Silver Wildcats (Part 2) Concentrated Cohorts And Long Corners
In part 1 of this series I floated the idea that in addition to buying up 150 million ounces (30k COMEX contracts) of American Silver Eagles and Canadian Maple Leafs (as Ted Butler claims and no one else has been able to refute in a meaningful way)…that instead of melting down the government-minted coins, they are holding them 'outside of the COMEX delivery system'.
Thereby sequestering that part of the hoard in an ‘undeliverable’ format or…
Forestalling or Burying The Corpse
Documented throughout the literature of (failed) enforcement of futures manipulation, forestalling is a tactic used by the ‘long corner’ intent on squeezing the market higher.
“To commit murder is very simple. The trouble is to bury the corpse". So said famed industrialist and manipulator P.D. Armour, in reply to the question of why he did not corner the delivery when such massive speculative short interest appeared in December Pork.
It goes something like this:
- Buy up all the potatoes in the market.
- Let them rot in a warehouse someplace.
- Then go in, and buy up a whole bunch of long contracts and stand for delivery.
- Squeeze the shorts who ultimately default as they fail to deliver on their promises.
- Prices skyrocket as the truth depth of the shortage is perceived.
In the case of silver futures, JPM would quietly extricate itself from its paper short in the process, thereby handing the other big 8 commercial traders their collective heads.
While price action continues to exhibit the hallmarks of commercial versus technical fund futures tail-wagging of derivatives, JPM’s massive hoard of silver puts them in a most adventitious position.
A giant financial institution maintaining a vice grip around a seemingly sternal profit machine.
But if they really want to blast the market higher and get the maximum amount of profit, they will need to ‘bury the corpse’.
The Long Silver Corner
Again, in a move that would make the Hunt brothers turn green with envy, JPM may have sequestered enough physical silver to make future delivery nearly impossible.
They could become sneaky long with a fuse that could blow the silver market sky high.
Who else could get away with this, without the CFTC stepping in?
*(As both Ted Butler and Ed Steer have elaborated both publicly privately for readers and subscribers, it is possible that one of the stubborn technical longs - who have maintained positions for much of the move down over the last 5 years - could a ‘hedged’ for this strategy).
This might clear the way for JPM squeezing the paper shorts they could soon be leaving behind.
Again, who would stop a client like JPM from buying a few thousand long contracts and then standing for delivery?
There is only a short seller of last resort or a long corner.
The equivalent of far less than a billion dollars attempting to deliver would disrupt the market and easily induce a default.
And contrary to popular assumption, defaults have been a reality throughout financial market history.
JPM may have circled the wagons on the silver market.
(Given, the record number of gold contracts taken for their own account over the last month, they are loading the boat for the subsequent rise in gold prices as well).
Concentration Versus Corner
JPM, as evidenced by the CFTC’s Bank Participation Report and the weekly CoT, is essentially one dominant (giant) short in COMEX futures.
They are so big, that COMEX silver futures boil down to a market where just a few sellers are the counterpart to a numerous group of paper longs.
That is concentration, an egregious position that in and of itself trumps any other rationalization as to how it should exist in a truly open and fair market.
It matters not that it is a hedged position - (it isn’t).
It matters not that these few big shorts are the market makers — the primary dealers and bookmakers - the liquidity of last resort.
Obviously, the mere presence of a position likes this creates a dangerous situation.
Naturally, they’ve been able to use it for profit.
But the always present danger is that if and when they exit, the silver futures market converts to a ‘long-only’ vacuum where disorder very likely spills over into the greater derivative universe.
For now, much of the world, including many ‘prominent newsletter authorities’ - and in addition to the mainstream media and the CFTC - ‘pretend’ like there is nothing to see here.
The collective whistling past the graveyard while one entity (government sponsored directly or not) has maintained an extremely concentrated short position, while more than likely accumulating one of the largest physical stockpiles of silver on earth.
In part 3, we’ll continue and address the idea that the CoT in conjunction with ALL government-generated data is itself a fiction… (Click here to for early notification and access)...
*Note — Once again, special thanks and credit...
Many of the historical references above were sourced from excellent work of Manipulation of Commodity Futures Prices - The UN-Prosecutable Crime Professor Jerry Markham, former CFTC enforcement attorney. Intimate knowledge of the inner workings of price formation and manipulation would not be possible with the work of Ted Butler.
Courtesy of http://www.Silver-Coin-Investor.com