Mexico Mike...

conflict of interest

Hi Bill!

It has been widely reported that intense lobbying was directed towards the CFTC as the policy regarding position limits was being discussed. I know that hundreds of complaints from retail speculators has not accounted for much traction among the poobahs at the CFTC, so its stands to reason that this lobbying - or we can call it bribery - has come from the larger commercial participants. And then, big surprise!, we hear that no formal decision has been reached and the issue has been delayed. Well, who could see that coming? Obviously the threat of pending sanctions did not deter the fine traders at JPM from running over the market again. This is very similar to the market performance ahead of the CFTC hearings in March, when JPM continued their intervention in full view with not a care that they would be under any additional scrutiny or subject to reprisal. The system is corrupt, bought and paid for, and they could care less who sees what they are up to. Not that it matters because even as they carry on with their manipulative trading, there are many apologists that continue to deny anything unsavory is ongoing at all.

Lets connect the dots here...

JPM is the largest participant in the paper silver market, and the largest short by far. SLV is marketed as a vehicle to own physical bullion, and its reported holdings have been growing rapidly, in some cases expanding faster than the rate silver is being mined throughout the world. Meanwhile the documented physical bullion inventories are gradually being drawn down, and investors around the world are competing to buy the metal. For example, Eric Sprott recently reported that his funds have accounted for more silver buying than was estimated for the entire world for the year. And we know buying has increased in China, India, and even in the United States as reported through record silver eagle sales. We know retail bullion shops are having trouble keeping stocks to meet the increased demand. So where is all this silver coming from? Something does not add up.

JPM claims that their short exposure is a hedge against physical bullion. JPM is the custodian for SLV, which itself is supposed to be backed ounce for ounce with physical bullion, but in all probability is not fully leveraged to the metal. And now we have the CFTC caving in to delay and minimize the requirements for position limits on the big players like JPM.

Is it the bullion owned by SLV investors that JPM is hedging through its short exposure? What kind of custodial relationship involves taking the other side of the trade for that bullion you hold in trust? What if the investors in the SLV are using this ownership as a hedge for their own outstanding short position at the COMEX? How many times can the same metal stand as a hedge against multiple trades? And what if that metal does not exist in the first place, since it seems unlikely that SLV can secure such large additions of silver bullion even as many other worldwide buyers are finding it very difficult indeed to take delivery?

I do not think the regulators care a big rats ass about maintaining an orderly market, or they would have acted long ago to restrain JPM. At the very least there appears to be a monumental conflict of interest on many levels. I doubt very much there is any legitimate inventory of silver that is being hedged at all in these trades. It is more likely paper hedging paper hedging yet more paper exposure, and there are a lot of people trying real hard to pretend its all above board and sustainable.

Some high profile articles have appeared in the media recently to suggest that silver is abundant, the institutions are playing by the rules, and its all just myths that would imply otherwise. Meanwhile, short term lease rates for silver remain negative across the board. Is that just myth too? And somehow in the midst of all this, silver has been capped and driven lower for yet another week and only the tinfoil hat crowd seems to notice or care.

cheers!

MexicoMike