Debunking the Post-CFTC Precious Metals Fear Mongering Campaign

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  • Mon, May 17, 2010 - 05:11am

    #41
    Peak Prosperity Admin

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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

[quote=Doug]

[quote]I disagree. I heard a clearly knowledgeable and skilled debater who is extremely careful with his choice of words win a debate against a less skilled debater who is less careful with his choice of words, less prepared or knowledgeable and inclined to become angry and argumentative[/quote]

I disagree with your interpretation.  Christian was clearly more knowledgeable and skilled, but he also had command of the facts.  Murphy made a lot of apparently baseless allegations that Christian shot down with facts, not rhetorical flourishes.  I suppose Christian may have been lying, but I will have to be convinced.

Doug

[/quote]

Sorry Doug, I guess I wasn’t clear in defining Christian as the clearly knowledgeable and skilled debater. So we agree.

I  suspect Christian of fudging the truth by omission in the Barrick lawsuit.

  • Mon, May 17, 2010 - 05:29am

    #42
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    A comment on Christian’s debating style.

At the CFTC hearing Christian said that JP Morgan were selling silver “hand over fist” and then went to the futures market to hedge by selling short. This is the “I mispoke” that Christian made when pulled up by Gary Gensler.

However when Bill Murphy said that Christian reported JP selling as the price went up but did not use the hand over fist quote he was accused by Christian of lying. Whether the price was going up or not I do not know but Christian certainly did not report the selling as occuring as the price went up.

Obviously if you do not precisely quote this guy he will deny ever saying something and accuse you of deceit. I know which is the greater deceit. 

 

  • Mon, May 17, 2010 - 03:38pm

    #43
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

 

 

Hello. This is Jeff Christian.

I do not normally participate in these commentaries, but saw a couple of inappropriate references to my personal ethics, so I thought I would clear things up.

First, I did not fudge anything related to the Barrick court filings. I was responding to a Gata lie about Barrick. Gata said, explicitly, that Barrick had argued in court that it was immune in this matter due to the fact that it was acting as an agent of central banks. I said, correctly and accurately, that Barrick had not made that argument. You are right: Barrick argued that since the suit did not include all of the alleged participants in the alleged scheme, it could not proceed as a matter of law. It also argued that even if Blanchard had named all of the alleged participants, some of them, the central banks, had immunity from the case, and therefore the case could not proceed as a point of law. Both of these are correct.

What I said was that Gata had lied about what Barrick had argued in its court filings. I was 100% correct and fudged nothing.

Further on this matter, Blanchard was a client of CPM Group’s, until shortly after it filed the case against Barrick. It ended the relationship. I knew and worked closely with Don Doyle, the owner of Blanchard. I will not say anything about Don here, since he has demonstrated a willingness to sue people at the drop of a hat regardless of any merit to his grievances.

Second, there seems to be great confusion about what I said, meant to say, and how I corrected myself when asked for clarification by Chairman Genssler, in the CFTC hearings. Given that these were comments off the top of my head from a remote televised place in South Africa on a subject that the CFTC had not asked me to prepare myself for, I think I should be allowed to stumble on my words at times in describing what seems to be incredibly complex financial transactions in the minds of many gold market observers. Given that you seem to respect my speaking skills, I guess I have let you down by buggling my words once.

What I said, or meant to say, was that the bullion banks (I do not believe I mentioned JPMorgan or any other bank by name) were buying silver and gold hand over fist in the dealer market, as investors that had purchased these metals, either leveraged or unleveraged, unloaded their metal as their credit lines were withdrawn during the great credit freeze of September and October 2008. The banks, as market makers, stood to buy back gold and silver as their clients sold. The banks in turn hedged these purchases by selling short on the Comex. Because the Comex has a clearinghouse backing up its trades, it was one of the most liquid places in the precious metals market at that time in which the banks could lay off the price exposure they were taking on. Remember, some investors were selling massive amounts of metal, even as smaller investors were buying. Prices were plunging. The bullion banks stood as buyers, as they should have as market makers, even in the face of the cascading lower prices. They protected themselves in the paper market. That should not be any big deal for anyone to understand or accept. That is how markets have worked for centuries.

It is interesting because around 2001 or 2002 there was a time when market makers in the municipal bond market stopped picking up their trading phones. That was a much larger abbrogation of the market makers’ responsibilities to the markets. It stands in contrast to the execution of buy-backs.

I hope these comments clarify these two points. I hate to have people misrepresent what I say, almost as much as I hate people who misrepresent what I say question my integrity without knowing the facts about which they are speaking. Yes, I try to be careful with my words. As I said to Bill Murphy once, Words and facts matter.

Cheers.

 

 

 

 

 

 

  • Mon, May 17, 2010 - 03:49pm

    #44
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

Jeff!

It’s an honor to have you here participating in this conversation! I hope my esteemed colleages here on the site will join me in welcoming you to these discussion forums, as it’s a rare and fortunate privilege for us to be joined by high-visibility industry professionals like yourself. I really hope you’ll find our discussions interesting and consider participating in some of them.

Unfortunately, some of my colleagues here have been exposed to GATA propaganda for a very long time, and as you know, they have been exposed to a campaign that makes you out to be a representative of an evil bullion bank establishment. I hope that nobody will have the bad taste to say anything insulting toward you here, as that is not permitted by the site’s posting guidelines. But in case that should occur, I hope you’ll know that many of us really appreciate your participation and welcome your views with an open mind.

Best regards,

Erik

 

  • Mon, May 17, 2010 - 04:21pm

    #45
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

The only issue that even appears to have the potential of legitimacy here is the question of JP Morgan’s large short position in the silver market. As described in the article, the allegations about 100:1 and LBMA were just plain nonsense. But I did write the following in the original article:

[quote=Erik Townsend]

Ted Butler’s research alleges the presence of a very large concentrated short position in the COMEX futures market, held by J.P. Morgan. I’m inclined to believe that this much is true. Is it really being used to manipulate the market? Based on Ted Butler’s research alone, I would say maybe. Ted’s argument is, essentially, what other purpose could there be for a short position larger than the annual global production of silver? I can’t think of any plausible alternatives, but this argument still lacks certainty. The fact that neither Ted Butler nor I can think of such a reason certainly speaks toward the possibility that JP Morgan is manipulating the market, but doesn’t prove anything conclusively.[/quote]

So, as I said in the article, I was unable to fathom a plausible reason that JP Morgan would be holding a short position so large that it rivals the annual production of silver. But I also left room for the possibility that although neither Ted Butler or I could think of such a reason, there could still be a valid reason neither of us thought of. I think Jeff just provided it:

[quote=Jeffrey Christian]

…the bullion banks (I do not believe I mentioned JPMorgan or any other bank by name) were buying silver and gold hand over fist in the dealer market, as investors that had purchased these metals, either leveraged or unleveraged, unloaded their metal as their credit lines were withdrawn during the great credit freeze of September and October 2008. The banks, as market makers, stood to buy back gold and silver as their clients sold. The banks in turn hedged these purchases by selling short on the Comex. Because the Comex has a clearinghouse backing up its trades, it was one of the most liquid places in the precious metals market at that time in which the banks could lay off the price exposure they were taking on. Remember, some investors were selling massive amounts of metal, even as smaller investors were buying. Prices were plunging. The bullion banks stood as buyers, as they should have as market makers, even in the face of the cascading lower prices. They protected themselves in the paper market. That should not be any big deal for anyone to understand or accept. That is how markets have worked for centuries.

[/quote]

So why in the world would J.P. Morgan be short silver to the tune of something close to the annual production of the metal? Because in the 2008 crisis they had a fire-sale opportunity to buy physical metal from leveraged holderssuch as hedge funds who were being forced to unwind their positions because of the loss of repo lines and other financing during the credit crisis. That makes perfect sense.

If Bear Sterns and then J.P. Morgan came into a huge quantity of physical metal under such circumstances, they would not be able to just sit on it and be exposed to price risk. Especially not in the face of the biggest liquidity crisis in recent history. So they would have to do one of two things in order to keep their risk under control: Either sell the metal, or hedge it in the futures market.

What would I do if I were in their shoes? And in 2008 no less? I’d damn well keep the metal because after all “posession is 9 10ths of the law”, and the prospect of a complete meltdown of the paper market system was looking possible. By keeping the huge inventory of metal that others were forced to sell, and hedging the position by going short in the futures market, they would be making a very, very astute trade: They would be hedged against any price fluctuation (value at risk of loss = zero) so long as the system was functioning. If the whole financial system blew up and the futures exchanges defaulted, they’d have a whole lot of precious metals in their vault while everyone else was coming to terms with the fact that their whole business was just paper and just went poof.

So now I have a perfectly plausible answer to Ted Butler’s oft-repeated question, How could a concentrated short position that large be anything other than a manipulation?

To prove this explanation would require auditing JP Morgan to see whether they’re still in posession of an amount of metal approximately equal to their large short on the COMEX. If they are, that answers the debate and both GATA and Butler are proven dead wrong!

Why doesn’t J.P. Morgan come forward with that explanation if that’s the case? Why would they? GATA is doing a fine job of filling the system with an absurd amount of rhetoric and propaganda. If I were JPM, I’d watch how that plays out and take the other side of the bets being made by naive retail speculators. Perhaps that’s exactly what’s been going on all along?

Very interesting indeed…

Erik

 

  • Mon, May 17, 2010 - 05:25pm

    #46
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

Jeff,

Welcome, and thank you for offering your time here.  I listened to the Financial Sense podcast with yourself and Mr. Murphy just last night and found it highly informative and clarifying.  Debates like that are just what is needed.  I can’t honestly say that all my potential concerns regarding manipulation of gold and silver markets have been allayed, but I felt that debate did wonders for separating much of the wheat from the chaff, as it were.

– Nick

  • Mon, May 17, 2010 - 05:33pm

    #47
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

Erik, interesting theory !

 Wouldn’t that mean that JPM has done a Hunt Brothers.. and virtually cornered the physical market ?

If so,  maybe it’s acting as an agent for… hmm… curiouser and curioser.

  • Mon, May 17, 2010 - 07:20pm

    #48
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

Jeff. Welcome to the site and thanks for clearing that up. I thought that you carried yourself extremely well in the “debate” (actually it was a one-sided blowout, GATA’s credibility with me is dirt right now), and presented facts and chains of reasoning that were compelling. 

I use the CPM Yearbooks with regularity. Good stuff. 

 

[quote=Erik T.]

Unfortunately, some of my colleagues here have been exposed to GATA propaganda for a very long time, and as you know, they have been exposed to a campaign that makes you out to be a representative of an evil bullion bank establishment. I hope that nobody will have the bad taste to say anything insulting toward you here, as that is not permitted by the site’s posting guidelines. But in case that should occur, I hope you’ll know that many of us really appreciate your participation and welcome your views with an open mind.

[/quote]

I’ll second that but I think that there are shenanigans in all the commodities and equities markets, but GATA does a disservice to exposing them with this nonsense.

GATA exposed itself as uncredible in the debate. Conjecture, strawmen, red herrings, I don’t think that there wasn’t a single logical fallacy that Bill Murphy didn’t use. In fact, he sounded hysterical. 

Now, as far as the shenanigans. That doesn’t mean that you have anything to do with them. Bill’s facts are wrong, and he’s barking up the wrong tree. What angers me is the damage they do to the cause of rooting out corruption where it really is. 

  • Mon, May 17, 2010 - 07:52pm

    #49
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

Jeff, welcome.

I followed GATA for a while as another naive investor.  I read Erik’s article with great interest, listened to the so-called debate and read your post above.  I agree with Morpheus, the debate was a blow-out and I’ve lost all respect for and interest in GATA.  You and Erik have provided a tremendous service to this site and I, for one, thank you both.

Doug

  • Mon, May 17, 2010 - 09:39pm

    #50
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    Re: Debunking the Post-CFTC Precious Metals Fear Mongering …

Gents,

Thanks for all of your warm welcomes. I feel like a LURP walking into a base camp.

Let’s continue this discussion.

 

 

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