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Nice Setup for Gold and Silver
ProofCollection
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A good analysis/update of the paper market conditions for gold and silver. Really interesting that the large net short positions are now concentrated in just a handful of US banks, while the rest of the world is long.
Nice Setup for Gold and Silver
Nice Setup for Gold and Silver
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Question is when will it occur?
I have a very strict gun control policy: if there's a gun around, I want to be in control of it - Clint Eastwood
Considering that those derivatives are worth the annual silver market 200X over leads one to believe that there is a tad more going on here than casual hedging or thoughtful investing. It's strange that a tiny $1 BILL market like silver needs such positions against it. The gold market only has $100 BILL in derivatives (ie 1/2 of the silver derivatives). One would think that there are many ways to help control the price of gold worldwide, but far fewer for silver. At least that's my 2 cents why the 138X disparity in net value vs. market value. It would be comparable to a $14 TRILL gold derivatives position.
roadrunner
Silver has been starting to move up today and push the gold:silver ratio down, indicating another short term move up in the metals....probably Thursday we see $900 and $12.70 taken out. The only thing keeping the metals from taking off is the stock market defying a drop over the past 2-3 weeks.
roadrunner
I knew it would happen.
<< <i>Interesting. However, I usually dismiss arguments like his. I don't like how he couches his thoughts on "manipulative short selling." Why is always the short sellers who get finger pointed? How about the manipulative long buying?? >>
In this case, it would be because there's only a handful of parties doing the manipulation. 2 banks, 96% of the shorting.
Manipulative long buying? I would argue that it is a little less manipulative. If I naked short sale a bunch of silver and get caught unable to deliver, I declare bankruptcy or something and walk away. However, if I chose to buy a bunch of silver, I have to have the money in order to do that. If someone wants to acquire and hoard a commodity, I wouldn't have a problem with that. The Hunt bros tried it and ended up going bust, but they were't able to just walk away through bankruptcy, they lost everything. It's also easier for the supply to adjust to rising prices while by manipulating prices down you may force suppliers out of business. I don't know, good question though. Do you think there is any manipulative long buying happening?
<< <i>I wonder if I could somehow buy a few hundred million oz. of silver as an uncovered long? D'ya think that the exchange would just let me go ahead and implement the position? I don't have any money to back it up, but since when does that matter? >>
Could you explain what being an uncovered long means? Do you mean buying on credit? Someone would have to lend you the credit to that, they would be taking the credit risk.
When the shorts are 2 banks it's no problem. But if 1 or 2 long individuals (other than a major bank) tried to take delivery of 50-100% of the Comex silver, they would be thwarted in some manner by changing rules or requirements. The exchange simply would just not allow that to happen...just like they did to Bunker Hunt. Bunker had the idea of cornering a PM's exchange long before JPM, HSBC and others decided to do it.
Buffet tried to secretly take a 120,000,000 ounce silver position that was not part of the exchange a few years back (100% of the Comex position). And the pundits wouldn't believe it until Buffet admitted to it. It wasn't long after that where he was no doubt persuaded by the govt to dump his stash and get with the program.
Well, it didn't take long to meet the $900 / $12.70 level - 10:30 am the next morning.
roadrunner
I have a very strict gun control policy: if there's a gun around, I want to be in control of it - Clint Eastwood
Here is one of the smartest investors in the world identifying silver as undervalued and starts accumulating it at around $6/oz. Check. Good move Warren.
The silver chart is slowly trending upwards in the 2002-2005 range and then begins to move parabolic by the end of 2005. Check. Still hanging in there as things are heating up. This is just the beginning.
The price of silver only falls below $9/oz for about 5-6 days in January. From then on it's only higher for all of 2006. The price of silver peaks in a strong move in April at $14.30/oz and then falls back in mid-April to what would be the low for the rest of the year at $9.70. It quickly recaptures $10. If the peak was removed from the charts you would still have a smooth exponential curve working its way towards $20/oz. over the next 2 yrs. Buffet knows how to read a bullish chart. During the rest of 2006 silver meanders between $10 to $12/oz. So the smartest investor in the world sells his stash at $7.50 while the world market is no lower than $9.70? Yeah right!
Anyone with half a brain, and certainly the smartest investor in the world could see what the silver chart was saying. The final run in silver was a long ways away, just like it was for gold, oil, etc. And the smartest guy in the world who usually buys early/low and sells later/higher was thinking of selling in 2006 yet passed on the opportunity to move any silver as prices went up towards $14/oz. Instead he sells out for $7.50. Sure! I buy that...lol.
The oracle of Omaha made the right moves and he would have doubled or tripled up in silver had he allowed the 2006-2008 commodity bull to play out. There was plenty of time to slowly disperse the stash as well without upsetting prices to much. What was more likely the reason for Buffet selling was to appease the FED/Treasury boys who wanted the 120,000,000 ounces of silver where they could keep an eye on it and still be able to "paper it up" when they so desired....ie in the new SLV that began operation in April.....just after silver fell back 40%.....got to hand it to those guys...lol. If Buffet did only get a measly $7.50 that could explain the bargain price as the govt would have owed him a big favor down the road for having taken away his silver position. And where else could they get 100 MILL ounces of silver without messing up the silver market? It took WB 9 years to accumulate that stash.
Basically, WB did the same thing as Bunker Hunt but was given an option he "couldn't refuse." Some of that payback came to fruition in the past 1-2 yrs. where he was given ownership stakes at very agreeable terms in teetering finanical giants. Whether those gambles work out in his favor remains to be seen. But the players needed a $100 MILL silver stash to start out SLV and there weren't too many places to go to get it. It only took the fund a few short weeks to ramp up demand to that $100 MILL ounce mark.
WB was in the right place at the right time with silver. He played by the rules presented to him. Considering he plays positions for the long haul (20-30 years or more), it made no sense to cash out for dirt when the silver market was just beginning to pick up steam. No doubt he was thinking way down the road when silver could reach lofty heights like in 1980. He was persuaded to not do that. The PTB really didn't approve of their #1 poster child for capitalism to be the #1 player in silver holding more than the entire Comex inventory. After all it would give fiat a bad name. If Buffet was doing it why not everyone else? But, it made perfect sense that a company worth tens of $Billions would diversify a tiny $1 BILL stake into PM's for the reason of diversification and safety.
roadrunner
<< <i>
<< <i> If I naked short sale a bunch of silver and get caught unable to deliver, I declare bankruptcy or something and walk away. However, if I chose to buy a bunch of silver, I have to have the money in order to do that. >>
The mistake in your argument is assuming that some brokerage firm is going to let you sell short anything without putting up cash. That's not how it works. You need no less money to short than you do to buy.
<< <i>I wonder if I could somehow buy a few hundred million oz. of silver as an uncovered long? D'ya think that the exchange would just let me go ahead and implement the position? I don't have any money to back it up, but since when does that matter? >>
For some reason, folks here think you can sell something short without putting up margin. You should know that the requirements for selling or buying are similar. Your argument is moot. Selling naked doesn't mean not having the $$.
Selling short on margin isn't the question, but selling short naked is. I know what a margin account is. My argument wasn't stated very well. Selling short naked means that you can't deliver the physical goods and that you simply substitute a paper contract or cash in place of the physical. As such, if you are a large bank with huge amounts of assets the charade can be carried out ad infinitum - especially if you are a bank getting unlimited public money.
Selling naked without being able to deliver anything but another paper contract in its place is manipulation if it is well-known that any attempt to force delivery will meet with new regulations that will be designed to protect the non-deliverers.
Unless the little guys are able force delivery at some point in time, the price can and will be manipulated for as long as it is advantageous for the banks to do so. If a long borrows money and wants to force delivery, the rules change. It's unfair, it's dishonest, it's manipulation of the highest order - and it should be made criminal.
The oracle of Omaha made the right moves and he would have doubled or tripled up in silver had he allowed the 2006-2008 commodity bull to play out.
I always wondered about Buffet when he did that. It was obvious that he called the market correctly. It wasn't obvious why he bailed. Very strange.
I knew it would happen.
<< <i>[
Selling short on margin isn't the question, but selling short naked is. I know what a margin account is. My argument wasn't stated very well. Selling short naked means that you can't deliver the physical goods and that you simply substitute a paper contract or cash in place of the physical. As such, if you are a large bank with huge amounts of assets the charade can be carried out ad infinitum - especially if you are a bank getting unlimited public money.
Selling naked without being able to deliver anything but another paper contract in its place is manipulation if it is well-known that any attempt to force delivery will meet with new regulations that will be designed to protect the non-deliverers.
Unless the little guys are able force delivery at some point in time, the price can and will be manipulated for as long as it is advantageous for the banks to do so. If a long borrows money and wants to force delivery, the rules change. It's unfair, it's dishonest, it's manipulation of the highest order - and it should be made criminal.
Iq] Ok. I concur with you.
The entire hoax gets hazier on the long side as well, because if you look at the run up on oil last year to the $140 there was never any intention of taking delivery of the petrocarbons. This play works on both sides of the market.... I guess the only thing to do is jump on the momentum players side or just stay on the sideline. In terms of gold and oil though (and most commodities in general), the market is up. But like all markets, nothing goes straight up. And there are multiple types of arb plays in oil and metals-futures and options, and the stock exchange traded EFNS where the arbs squeeze profits and flip positions in all sorts of ratios. All of this adds to liquidity. If you recall the markets from the 1970s, the volume was thin and the market quotes very wide....
Now at least you can get in and out of a market that's quoted in pennies and nickels...instead of 1/2 points and points.
Cheers!
Not so. They did intend to take delivery as part of their regular business. I know for a fact that the company (SemCrude) who got caught on the long side when prices crashed was also in the middle of a large program to expand their crude oil storage facilities in Cushing. Those large tanks are now all in operation, storing crude oil.
The main problem was that their trading operations ran amok buying much more in crude oil futures than their physical ability to store it, but their bias was running to the upside in both futures contracts and physical storage capacity. They simply guaged the ultimate price level incorrectly, in a big way.
I knew it would happen.