Monday, May 2, 2011

Pure Criminality

I hope precious metals newbies have not been emotionally derailed by last night's obvious ambush of silver by the corrupt Wall Street bullion bank cartel.  It's funny because just yesterday I was chatting with my significant other, who happens to be from Las Vegas, about organized crime.  She mentioned that Vegas is full of organized crime gangs, not just the casino mafia.  I replied that any area that generates tons of cash flow is mired with organized crime and extreme corruption:   Vegas, DC and Wall Street most prominently (obviously there are others but those are the biggest).  Little did I know that several hours later the action in electronic silver trading would ironically highlight my point about Wall Street!

Make no mistake about it, what occurred last night right at the open of electronic futures trading in gold and silver was nothing more than a very aggressive attempt by the big Wall Street banks who are irrationally short paper silver to shake out weak hands in order to reduce the fraudulent short positions in paper silver.  Anyone who thinks last night's action - as reported in the mainstream media - was connected to a feared slowdown in China or the Bin Laden thing or the Bolivian mining news is either hopelessly naive or pathetically ignorant of the facts. 

So let's look at some facts.  First, no other commodities were hammered.  If China slowdown fears were the culprit, shouldn't all of the base metals used in industrial production have been hit hard along with silver?  Seriously.  Even more telling was the fact that the dollar barely moved in either direction last night - and it's below 73 right now.  The media loves to explain movements in gold/silver with inverse movements in the dollar.  How come the dollar was not doing a moonshot in response to the gold/silver cliff-dive?

Second, the CME has been raising silver margins regularly now.  We are not seeing this in other commodity contracts.  In fact, the margin on Comex silver was raised over the weekend from a little over $12k to a little over $14k.  That's over 30%.  The margins on gold were not raised.  The CME always seems to raise silver margins when silver is moving sharply higher and when all of the evidence points to physical silver shortages.  That latter point was apparent to me when I saw the very low number of delivery notices handed out.  Typically a large percentage of the open contracts are given notice and delivered within the first few days of a delivery period.  Not this time.  What this tells me is that banks with large counterparty delivery positions (i.e the ones with big short positions, like JPM and HSBC) are going to make an aggressive attempt to induce weaker hands to puke their positions before JPM and HSBC are actually required by contract law to make delivery.  Let's see how this plays out over the next 3 weeks.  Last notice day is May 27th and you can monitor delivery activity on the CME website.

Third, some big off-Comex futures brokers raised their in-house margin requirements for silver to double or more than double the required margin at the Comex.  The most prominent firm, and one of the world's largest commodity brokers, is MF Global.  MF Global jacked its margins on Friday to a little over $25k.  MF Global happens to be run by ex-Goldman CEO Jon Corzine.  Hmmm, anyone think there is any connection between Corzine and the big firms who control the Comex?  How about between Corzine and the CFTC chairman who is also an ex-Goldmanite?   Another very large futures broker, thinkorswim - which happens to be owned by Ameritrade - raised its margin on silver to over $30k.  Anyone besides me understand that Ameritrade caters to small, individual speculators who were likely forced to sell to cover this margin hike?

Needless to say, last night's ambush was comically initiated right at the open of electronic trading, which commences in the early evening on Sunday, when the futures markets tend to be at their least liquid.  There was an absolute flood of sell orders at the open but the cliff-dive chart was accompanied by a relatively small amount of total volumn.  This suggests that there were some motivated "sellers" trying to push the market lower and force selling by the MF Global or Ameritrade customers who would be unable to meet the new margin requirements.  To be sure, there was also plenty of unloading by longs who were frightened by the volatility and wanted to protect any profits they might have.

Anyone who thinks this was anything but a criminal event staged by the corrupt Wall Street crime "families" needs to better educate themselves on the facts of the precious metals market.  Please notice how the dollar is now plummeting, gold is now UP over $7 from Friday's close and silver is down a mere 80 cents.  Kudos to all of those who understand the dynamic and held on tight to their position.  It is a tried and true law of economics and markets that market interference/intervention always fails and ultimately backfires on the parties attempting to manipulate.  In this case Wall Street crime families and the Fed.

Quite frankly I think it's tragic that there are well-respected analysts like Ted Butler out there spreading the gospel that the CFTC and SEC will ultimately crack down on this or that bullion ETF's like SLV and GLD are legit.  In his latest newsletter he defended SLV's credibility and made the claim that SLV holds all of the bullion that it is supposed to hold.  He clearly has not read the prospectus or he would understand that there are legal loopholes a mile wide in both the GLD and SLV prospectuses that make it possible for both ETF's to play the fractional/leasing games with their metal. To assume that a criminal enterprise like JPM would not take advantage of this is a tragic flaw in Butler's body of work.  It is absurd to overlook the obvious connection between the JPM Comex short position and the fact that JPM is the "custodian" of the largest known stockpile of Comex-deliverable silver bars on the planet.  I know based on my 25 years of experience in this industry that the people who work on Wall Street and rise to the top get there by lying, cheating and stealing to whatever extent they can.  The amount of money JPM is losing on its silver short is "blood" money.  Expect this aspect of the game to become even more intense.  But then again Butler lost all credibility with me in this part of his otherwise brilliant Comex/COT statistical/analytic work when he repeatedly and unyieldingly defended his view that the CFTC would eventually crack down on the corruption and fraud at that Comex.  I got news for you Ted:  the perps would be ice-skating in hell before that ever happens...

Quick editorial update:  I just learned that China and Vietnam, the largest and fifth largest gold buyers in the world were closed last night for their May Day holidays.  Adds even more weight to the argument that last night was a strategic ambush.


  1. Good post. ZH seems, at times to be on Butlers team. Clever, organized thieves but not to smart...

  2. The ECU selloff is accelerating. Now well below the 200dma. Any reason for this or just weakness across the board in PM stocks?

  3. Good article. What needs to happen though is that key silver defendants/significant bloggers need to synchronise and start fighting back as a unified force (with the backing of the readers).

    Ted Butler I believe did seek counsel in relation to the CFTC position limit public comments (I was a respondent amongst over 5000)and he said that if the CFTC did not listen to public views then legal action can be taken.

    Given last nights take down and the CFTC inaction to deal with position limits (comments closed on 28th March and mysteriously position limits disappeared from the agenda at their early April meeting) shoud it not be viable that the international community seek a class action against the CFTC? Ted may seem to be turning over each cheek but then again it can be viewed as reasonable action before culminating in sueing the regulators.

    Lots of decent people would have lost money last night straight into the pockets as bonuses for these lying scumbags somehow it needs to stop.

    Harvey Organ and GATA attended the Andrew McGuire manipulation hearing in front of the CFTC. What needs to be organised now is prominent prosilver representatives challengeing the regulators in the courts.

    If a class action can be successful with an ipod battery life then surely the PM's are a legitimate case.


  4. very true about naivite and hopes for regulators to come through. this is nothing new in history. Woodrow Wilson nearly 100 years ago warned would-be regulators about the consequences (what's now referred to as 'Regulatory Capture') of creating Federal regulatory bodies: "If the government is to tell big business men how to run their business, then don't you see that big business men have to get closer to the government even than they are now? Don't you see that they must capture the government, in order not to be restrained too much by it? Must capture the government? They have already captured it."

    having experience lobbying on wall street, i'm not sure where those who are writing get the idea that legislators and regulators (i.e. executive branch), not to mention the judicial branches of US power are there to help the little people. I've always seen them there to help those corporate people, but not biological individuals.

    great post, dave.

  5. Thanks for the feedback SP and Anonymous.

    JD ECU weakness is partially correlated with the current selloff in just about all juniors and highly due to manipulation going in the stock. This manipulation has been catalogued meticulously and on a daily basis by one of the largest holders. All the evidence has been presented to the Canadian regulors who, just like good lapdogs for their U.S. masters, do NOTHING about it.

    I will probably add some to the fund here when I think this current metals pullback is done. ECU should be soon releasing some drill results from the deep MSZ they are drilling. If those results are what I think they could be, the shorts will undergo a religious experience on their position. But please do your own due dili. I'm not recommending any stock, just communicating what I think and what I'm doing.

  6. Appreciate your thoughts. Don't worry about other idiots i'm not looking for recommendations etc. I know people love to bash when stocks go down that people have mentioned in the past. I am long a number of juniors and 99% of the people I know own 0 precious metals and 0 mining stocks. Therefore I come to your site and other to discuss. When the usd really tumbles it is going to be very sad for those who have not prepared accordingly. I say sad because many of them are family friends who think i'm a nut. Anyway I couldn't find any new info on ECU and was just wondering what you thought. I mentioned in the past Golden Minerals AUMN from your homestate of Colorado. It also has seen a significant pullback. It is one of my favorite juniors. If you have any free time check it out. I bet you like what you find.

  7. Hi Dave,
    Doesn't PM protect my wealth from QE? That is the main reason investing in PM. PM is a no brainer bull market due to QE, right? Thus there is an inverse relationship between the dollar and PM. Not until the past few days, the dollar was tanking while precious metals were at record highs.
    Sorry if my questions seem elementary. I am not a sophisticated investor. Just someone trying to protect my savings. Thank you. Leilani

    PS I will keep Powder Addiction in mind the next time I ski Colorado.

  8. Dave your assumptions appear crazy.

    1) gold and silver are lightly traded no more than 5% of investors own gold, less than 1% own silver.
    2) It has no real value only intrinsic value
    3) the gold and silver markets have no regulation as to purity or contract
    4) Gold and silver are frequented by scared money of late the anti-currency crowd and those that think we are at the end of the world.
    5) When my bagboy tells me I should invest in silver, I want to be selling silver.
    6) The Bubbleheads love bubbles. The same hair dressers and cab drivers that were going to get rich in housing are now buying gold and silver. But somehow they always end up still cutting hair and driving cabs.
    7) Finally Buffett's take...
    "Gold really doesn't have utility," the 80-year old told shareholders at Berkshire Hathaway's annual general meeting. "I'd bet on a good producing business to outperform something that doesn't do anything."

    "if you take all of the gold in the world and put it into a cube, it would be about 67 feet on a side and you could get a ladder and get up on top of it. You can fondle it, you can polish it, you can stare at it. But it isn't going to do anything."

    "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

    8) Gold bugs never get out before they get trampled. In a world of indian poker, you can call what other do corrupt or you could invent a conspiracy but reality shows time in time again that the gold bugs get crushed. Those timid souls that were late to the buying frenzy let go but the gold bugs buy the dips and get swallow with each dumping. Gold could lose 50% of its intrinsic value over night and not a single soul on earth would have a clue what it was really worth in the morning.

  9. I think your article is completely full of crap. You offer no proof whatsoever.
    Silver has skyrocketed at a parabolic andgle and was due for a correction. The shorts- traders- not the boogey man took advantage and got the stops to do the dirty work for them.

  10. of course you won't post my comment because of your absurd belief that everything is some sort of criminal conspiracy. You're a joke.

  11. Besides agreeing with Lordrobot I will have to say that silver made a failed move at $50. After gold outperformed friday and silver did not follow, it scared the momentum traders away in a thinly traded market.
    There is nothing, NOTHING strange about that.

    I will also tell you and your readers a little secret before you go way too far off on the conspiracy theory track: The value of any asset, including precious metals, is exactly what you can get a buyer to pay for it at the moment that you're selling. No more, no less.
    The precious metals price falls when there are no buyers. In a less capitalized market like silver you will see from time to time that there are no buyers. Again, nothing strange in that.

  12. To all the fiat slaves...

    “What is the meaning of a gold standard and a redeemable currency? It represents integrity. It insures the people’s control over the government’s use of the public purse. It is the best guarantee against the socialization of a nation. It enables a people to keep the government and banks in check. It prevents currency expansion from getting ever farther out of bounds until it becomes worthless. It tends to force standards of honesty on government and bank officials. It is the symbol of a free society and an honorable government. It is a necessary prerequisite to economic health. It is the first economic bulwark of free men”. W. E. Spahr.

  13. Silver goes down, the silver bears come out of hibernation.

    Silver goes up, the silver bears growl all the way back to their caves to sleep it off.

    Is the US Dollar still below 80?
    Is the US still in debt to the tune of $14 trillion dollars plus?
    Is inflation STILL raging in food and energy?

    If the answer is yes to all of the above, then buying silver and gold is a prudent move to protect one's wealth.

    I bought silver when it was $5 an ounce, I can wait to sell. Prices of silver go up, down, sideways, just like any commodity, lust like any winning stock.

    Kindly go back to sleep silver bears, it is still the winter of your discontent.

  14. @ Anonymous:

    Nice quote from W.E. Spahr, but the problem is that gold and silver are just as easily manipulated by banks and the like as fiat is, as is evidenced by the CRASH. So the so-called "sound money" is not very sound at all, is it?

    Maybe no money is sound...

  15. @anonymous2...actually you can't conjure the gold and silver out of thin air and place it in a friends and family account like we did under TARP,TALF, ETC...perfect no...better than current system...probably..

    Jim Rickards - Gold Standard Coming, Fed’s Hoenig Correct
    Fed Governor Hoenig shocked many observers yesterday when he stated, “The gold standard is a very legitimate monetary system...We're not
    going to have fewer crises necessarily. You will have a longer period of price stability or price level stability, but I don't know that
    you'll have lower unemployment, I don't know that you'll have fewer bank failures.”,_Feds_Hoenig_Correct.html