Der neue Text von Ted Butler!

verfasst von yatri, 14.06.2002, 09:53

TIME FOR ACTION
By Theodore Butler
(The following essay was written by silver analyst Theodore Butler.
Investment Rarities does not necessarily endorse these views, which
may or may not prove to be correct.)

The fundamentals in the silver market continue to be strong. Within
the past month or so, both major recognized statistical compilers,
CPM Group and Goldfield Mineral Services, confirmed a substantial
deficit for 2001 and a larger projected deficit for 2002. Therefore,
existing world silver inventories continue to be depleted at a rapid
rate, to the lowest documented levels in hundreds of years. Base
metals' production has leveled off, due to large inventories of
copper, lead and zinc, promising stagnant production for byproduct
silver, the largest category of silver mining. Gold production is
forecasted to level off and decline, further inhibiting byproduct
silver production.

On the demand side, all indicators are flashing green. While stock
markets seem shaky, silver industrial demand appears to have
bottomed out. Let's face it - if silver has remained in a deficit
consumption pattern in an economy that has suffered the blows of the
past year, it is likely to remain in deficit for the foreseeable
future. As I have written previously, there can be no more bullish
state for any commodity than to be in a deficit. In addition, there
seems to be a growing realization that the digital photographic
revolution will not adversely impact consumption of silver in the
foreseeable future. New and unanticipated uses for silver,
particularly in health care and bacteria fighting develop almost
daily.

Silver investment demand remains strong and recently appears to have
accelerated. The Central Fund of Canada, a closed-end mutual fund
which holds physical gold and silver twice this year increased the
amount of metal they hold. In all, 6 million ounces of silver have
been added to the fund so far this year, approximately doubling
their silver holdings from year-end levels. This is silver taken off
the market that was not contemplated six months ago.

Additionally, sales of Silver Eagles by the US Mint continue their
blistering sales pace. Not many people realize just how strong
Silver Eagle sales have been, particularly when compared to Gold
Eagle sales. I think it's instructive to make the comparison between
Silver and Gold Eagle sales, because it equalizes extraneous
factors, like currency and monetary considerations. The US Mint
(www.usmint.gov) keeps full year and monthly sales for Eagle bullion
coins from the year 1992 through the present (the program began in
1986). From 1992 through the end of 1999 (encompassing the Y2K
buying binge), Silver Eagles outsold Gold Eagles by a little less
than 6.5 times (on an ounce basis, not on a money basis, as gold was
and is generally 70 times more expensive than silver). But, from the
beginning of 2000, through the end of May, 2002, Silver Eagle sales
jumped to more than 40 times Gold Eagle sales, a 6-fold increase.
From the beginning of 2002, through May 2002, Silver Eagle sales
have soared to 88 times Gold Eagle sales. Clearly, investment demand
for silver is increasing markedly and noticeably.

The bullish engine for silver is hitting on all cylinders - strong
industrial demand, stagnant production, large and growing deficits.
Throw in new and growing investment demand, and the engine of demand
becomes super turbocharged. To have more bullish data is hard to
imagine. Yet the price doesn't reflect this condition. While it's
nice to see that silver briefly nudged its head above $5, after
being below that level for more than a year and a half, $5 is a sick
joke in terms of a free market price for silver. It’s a great buy
because of the low price caused by the manipulation by leasing and
short selling.

I have confined most of my analysis to reasons why you should take
advantage of the artificially depressed price of silver, and take
the logical next step of buying real silver. That logic applies more
than ever. With the passage of time, the deficit's grinding
depletion of existing inventories becomes the silver investor's best
friend. That grinding depletion of inventories guarantees a price
rise of historic proportions, once the real move commences. I have
always taken comfort in knowing that the artificially depressed
price of silver had wrung just about all the real risk to the
downside. My imploring folks to buy real silver couldn't possibly
cause them severe financial damage. After witnessing the parade of
stocks that have declined 80 and 90%, in the time I have been
advocating real silver, it’s good to know that silver can't decline
by similar amounts, and that is more comforting than ever.

But man doesn't live by investment alone. Sometimes, an investment
transforms itself into something else. A higher calling, perhaps. An
intellectual pursuit. That's how I view my experience with silver.
It's not just a great investment to me. It's something much more.
That doesn't mean it has to be something much more than an
investment for anyone else, I'm just speaking for myself.

One of the things that silver has come to mean to me is the real
life lesson it has taught me on the difference between free markets
and manipulated markets. I mean, these concepts are somewhat
theoretical, unless you have the occasion to actually witness a
manipulated market in process. I can tell you that this has been an
absolutely fascinating process to observe. I feel blessed that I
have been able to record and describe my thoughts about this
process. Additionally, I have been fortunate to be able to try and
correct the manipulated condition of the silver market.

That leads me to the title and purpose of this piece. Many of you
know that I have petitioned various government agencies and
regulators over the past 15 years to end the manipulation in silver.


Starting in February of this year, I started writing to the Chairman
of the Commodity Futures Trading Commission (CFTC), concerning the
concentrated and uneconomic short position on the Commodity
Exchange, Inc (COMEX), the largest precious metals exchange in the
world. The documentation for my allegations come from a report that
the CFTC releases weekly, the Commitment of Traders Report (COT). I
have previously written an article explaining my views on the COT
(http://www.investmentrarities.com/08-14-01.html), so I'll get right
to the point on why I'm writing to the CFTC so much this year.
A generally overlooked aspect of each COT is the section on
concentration ratios. Concentration ratios are kept, in the first
place, as a tool for the CFTC to use to spot manipulation. If one,
or a small group of traders, establishes too large of a position in
any market, it may exert undue influence on the price of a
commodity. That is certainly logical, as manipulation is basically
nothing more than one, or a few traders, rigging a price with big
positions. And that is the gist of my allegation to the CFTC, a tiny
number of traders are net short an incredibly large amount of
silver. How few and how large? Well, as my most current letter to
the CFTC states, four or less traders (remember, this may mean only
one or two) are short almost 250 million ounces. Eight or less
traders are short almost 350 million ounces of silver. As you should
be aware of by now, there is not more than 125 million ounces of
verifiable silver in the whole world. That means this huge short
position is unbacked, and unbackable, with real silver. That means
the short position exists for only one purpose - to artificially
depress the price. Which it is doing.

The only response I have received from the CFTC so far (and I have
sent ten letters), is an acknowledgement, on April 12, that my
allegation,"would potential involve violations of CFTC and Exchange
rules pertaining to price manipulation." That tells me that the CFTC
is taking my allegation seriously, and is looking into it.
Unfortunately, that process is slow, and behind closed doors. In the
meantime, the market remains manipulated. That is intolerable to me.
It should be to you also. Please be clear on my intentions. I am
only looking for open debate and discussion on this issue. That
means full disclosure and transparency. Privately, the big short
traders are telling the CFTC why their shorts are not manipulative
shorts. They are concocting stories how their short sales are merely
offsetting hedging by foreign silver mining companies. I think I can
demolish the shorts' arguments with logic and common sense if I am
given the opportunity. That is the key, to drag this issue out in
the open where the crooked shorts don't want it.

So I am asking you to do something to get this issue fully and
fairly debated. I want you to write to your elected officials and to
the CFTC, demanding that the CFTC debate this issue openly. If the
CFTC doesn't think there is a problem with such historically large
net short positions, let them say why. If they do sense a problem,
let them address that. It is not right for me to continue to make
public accusations, if I am off base. It is time to decide if
there's something wrong on the COMEX, or not. It is a time for
action.

These same short traders play the same game in the gold and copper
markets on the COMEX. But I don't write about that, because while
the number of short contracts these same traders hold are
historically large and manipulative, they don't translate into the
equivalent amounts that exist in silver. It is just preposterous for
such a small number of traders to be net short more than all the
known silver in the world. If you agree, take some action and write
a few letters. E-mail is not as effective as a printed letter, but
please send a fax. The Chairman of the CFTC, James E. Newsome's fax
number is 202 418 5533. Good luck.

June 10, 2002

The Honorable James E. Newsome
Commodity Futures Trading Commission VIA FAX and E-MAIL
Three Lafayette Centre
1155 21st Street, NW
Washington DC 20581


Dear Chairman Newsome;

The manipulation of silver by the handful of short traders on the
Commodity Exchange, Inc. (COMEX) continues unabated. The evidence,
issued by your own agency, week after week, could not possibly be
clearer.

Your Commitment of Traders Report, released June 7, 2002, for
positions held as of June 4, show the concentration of net short
positions in both categories have reached all-time extremes. The 4
or less largest traders category (meaning 1 trader to maximum 4)
indicates a net short position of over 248 million ounces. The 8 or
less largest traders are now net short over 346 million ounces. They
still control near 50% and 70% of the market, respectively. These
are shocking and uneconomic quantities, whose only purpose is to cap
any price rise in silver, and then drive it lower. It is clear that
they will succeed again, because there is no restriction to their
manipulative short sales. This is against every principle of our
commodity law.

It is disgusting to witness this continuous illegal behavior. These
activities, motivated only by greed, make a mockery of your agency
and the law itself. These short traders can't justify their paper
sales with real silver, yet they are allowed to short whatever
amounts are necessary to depress the price. They are laughing all
the way to the bank. Thousands of market participants are held
hostage and are literally being robbed, by the illegal activities of
the few. It is up to you to end this scam.

The day will come when we will all witness the results of the
long-term silver manipulation by these very few COMEX silver traders
- market emergencies, disorderly pricing, shortages and defaults.
Why wait for that day before moving against them?

Respectfully yours,
Ted Butler
This is a serious matter and I don’t want to follow it with a lot of
arguments as to why you should own silver now. But I think one thing
must be said. If the CFTC curbs the big silver traders, it will make
a dramatic difference in the silver market. It will change it
forever. It will end their price-capping ability and allow the free
market to work. That’s the best possible scenario for anyone who
owns silver.
This is an issue that can attract the attention of the media.
Eventually, if it’s not corrected, the newspapers and the TV will
investigate and have a field day. This could be an explosive
scandal. The silver manipulation will end sooner or later. It’s
important to own silver before it does.


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• Der neue Text von Ted Butler! - yatri, 14.06.2002, 09:53