Comex silver shorting...
Ted Butler Letter to COMEX on Silver Market Manipulation
October 8, 2001
Vincent Viola
Chairman
J. Robert Collins, Jr.
President
New York Mercantile Exchange, Inc.
One North End Avenue
World Financial CenterM
New York, NY 10282
Dear Mr. Viola and Mr. Collins:
This is to inform you that there is a serious and dangerous problem in the silver futures market on the Commodity Exchange, Inc. (COMEX), according to the just-released Commitment of Traders Report (COT). The COT of Oct. 5, 2001, for positions as of Oct. 2, clearly indicates a manipulation in progress. The amount of net short contracts held by the large commercial category (normally considered COMEX insiders), is obscene and preposterous in regards to market concentration and compared to silver in the real world. There is no way, that a reasonable person would not conclude that the commercials' silver short position is both manipulative to the silver price, and an extreme danger to the very existence of your exchange.
In the past three weeks, the large commercials have increased their net short position by 175 million ounces, or 350%, to 225 million ounces net short. Last week alone, the large commercials sold net short over 90 million ounces of paper silver futures contracts. Large commercials now make up 80% of the entire futures short position. The price of silver would be materially higher, were it not for this manipulative and uneconomic naked short selling. The additional 175 million ounces sold short, in just three weeks, is more than any country can produce in two years or much longer. It is more than all known silver stockpiles in the entire world. It is not possible for the short selling of 175 million ounces of silver, in a three week period, not to manipulate the price.
Worse, the concentration of silver short positions among the large commercials is troubling. Four or less traders hold 130 million ounces net short. That's also greater than all known silver bullion in the world, and more than any country produces annually. Unless these 4 or less traders own all the silver in the world, and then some, then this is a starkly naked short position. To claim it might be a mining hedge, considering the trading history of the large commercials, would defy logic. To claim that it might be a hedge of metal inventories would be silly. Did someone just come into 175 million ounces of real silver in the past three weeks? It is obvious that the large commercials are masquerading as hedgers - they are speculators, pure and simple. By pretending to be hedgers, these large commercials seek protection from basic commodity law which proscribes that speculators not influence prices unduly. To be clear, the four or less traders in the commercial category are manipulators, or represent manipulators. There is absolutely no economic purpose to their naked short position, save to depress the price of silver. You must put an end to this manipulation.
On top of all the above, the Sep. 11 horror buried the 30 million ounces of silver in the Scotia Mocatta warehouse, rendering it unavailable for a long time. This 30 million ounces makes up 30% of the entire COMEX silver inventory, the largest in the world. In fact, the buried and unavailable silver comprises 25% of total known world silver bullion inventory. One quarter of all known silver bullion in the world is made unavailable overnight, and COMEX insider commercials rush to sell short obscene amounts, on a 50 cent rally? Who do these insiders think they are?
I am a silver analyst who has consistently recommended COMEX silver warehouse receipts as the best method for holding physical silver in size. Many people have taken my advice, and have purchased these receipts. But, I must tell you, I am troubled by what I see. First off, I am troubled that the COMEX has not been forthcoming with public assurances that all the silver involved in the WTC 4 warehouse is fully insured and that the owners will be protected. All the insurance companies came forth, with great fanfare, to proclaim there would be no attempt to invoke war or terrorist exclusions in any WTC-insured losses. The COMEX's silence, on this matter, is conspicuous and disturbing. Second, the sheer mismatch between the extreme and concentrated commercial naked short position, jumping 350% in three weeks, and the suddenly-reduced available physical silver inventory, is most alarming. Inventory is effectively sharply reduced, and the insiders short position explodes 350%. A reasonable person would contemplate default. This is your notice, that if we do have a default in COMEX silver, or any market emergencies related to restricting the rights of bona fide long contract holders, it will be because of the concentrated commercial COMEX- insider shorts.
No other market in the world, just COMEX silver, has such a large, concentrated short position, where a few traders are allowed to be short more than, literally, all the known material in the world. Given the magnitude of the concentrated naked short position and the condition of the Scotia Mocatta facility, I call on you to rectify this outrageous situation immediately. It is your responsibility to end the clear short side manipulation in silver by these insider crooks. I understand that you are new to COMEX leadership, and your backgrounds don't indicate a close association with the commercial insider manipulators. If you don't end their crooked activities, you will be sanctioning those activities.
I have no other way of ending the silver manipulation, aside from notifying you or writing about it in the public domain. It is not my intent to inflame the situation. I would prefer you reigned in the out-of-control insider manipulators - that's what self-regulation is supposed to be about. However, if you choose not to address this issue, or tell me why I'm off-base, I will have no other choice but to publicly present the facts as I see them, and let people make up their own minds. If I don't hear from you by my next publishing deadline, close of business Wednesday, Oct. 10, 2001, I'll assume you have aligned yourself with the insider crooks.
Ted Butler
cc: N. Wolkoff
C. Bowen
B. Purta |
