole commercial short thing to my attention six months or so ago.  It was a great find.  That's what makes this site so awesome, everyone brings a piece of the puzzle and together it helps us to see what is really going on.

I do believe we have a bottom coming up soon, but I'm not exactly sure when.  Hopefully it is before we hit 15.25.

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Great Discussion Guys

I will check with a coin dealer or two in my area, just to see if there has been even a small up tick in the number of people coming in to buy the shiny metal.  I find the content of the articles all of you have posted remarkable.  With all of the information they provide it is kinda hard to not think about manipulation and the influence the big banks hold in the market.

The sad thing about this is that the bankers are going to make money on the next leg up.  Talk about greed and a totally rigged system.

Well, I will be one of those people buying this week.  Not enough to effect the market, but hell, I am almost out of credit card debt (been a long journey there) and haven't bought a physical ounce for a little while.  If this is the bottom, it is nice to know I will be getting prices at the right moment.

As always guys, thanks for the great info.

Jason

Jim H's picture
Jim H
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Posts: 2379
Jbarney...

Nice to hear from you JB... it's all of us buying together that IS the market... so don't discount your action.  It's clear to me that another run on Silver physical has started.. not sure what you will find at your local coin shop.  Listen to the SilverDoctor's end of week market wrap.. the guy from SD Bullion talks of a BIG uptick in Silver sales at their business just last week when Silver dipped back into the $15's;

http://www.silverdoctors.com/its-gonna-be-a-hot-summer/

As well I have noticed that Texas Precious Metals is out of ALL forms of 90%, and is once again out of Austrian Phil monster boxes.  On the Silver Doctors podcast above, you will hear the SD Bullion guy talk about the fact that 90% is the canary.. it runs out first.. and is in fact running out now (obviously, they aren't making more of it).  

Is this going to be the Big one, or just another wash/rinse/repeat cycle?  I don't know.. but I do know that at some point, the wash/rinse/repeat drill will turn into the real thing.  Funny how that happens, right?     

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