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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: Eva who wrote (20506)	9/15/2003 11:49:04 PM
From: Eva	Read Replies (2) \| Respond to of 39344

............and from the same article: ( you got to read this!) financialsense.com The Short Sellers Achilles Heel The silver market has awoken out of its decade-long slumber much to the consternation of the short sellers who now remain extremely vulnerable to a short squeeze if the trading funds and the small trader ever awaken to their own strategic advantage. The simple fact remains the commercial shorts don’t have the silver to back up their short position. I’ll say that again. They don’t have the silver to back up their short positions. The short position is so huge now that all it would take to initiate a squeeze is for small traders to begin demanding delivery or for the trading funds to stand for delivery. Things have became so desperate for the commercials it has become necessary for the commercials to take out more short contracts last week and bring their short positions to a decade-long record. Last week alone commercials went short a net 8,235 contracts, equal to 41,175,000 ounces of silver. The amount of registered silver in the COMEX warehouse is only 43,732,784 ounces of silver. In other words, in one week alone the commercial short sellers have gone short almost the entire amount of silver ready for delivery on the COMEX. It gets worse and more intriguing when you consider that their entire net short position is 81,755 contracts representing 408,775,000 ounces short. That is almost 10 times the amount of silver that is registered and available for delivery. It is also close to 4 times the entire amount of silver held as inventory on the COMEX. At a time when the officials of exchanges are coming under close public scrutiny for their actions and behavior one can only wonder if the officials that run the COMEX are asleep or in bed with the short sellers. What is known is that the short sellers represent big financial interests and not commodity producers. This makes their position that much more perilous. Unlike a farmer who is a producer of a commodity, a financial firm can only honor their contract by having possession of the metal. What we have here is a very speculative position that can only end in default if the holders of long possessions press their demand or take delivery. The real value or price of a derivative is that it, in a real sense, is not an option on the right to buy or sell something. In reality it represents the right to default in a forward. This is exactly the position of the commercial short sellers today. Plain and simple, the commercial shorts don’t have the silver to back up their short position. All they can do to keep from defaulting is to increase their paper short position in the hopes they can drive the price down low enough to cover their short position. It has become a game of nerves. The commercials are hoping the technical trading funds will retreat along with the little guy so that they may get out of their desperate situation. They have played this game numerous times before and always walked away winners. The game is working out much differently this time. Perhaps the technical trading firms and the little guy see that the financial beast as been wounded and smell blood. At least for the moment they are standing up to the commercials who have always won this game. Maybe it is revenge for all of the money the commercials have taken away from the fund traders and small specs. Or perhaps it is the sense that a new trend has begun a transition from a bull market in paper to a bull market in hard assets. As a reader and observer of military history it is fascinating to observe the apparent weakness and vulnerability of the commercial short sellers. Battles are sometimes won by an unexpected event, a sudden change in tactics, or the loss of morale and spirit of one of the armed combatants. Perhaps that is what the commercial short seller is waiting for. It has been a tactic that has always been used in the past to win the short seller game. Eventually, the other side’s resolve is weakened and the longs abandon the battle. What the longs may not realize and what is becoming the commercial’s worst fear is that if the longs awaken to the fact that the battle is theirs for the taking. All it would take to end this battle with overwhelming force is if longs switch their position to the nearest month contract and start taking delivery. The battle would be over instantly. In military terms the commercials don’t have the troop strength to back up their bluff. In this case it means they don’t have the silver to cover their short position. Not unless they have discovered a secret unknown hoard of silver such as the Lost Dutchman’s mine, they simply can’t cover their position. They are relying on what they have always relied on which is the ignorance of longs and their inability to exploit their own strength and the weakness of the commercials. Sometimes Goliath looks bigger and stronger than he really is. Goliath was brought down by a stone. In the case of the commercials all it would take is delivery.

To: Eva who wrote (20506)	9/16/2003 8:16:03 AM
From: austrieconomist	Read Replies (1) \| Respond to of 39344

Puplava article. No discussion at all regarding the possibility that the commodity surge reflected in the CRB Index from November, 2001 through January, 2003, might be explained in large part by the MZM surge from November, 2000 through January, 2002 (20% continuous annualized growth rate). research.stlouisfed.org Despite the recent appreciation in the CRB Index the past month, the last 7-8 months in that Index are best characterized as flat to down. Russell made observations last evening regarding the commodities climate as better fitting a deflation scenario than an inflation scenario. "Take a look at the P&F chart below. This chart has a decidedly bearish look about it. The chart is the Goldman Sachs Spot Commodity Index. As this chart breaks down, it's saying "deflation in commodities." Deflation? Russell, what the hell are you talking about -- how can that be? And my answer again is GLOBAL OVERPRODUCTION. Overproduction is apparent in every area of the world economies and obviously commodities are proving to be no exception!" I am staying flexible in my thinking regarding inflation/deflation. My present belief is that much greater rates of money creation than have already been undertaken will be required to create an inflationary environment that can overcome the present debt structure.