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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: regli who wrote (52638)6/20/2006 1:52:03 PM
From: mishedlo  Read Replies (1) of 116555
 
Here is the reply I sent to the person that emailed me the article before I asked Heinz his opinion on it.

By basic thought is this is nonsense.
At least much of it is.
There are two sides to every trade.
There can not be record short positions without record long positions.
So how can it be wrong for there to be record short positions unless it is also wrong for there to be record long positions.
Are the shorts to blame or the longs?
Bear in mind that silver went up from $8 to $15 in a hurry.
You had to be nuts to think that would hold.
Who else was left to buy?
This can easily be resolved if longs start taking delivery.
If there is genuinely a shortage the problem will appear very quickly.
Instead, specks pile in and pile in and pile in and pile in and seldom take delivery.
Someone HAS to take the other side of that trade.
Do you NOT understand that?
Then what happens at $15?
You tell me.
Who is left to buy?
No one is left to buy. Not only that, specs do not want delivery so they start selling futures.
Down the price goes.
Now is there some smackdowns going on? Yes in all liklihood.
Any more so that in the stock market? Probably not.
One can make a case that the whole thing is crooked but I am not sure silver is more crooked than anything else.
But the point is simple.
It can NOT be wrong for there to be a huge number of shorts if it is also not wrong for there to be a huge number of longs.
You simply MUST understand the logic of that statement.
Do you want the CME to limit the numbers of silver futures people can buy?
The cure is as I said. Take delivery.
Besides there was a general unwinding of about a zillion carry trades all over the globe.
Silver was manipulated vs the India stock exchange, vs the Icelandic Krona?
Phooey - all carry trades were hammered hard

Mish
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