Manipulating metal prices. Daily Kos article
fastrudy
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Proud recipient of two "You Suck" awards
There is everything to gain and nothing to lose by the banks playing with silver. The Fed/Treasury have a vested interest in the value of the dollar/treasuries. Even if the banks lost hundreds of millions a year in their metal's positions, they have made that up in spades in currency and stock plays not to mention having a very thankful govt looking to reward them for their "help." Being able to have some control to the alternatives to the treasuries/US dollars (such as foreign currencies, oil, and precious metals) as well as the rate of interest has everything to do with their longer term plans. The bankers would be absolutely foolish to let such an opportunity go by untouched. Greenspan has testified to Congress that the US stands ready to lease or sell gold as needed to support the US dollar. Paul Volcker has admitted that one mistake he made in the 1970's gold runup was not to stage some sort of gold "price controls." To think that silver (the average man's gold) is somehow immune to manipulation is a long stretch.
The fact that the Office of the Comptroller of the Currency (OCC) shows a $190 BILL silver derivatives position (ie short) by 2 or 3 US banks speaks volumes towards manipulation. That position has doubled in the past 2 years which is astounding. If one assumes above ground silver stocks at 450,000,000 ounces then this postion is currently worth $6.3 BILL. So the derivatives position is 30X the world's above ground supply. It's 100 years or more of the annual mined supply. I guess someone feels it's necessary to have a paper bet 30X greater than what exists, very similar to what was done with credit default swaps on mortgages, banks, and insurers. A 15X leverage wasn't good enough 2 years ago. Maybe it will be up to 60X and 200 years by the end of 2010.
The gold derivatives position is actually more sane at a mere $100 BILLION which equates to over a 3,000 ton position or about 150% of annual gold production. Why the silver position is 20X larger than gold's when it is even less of a currency alternative is worth pondering. One thought is that if silver was to be found to be in a true shortage and people started looking for it and couldn't get it, it would help propel the price of gold and other precious metals as well. So what's easier to control, gold or silver? At the current 65X gold/silver ratio, there would have to be 3.2 TRILLION ounces of gold in the world to be on par with the value of the 150,000 tons of gold mined through all of history. Obviously there aren't anywhere near TRILLIONs of ounces of silver left. The ETF's only hold hundreds of millions of ounces. We're off by a factor of approx 10,000 here. Even if we raised the estimate of silver from 450 MILL ounces to 4.5 BILL, we still off by a factor of 1000 vs. gold. Nope, no chance of manipulation here.
roadrunner
<< <i>Please. This guy's take on "manipulation" is just plain wrong. >>
I have to agree with you ... all this bs about manipulations reminds of the Dec 21, 2012 doomsday bs.
I'd like to see just one reasonable explanation for the $190 billion in silver derivatives and why a 30-1 leveraged position equating to 100 yrs production of silver, held by 2-3 major US banks, makes sense in anything but a manipulation environment. This tiny, peanut sized, "no count' silver market is leveraged 1,000X-10,000X higher than gold. And while you're coming up with an answer to that, look for a reason as to why the world needs $350 TRILL in interest rate swaps considering that's probably 5X-10X world GDP and many mutliples of all the bonds in existence. Both of these leveraged positions defy any logic I can think of nor have I ever seen any reason offered by either side as to why they should exist in that size for legitimate market hedging.
roadrunner
<< <i>Link to Daily Kos >>
<< <i>It's funny that the contrary opinion holders to PM's manipulation never, ever post any information of value to support their positions. For some reason, stating "this is bs" is about all the reasoning you ever see. >>
As the saying goes... "If it looks like a Duck, walks like Duck etc..." No reasoning or long winded responses required.
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
<< <i>It's funny that the contrary opinion holders to PM's manipulation never, ever post any information of value to support their positions.
roadrunner >>
I'm afraid the generalizations about manipulations are completely false. First of all, no one ever gives a name of the phantom "banks" who are claimed to have "manipulated" a market. WF Banks? Put a name on it.
This guy knows nothing of the futures market, why it exists, or who the producers/sellers of silver are.
Apparently he read some book by Richard Nye who blasted specialists on the NYSE for stepping in front of sell orders. There are no specialists in the futures market...no market makers. If you've ever worked on an exchange floor or for a fund outfit, you'd know banks can't manipulate a market.
Unless to manipulate it?
Don't feel like silver is the only thing being manipulated. The whole economy is being played with.
If you think that the large banks aren't culpable, explain how the largest banks who held the worst losing positions in leveraged derivatives managed to get massive government bailouts for themselves. No influence peddling there, yep. None at all.
I knew it would happen.
Typical response and exactly as expected.
I'm afraid the generalizations about manipulations are completely false. First of all, no one ever gives a name of the phantom "banks" who are claimed to have "manipulated" a market. WF Banks? Put a name on it.
You must not get around very often. These bank's named are referenced at least weekly and also in many articles linked to there.
But to refresh your memory:
JPM, HSBC, GS. No need to look any further than those 3.
JPM inherited the massive short positions of BSC and has only increased them. JPM is the ring leader with the most massive amount of shorts in all categories: CDS, interest rate swaps, silver shorts, gold shorts, etc. JPM is clearly the nation's central bank but GS is the brains behind all the games. The positons held by WFC, BoA, Citi and others pale in comparison to the main 3 when it comes to PM shorts and PM derivatives. If you don't have the metal to honestly short, then you use paper and lots of it. Hence the $190 BILL silver paper derivatives position that is about 100 yrs of mined supply.
Out of all the walking ducks out there, not one good explanation as to why $190 BILL in silver derivatives are held by 2 major US banks. Just as expected, no answers, just quackery. This is not hypothesis or conjecture, nor generalization of any sort but a certifiable fact as per the govt's own OCC. If you don't think that the stock market is not rigged in favor of large traders like GS then you need to dig deeper. Why has GS trading volume in the current "rally" been 5X the number of trades of all the other major banks and traders combined? Is this just a Goldman Sachs rally? And ever since GS has become a "bank" they are required to report their derivatives positions to the OCC. Hence things are not as opaque as they once were. It's one thing to show up as one of dozens of positions on the Commitment of Traders report, but entirely different showing up as 1 of just 2 or 3 banks US on the Bank Participation Report.
Again, please explain why such a derivatives position in any market needs to exist, and also why 2 yrs ago when a 50 year position existed, there was a need to double it again. Find me another commodities market with a similar 100 year position held by 2 of the major banks. Does anyone hold a 100 yr hedged position in oil? diamonds? copper? gas? beanie babies? anything?
roadrunner
One would be making a false assumption if one did that.
The estimated above ground silver stocks are over 19 billion ounces.
Ray
roadrunner
I was just getting ready to reply and it looks like RR did a fine job.
Ted Butler and others have named the banks and detailed thier transactions many times, you just need to pay attention. When two known banks sell short 80% of annual production and they don't even own any or a mine then they are manipulating the market. When the Hunt Bros tried to buy a fraction of that amount they were charged with manipulation why wouldn't a seller face the same issue?
I guess the Hunt Bros didn't contribute to the right candidates.
<< <i>I'm afraid the generalizations about manipulations are completely false. First of all, no one ever gives a name of the phantom "banks" who are claimed to have "manipulated" a market.
I was just getting ready to reply and it looks like RR did a fine job.
Ted Butler and others have named the banks and detailed thier transactions many times, you just need to pay attention. When two known banks sell short 80% of annual production and they don't even own any or a mine then they are manipulating the market. When the Hunt Bros tried to buy a fraction of that amount they were charged with manipulation why wouldn't a seller face the same issue?
I guess the Hunt Bros didn't contribute to the right candidates. >>
I'm not sure you read my response.
Because a brokerage firm has a short position doesn't mean it's manipulating the price of silver. You confuse manipulation with the firms assumption that the price is headed lower. What reason on earth would anyone presume that with the unravelling of the economy that the price of silver, an industrial commodity, would go anywhere but down last year? Who on earth would presume with the wholesale liquidation of all asset classes, that somehow silver would go up? Ridiculous presumptions.
I have to take exception to the argument. 80% of the total production was purchased. Do you think that there was collusion on the buyside?
thanks for posting this (honest)
OPA the 2012 doomsday stuff is BS ...it is however, a cycle. the sun's magnetic field should shift sometime in 2012 though, which does coincide with the sun passing through center of the Milky Way (about every 26000 years) this time there is in an alignment with two other galaxies
nothing is linear! think about it
No one can make that statement with a degree of certainty.
<< <i>so my BS in econ is invalid?
nothing is linear! think about it >>
Which way is up?
Because a brokerage firm has a short position doesn't mean it's manipulating the price of silver. You confuse manipulation with the firms assumption that the price is headed lower. What reason on earth would anyone presume that with the unravelling of the economy that the price of silver, an industrial commodity, would go anywhere but down last year? Who on earth would presume
The point is still being missed. No brokerage firm, esp a bank, needs to have 10X to 1000X the world's inventory of silver shorted in derivative contracts (20 yrs min of mine production). The 10X number is assuming Lathmach's number of 19 BILL ounces of silver world wide is correct. I would contend it is far less than that. When Buffet purchased 120,000,000 ounces of silver ($1 BILL value) he was able to move the silver price several dollars per ounce or about 20-40%. The Hunt's a similar sized silver position. Surely accumulating only 0.6% of the world's silver should have been a non-event. This would be equivalent to selling less than a ton of gold on the market. SLV holds thousands of tons of silver. Compared to annual central bank gold sales of 400-500 tons per year, that is of no consequence. It's a tiny fraction of what exchanges daily on the LMBA. This is not a plain vanilla "short position," but grand larceny.
Generally, there is no way to explain the $190 BILL short position other than massive manipulation. If 2 favored-son banks didn't hold that position do you think the CTFC would allow it to exist? The world was stunned in the 1990's to find out that good old stockman Warren Buffet was the guy behind the 120,000,000 ounces of silver. That position was too large and he was given an offer he couldn't refuse to sell it. That would still be a larger holdings than what the Comex has in inventory.
roadrunner
I can and will. The 2012 scare is BS. The woo-woo "scientists" interpreting an ancient history....yeah, that's Prediction with certainty! I make that statement with 90% certainty.
We have gone through the Malenkovich cycles before with no cataclysmic event. Why doomsday this time? BS, pure and simple.
This is a skeptical website:
James Randi's million dollar challenge.
Proud recipient of two "You Suck" awards
<< <i>Generally, there is no way to explain the $190 BILL short position other than massive manipulation. If 2 favored-son banks didn't hold that position do you think the CTFC would allow it to exist? The world was stunned in the 1990's to find out that good old stockman Warren Buffet was the guy behind the 120,000,000 ounces of silver. That position was too large and he was given an offer he couldn't refuse to sell it. That would still be a larger holdings than what the Comex has in inventory.
roadrunner >>
I'm not going to agree with you. For one thing, you nor these writers know the full position of the banks, what the leverage is for certain, nor the hedge against the position. It's all hot wind to me, no offense.
<< <i>
I agree with you that the printing of all that $$ is inflationary. I agree too that much of what goes on is shady, but it's a stretch to say a certain bank is manipulating the price. Any manipulation, at best, is only temporary.
<< <i>
<< <i>
I agree with you that the printing of all that $$ is inflationary. I agree too that much of what goes on is shady, but it's a stretch to say a certain bank is manipulating the price. Any manipulation, at best, is only temporary. >>
From what I know about the DailyKos, it is operated by a bunch of socialists and conspiracy theorists that dream up ideas in their head and then go out to prove it, ignoring all contrary evidence and only focusing on supporting evidence, regardless of the probability of that evidence. It is a far-left-wing operation whose hard work at discrediting capitalism would put a hive of bees to shame.
<< <i>From what I know about the DailyKos, it is operated by a bunch of socialists and conspiracy theorists that dream up ideas in their head and then go out to prove it, ignoring all contrary evidence and only focusing on supporting evidence, regardless of the probability of that evidence. It is a far-left-wing operation whose hard work at discrediting capitalism would put a hive of bees to shame. >>
Let's not be indignant towards bees.
The irony behind their claim of bank manipulation is that banks lost billions of dollars in their trading accounts last year. So did some of the smartest traders in the industry.
There were less than a handful of winners, and they were in the Private Equity sector, not the banking sector.
The $190 BILL silver position has nothing to do with the KOS. It's a position verfiied and published by the US Office of the Comptroller and Currency. Is this the one time that the fiat bugs come out to say that the govt stats are fudged, but with CPI, GDP, jobs, etc. they aren't? The position is real (ie not hot wind), and no doubt leveraged heavily just like otc derivatives tend to be. Do you think JPM, HSBC, or GS put up $190 BILL or even $50 BILL to take such a position? More than likely 30-1 or greater. The $190 BILL in silver and $100 BILL in gold are reported directly from the US govt, not from writers, TASS, People Magazine, or the spiritual four winds. There's nothing to be agreed to here, it's 100% fact and the govt's publishing of the positions proves that. These positions have to be reported by the owners (ie the banks). If anything one would assume they might be understated.
How can one opaquely manipulate interest rates, commodity prices, currency prices, etc. while putting out min. cash? Highly leveraged otc derivatives. It's been the shell game of choice since Larry Summers, Robert Rubin, Phil Gramm, and Alan Greenspan promoted and approved them in the mid to late 1990's.
roadrunner
<< <i>
The $190 BILL silver position has nothing to do with the KOS. It's a position verfiied and published by the US Office of the Comptroller and Currency. Is this the one time that the fiat bugs come out to say that the govt stats are fudged, but with CPI, GDP, jobs, etc. they aren't? The position is real (ie not hot wind), and no doubt leveraged heavily just like otc derivatives tend to be. Do you think JPM, HSBC, or GS put up $190 BILL or even $50 BILL to take such a position? More than likely 30-1 or greater. The $190 BILL in silver and $100 BILL in gold are reported directly from the US govt, not from writers, TASS, People Magazine, or the spiritual four winds. There's nothing to be agreed to here, it's 100% fact and the govt's publishing of the positions proves that. These positions have to be reported by the owners (ie the banks). If anything one would assume they might be understated.
How can one opaquely manipulate interest rates, commodity prices, currency prices, etc. while putting out min. cash? Highly leveraged otc derivatives. It's been the shell game of choice since Larry Summers, Robert Rubin, Phil Gramm, and Alan Greenspan promoted and approved them in the mid to late 1990's.
roadrunner >>
We're still in disagreement. If you go to The US Office etc, you'll find the information pertaining to derivatives is where all the leverage is with the banks. Big losses there.
The contracts of gold and silver is a different story. If you read the fine print beneath the graphs and charts where gold is mentioned, you'll notice that the positions are hedged with option contracts.
Also, the friggin' banks lost money in the last quarter of 08. Again, I think the numbers are skewed by those writers.
Trading Revenue as a Percentage of Gross Revenue (top banks, ratios in %)*
% of Gross Revenue
00Q4 01Q4 02Q4 03Q4 04Q4 05Q4 06Q4 07Q4 08Q4
JPMorgan Chase (JPM) 5.9 10.6 6.1 9.5 3.9 5.6 9.7 8.1 -7.4
Bank America (BAC) 1.2 6.5 3.0 2.8 3.2 3.1 1.9 -21.2 -12.1
Citibank (C) 8.2 7.1 5.1 4.5 5.0 6.3 3.9 -51.4 -32.0
Goldman Sachs (GS) 5.2
HSBC Bank USA (HSBC) 2.5 2.4 0.8 1.2 6.0 5.2 5.1 -15.1 -200.4
Total % (Top 5 Banks) -17.3
Total % (All Banks) 2.3 2.6 1.8 2.0 1.9 2.2 2.3 -5.8 -6.3
Whatever money the banks may lose in the PM game is countered by what they make or can make in stocks, currencies, and bonds. Knowing where metals are going by maintaining obscene hedges certainly helps in knowing where the other markets may be headed.
I did further research on the world's silver inventory and found some estimates that compare closely to Lachmath's estimate of 19+ BILL ounces remaining above ground. Those estimates used the reported mined totals over history (approx 48 BILL ounces) and subtracted out usage and loss over the centuries. I would conjecture that the figures of 1/2 BILL to 4 BILL ounces being used by some analysts are more representative of silver coin and bullion bars that are readily available to the market. 86% of those 19 BILL ounces is socked away in jewelry and art formats. That silver is not readily available to the market and would require much higher prices to drive it out. Of those few billion ounces available to the market, how much of it is actually physically here in the USA?
2 interesting facts from that article. The historic ratio of mined silver to gold is 10.5 to 1. The ratio of above ground gold to silver is 5.88 to 1. Both would suggest that the current GSR of 66 to 1 is a little out of whack. And $190 BILL in silver derivatives (>15X annual world supplies) doesn't hurt when price supression is your goal. The fact that those are hedged with cheap options doesn't really change anything.
roadrunner
<< <i>PM's manipulation has never been about making money with the banks although when they do, that's a nice benefit. The game is about winning in currencies, bonds, and stocks. Manipulating gold and silver to that end, is a means to win. GS didn't keep a 50,000 gold futures short position on the TOCOM for years just to lose a few hundred million dollars. They did it to help control the gold market and hence the $USD for Uncle Sam. Their billions in payouts from their AIG bets was part of their reward for playing along.
Whatever money the banks may lose in the PM game is countered by what they make or can make in stocks, currencies, and bonds. Knowing where metals are going by maintaining obscene hedges certainly helps in knowing where the other markets may be headed.
I did further research on the world's silver inventory and found some estimates that compare closely to Lachmath's estimate of 19+ BILL ounces remaining above ground. Those estimates used the reported mined totals over history (approx 48 BILL ounces) and subtracted out usage and loss over the centuries. I would conjecture that the figures of 1/2 BILL to 4 BILL ounces being used by some analysts are more representative of silver coin and bullion bars that are readily available to the market. 86% of those 19 BILL ounces is socked away in jewelry and art formats. That silver is not readily available to the market and would require much higher prices to drive it out. Of those few billion ounces available to the market, how much of it is actually physically here in the USA?
2 interesting facts from that article. The historic ratio of mined silver to gold is 10.5 to 1. The ratio of above ground gold to silver is 5.88 to 1. Both would suggest that the current GSR of 66 to 1 is a little out of whack. And $190 BILL in silver derivatives (>15X annual world supplies) doesn't hurt when price supression is your goal. The fact that those are hedged with cheap options doesn't really change anything.
roadrunner >>
I would agree with you that the number one reason the government via the fed through the investment banks manipulates PM's is to protect the almighty dollar. I'm not so sure they directly are propping up the bond and stock market although I suppose you could argue the fed is now purchasing some treasuries which would help support treasuries a little and they did step in for awhile to ban short selling some financial stocks after they had cratered from their all time highs.
This does however bring up an interesting question, why does the government step in to help out their banking friends while ignoring the short selling being done not only in commodities but also the rest of the stock market?
Also why did the government step in and change the rules on the Hunt brothers when they had played by the rules and done nothing wrong? I think what happened with the Hunt brothers 30 years ago is clear evidence that the Silver market is most definately manipulated.
If this is the case many of you ask who in their right mind would even consider investing in Silver since the government manipulates the price of it, my answer would be to look back at history and view Silver and Gold as an insurance policy against hyperinflation or even if we don't have hyperinflation maybe above average inflation is all it would take to light a fire under PM's along with other commodites. it's all about diversification and PM's offer insurance against a meltdown in fiat currency.
<< <i>PM's manipulation has never been about making money with the banks although when they do, that's a nice benefit. The game is about winning in currencies, bonds, and stocks. Manipulating gold and silver to that end, is a means to win. GS didn't keep a 50,000 gold futures short position on the TOCOM for years just to lose a few hundred million dollars. They did it to help control the gold market and hence the $USD for Uncle Sam. Their billions in payouts from their AIG bets was part of their reward for playing along.
Whatever money the banks may lose in the PM game is countered by what they make or can make in stocks, currencies, and bonds. Knowing where metals are going by maintaining obscene hedges certainly helps in knowing where the other markets may be headed. roadrunner >>
I agree with you on these points and suggest to you that any short position of their size was mostly protected by hedges, including call options which provided them with a synthetic put...Short the silver contracts, long call options.
Norseman raises an interesting point as well. Why wouldn't the banks alledged short positions be called into question when the gov was harping on short positions in the stock market. The caveat that he mentions is a position against a collapsing currency (the dollar). So the synthetic put provides them protection against a rally in the metals--they support the dollar by buying treasuries. But the tug here is a long term--be it a slow term and destruction of the dollar. It's inevitable. You'd think that the gov would be purchasing PMs, not shorting them. My thoughts are that the collapse of the financial system came swifter than anyone could have dreamt.
The next few years should be interesting. I positioned for higher PM prices and higher commodity prices. Thanks for the heady discussion.
The SEC and CFTC have been totally negligent in their enforcement activity. If they could somehow not find cause for massive fraud with Bernie Madoff when the entire package of his Ponzi scheme was presented to them in great detail 10 yrs ago, why would we think they would find anything wrong with 2 or 3 banks holding up to 95% of the silver futures shorts from time to time? And why not $190 BILL in silver derivatives?
The SEC was quick to harp on shorting of bank stocks last year but made no such move to protect the general commodities market (esp oil, gold, silver) from similar massive short and naked short selling. They were probably happy to see it. It's time that our regulatory bodies started regulating effectively and equitably. It also means reducing the revolving door antics of bankers where they transfer back and forth from govt functions (Treasury, SEC, CFTC, FED, etc.) back to the company, and in many cases multiple times.
roadrunner
<< <i>Norseman raises an interesting point as well. Why wouldn't the banks alledged short positions be called into question when the gov was harping on short positions in the stock market.
The SEC and CFTC have been totally negligent in their enforcement activity. If they could somehow not find cause for massive fraud with Bernie Madoff when the entire package of his Ponzi scheme was presented to them in great detail 10 yrs ago, why would we think they would find anything wrong with 2 or 3 banks holding up to 95% of the silver futures shorts from time to time? And why not $190 BILL in silver derivatives?
The SEC was quick to harp on shorting of bank stocks last year but made no such move to protect the general commodities market (esp oil, gold, silver) from similar massive short and naked short selling. They were probably happy to see it. It's time that our regulatory bodies started regulating effectively and equitably. It also means reducing the revolving door antics of bankers where they transfer back and forth from govt functions (Treasury, SEC, CFTC, FED, etc.) back to the company, and in many cases multiple times.
roadrunner >>
I have to agree with you. I'm thinking the 3 Stooges or Keystone Cops could have done a better job than the folks running the SEC, CFTC, and the rest of the government. What a bunch of buffoons!