this may be HUGE - Silver lease rates

[Spartacus]

Re: this may be HUGE - Silver lease rates

Most Silver trading volume is for monetary use

800 million ounces is used annually for industrial use, but just last July for example, 114 million ounces PER DAY was used for LBMA clearing - IMHO mostly for monetary purposes.

Also note, the 114 million is end-of-day remaining balances - 10 billion ounces could trade daily, but if the trade is closed out before day's end, it's not counted in these clearing statistics

http://www.lbma.org.uk/clearing_table.htm

Idianov -

Hard to conclude Silver is used primarily for it's collateral function. I tend to think little of the silver is being employed for that purpose. That is primarily the Gold market's function. Silver offtake is constant and substantial for industrial use. Therefore it's not reliable as is Gold for collateral?

What's your read if you provisionally assume Silver were NOT being employed as collateral?

[ Note: Another large offtake from the Comex is bullion sequestered to ETF's, which is indeed a collateral but it's private small investor held, therefore behaves possibly independently of what you describe? This segment is permanently sequestering ever larger amounts of bullion each year. ]

Those statistics are only London, BTW - India and China and the middle east may be doing more monetary exchange in Silver, if not now then soon as those markets break free of the historically dominant NY and London exchanges

[Guest]

Re: this may be HUGE - Silver lease rates

Spartacus -

Fascinating info about possible monetization. Thanks very much.

[idianov]

Re: this may be HUGE - Silver lease rates

IMO, silver is less liquid than Gold and T-bill, therefore more risky to use as collateral to raise cash in open market. But it is still better than overvalued paper priced in overvalued d0llars.

In the short term, the negative silver lease rates suggest lower metal prices for 6 months down the road on the outlook of lower LIBOR rates while CBs provide liquidity to restart lending between banks.

Of course, the thesis will be wrong should the silver price continue higher due to dollar devaluation in ongoing debt deflation rout.

Igor

[Guest]

Re: this may be HUGE - Silver lease rates

Posted for general interest -

Antal Fekete argues that Teb Butler's theories about "naked shorting" of silver are incorrect. Those ideas have gained very wide acceptance, so a plausible invalidation of that would be quite informative.

He puts forward his view of leasing, and the correct resulting interpretation of negative lease rates.


______________


September 25, 2007

Exploding the Myth of Silver Shortage

by Antal E. Fekete
On Thursday, September 20, 2007, the lease rate of silver suddenly dipped into negative territory. It fell to minus 0.1 percent per annum. I wish Ted Butler stopped bitching about silver manipulation, and instead explained the behavior of silver lease rates and the silver basis to his readers. In particular, he should explain negative lease rates, and negative basis or backwardation. It may be more helpful in promoting an understanding of the silver market than telling fairy tales about raptors and dinosaurs.

I have a long-standing disagreement with this silver analyst. I hold the view, in opposition to Butler's, that silver is a monetary metal second only to gold in importance. Supply-demand analysis of price is not applicable to silver, still less to gold. The reason is that both supply and demand are undefinable in case of a monetary metal. There is no way to quantify speculative supply and demand. Speculators make split-second decisions and from sellers may become buyers, or the other way round.

Making predictions for the silver price on the assumption that it is allegedly scarcer than gold does not make sense. Silver has been, is, and will continue to be cheaper than gold for a monetary reason that is the very opposite of the scarcity argument. The monetary stockpiles of gold are much larger than that of silver. Therefore there is less of a threat for the value to drop on account of new additions to the stockpile in the case of gold than in the case of silver.

It is not the absolute change in mine output that has an impact on the value of a monetary metal, but the relative change as a percentage of existing stockpiles. For this reason gold is more valuable than silver: the huge stockpiles of gold make the impact of a change negligible. Ergo the value of gold is more stable. In technical language, the marginal utility of gold declines more slowly than that of silver.

As a consequence, the specific value of gold is higher. This means that the value of the unit weight of gold is higher than that of the same weight of silver. Once this fact has been firmly established by the markets, it is not likely to change. The monetary metal with the higher specific value is more portable both in space and time. In more details, the cost of transporting the unit of value as represented by gold is lower.

For example, if the bimetallic ratio is 15, then the cost of transporting the unit of value as represented by silver is about 15 times higher. Roughly the same rule applies to the cost of storage as well. This makes gold superior to silver as a monetary metal. It is more suitable as a vehicle to transfer value over space as well as over time.

But silver is still a monetary metal, and for certain application such as parcelling out value in ever smaller bits, for example, silver could be superior to gold. And, of course, when it comes to enumerating industrial applications, silver has a very impressive list. In many cases there is no substitution for silver. However, do not make the mistake to think that gold has no industrial applications. It does but, because of its high specific value, these applications are mostly submarginal and as such they are ignored.

In 1922 Lenin gave a textbook example of such a submarginal application of gold. At a meeting of Communist party activists he famously said that, after the final victory of Communism world-wide, gold will be used for the purpose for which it is so superbly fitted, namely, to plate the walls of public urinals. He did not say that his plan could not be realized in the workers' paradise because workers would pick the gold plate of urinals just as fast as the government was installing them.

Another common mistake people make when comparing gold and silver is to say that gold is "not consumed" and therefore practically all the gold ever produced is still available while silver is "consumed" and, hence, is getting scarcer relative to gold all the time. The truth is that both gold and silver are consumed, for example, in the arts (including jewelry).

The difference is in the cost of recovery, recycling, and refining relative to the underlying value. Precisely because the specific value of gold is higher, the cost of recovery for gold is lower, so much so that gold in the form of jewelry is often lumped together with monetary gold for statistical purposes. By contrast, silver plate could not be lumped together with monetary silver because of the substantial cost of recycling expressed as a percentage of the underlying value.

Returning to the silver lease rate, this was not the first time it dipped into negative territory. The 30-day lease rate was pretty consistently negative between May 25 and August 4, when it shot up and reached a high of plus 0.4 percent on August 31.

The fact that negative silver lease rates are not impossible but a well-observed fact of the silver market has exploded the myth of a world-wide shortage of silver. Come to think of it: lessors of silver are willing to pay lessees a premium for borrowing the metal. But before you rush over to ask lessors for free silver, you had better come to a correct understanding what negative lease rate means. The collapse of the silver lease rate on September 20 to negative territory meant panic short covering in silver. The shorts anticipated an imminent and substantial rise in the price of silver and were running for cover.

How did they know that the silver price was poised to rise? They were not led by crystal balls. They acted on the historic correlation between gold and silver prices which customarily move "in sympathy" with one another. On September 10 the gold price was getting ready to break the resistance level at $700, while the silver price lagged far behind in relative terms.

The peak price of gold for the past 27 years, $730 an ounce, established in July, 2006, was well within earshot. The corresponding peak price for silver, $15, established at the same time, was not. Thus gold was well-placed to make a new high soon, silver selling at $12.75 was not. Nevertheless, if gold moved, it was reasonable to assume that silver would play catch-up. In the event the price of silver moved some (on Friday, September 21, it closed at $13.50) and, according to analyst Clive Maund, "was set to go through the roof" (www.safehaven.com, September 19, 2007).

The point is that if this happens, as it very well might, the price move will not have been caused by any kind of shortage. The notion that we have a silver shortage is preposterous. Most of the silver produced by the mines and sold by the U.S. Treasury during the past 60 or so years still exists in monetary form.

Monetary silver is owned by private individuals who entrust it to commercials skilled in making monetary silver yield a return. This is the reason why silver and gold are monetary metals: they can yield a (more or less consistent) return to their holder if traded adroitly and professionally. This fact may not be too well known, but it is true nevertheless.

"Demonetization" has done nothing to destroy the unique ability of monetary metals to earn a return. Without a doubt, the best way of making this happen is through playing the short side of the market. Sitting on a long position of silver will not hatch the silver egg, nor is it a very intelligent way to make silver yield a profit. A better way is covered short selling which to the uninitiated appears to be naked short selling. It is not.

The commercials are neither stupid nor suicidal. They are professionals who make it their business to call the tops and bottoms in the price moves of monetary metals. It is well-known that they have an excellent track record in calling the market. This is not because they are vicious people who manipulate the market to their own advantage enticing the poor bulls to enter the slaughter-house. They use methods that are well-known, pretty standard among professionals, and can be learned from textbooks.

Using these methods they can turn the variable silver price to their advantage (or to the advantage of their clients on whose behalf they trade). It is not a cabal. You can join their ranks if you are willing to study those methods and go through the training which may be too rigorous to your taste.

If you are envious, or have moral objections against other people being able to make money consistently by trading the monetary metals, then you should lodge your complaint with the government which is responsible for "demonetizing" first silver (1873) and, a hundred years later, gold (1973). Before "demonetization" there were no commercials, no speculators, and no scalpers who made money by betting on the variation in the price of monetary metals. Those who had tried to make a living that way went hungry. The prices of monetary metals were stable.

Whenever the price of silver significantly lags the rising price of gold, there may be panic short covering and the leased silver will be returned to the lessors in a hurry. If the lessors were not prepared for this avalanche of silver (because they expected that the leases would be rolled over), then they may not be able to absorb the silver flowing back to them. In this case the silver lease rate drops dramatically and may even dip into negative territory.

It is important to be able to interpret this correctly. As I said, silver is delivered faster by the lessees than the lessors are able or willing to absorb it. Admittedly it is a market aberration, but whatever it means, it does not mean a shortage of silver. Far from it. It indicates a relative redundance of silver that momentarily cannot find lessees in view of an impending rise in the silver price.

The verbiage about silver manipulation is just so much tilting against the windmill. In his latest commentary dated September 18 Butler distinguishes between upside price manipulation or cornering the shorts, and downside price manipulation or cornering the longs. He adds that while the former is fairly common, the latter is exceedingly rare. Downside manipulation results in much lower prices than would otherwise prevail and, when it ends, the price explodes upwards. Butler is right on. A corner on the longs is in fact so rare that it does not even exist, except as a figment of the imagination of some analysts. The longs cannot be cornered, especially in a corner lasting for years.

Rumor-mongering about present or future silver shortages do not bring credit to the analyst. He should go back to his textbooks and study the market in greater depth. Above all, he should learn the elementary differences between monetary metals and non-monetary commodities.

We have had a torrent of short covering recently. It should have caused a meteoric rise in the price of silver, as predicted by the analysts. It just did not happen Yet it may still happen. Suppose it does. Will then the case for market manipulation be established? Of course not. What it would show is not that the commercials can and do manipulate the market and control the silver price that way. It would only confirm what we have known all along, that the commercials have a superb understanding of the silver market and can correctly anticipate impending significant price moves.

[Spartacus]

Re: this may be HUGE - Silver lease rates

EDIT: I loved Prof. F's Real Bills debate, and was looking for some insight when I read this - I've read it several times now and just find it amazing.
It's unproven assertion after bald, unproven assertion after ... well, you get the point
Just a couple of points ....

assertion (sans proof) This is not because they are vicious people who manipulate the market to their own advantage enticing the poor bulls to enter the slaughter-house. They use methods that are well-known, pretty standard among professionals, and can be learned from textbooks

Not one link? Amazon? Abe's books? website?

assertion: (sans proof) A better way is covered short selling which to the uninitiated appears to be naked short selling. It is not ...

It looks like he's claiming there's no naked shorting going on in Silver, and anyone who thinks there is is dumb (calling Butler "uninitiated")

look for "naked" here:
http://www.financialsense.com/fsu/ed...2007/0423.html


assertion: (sans proof) How did they know that the silver price was poised to rise? They were not led by crystal balls. They acted on the historic correlation between gold and

A guess about what the commercials did, worded as proof of "smart money"

My personal thinking on the commercials was set a long time before I ever read Butler -
http://www.alibris.com/search/search...*listing*title

Silver bulls / by Paul Sarnoff. --
by Sarnoff, Paul.
Westport, Conn. : Arlington House, c1980.
Description: 199 p. ; 24 cm.
ISBN: 0870004808 :

The Silver commercials have privilege (at the very least, they had more than enough in 1980) - lots and lots of it.
END EDIT

he seems to think the chart numbers are the actual price of leasing (or "lease rate")

the commercials have a superb understanding of the silver market and can correctly anticipate impending significant price moves.

can this possibly be right? Insider knowledge of markets that lets you make money consistently is not proof of manipulation, it's proof of good fortune-telling?

He prefers ESP (precognition) as a better explanation than market manipulation?

this "smart money" point of view has been discredited many times. if you have All the money in the world, you can buy better tax and legal advice - you can't buy accurate predictions of the future.

[friendly_jacek]

Re: this may be HUGE - Silver lease rates

this "smart money" point of view has been discredited many times.

Is that so? I missed the memo. Can you elaborate?

[Spartacus]

Re: this may be HUGE - Silver lease rates

Is that so? I missed the memo. Can you elaborate?

Make sure we're talking about the same thing - separate privileged money (like the guys who got stocks pre-IPO for free during the internet boom) from "the smart money"

Every bond blowup in history is proof - the big bond trading houses have more money than god but experience regular blowups.

If you had a billion dollars, could you go out and buy GUARANTEED investment picks, advice better than anything the rest of us can afford, without being an insider? Without privilege?

Also, there are short periods where somebody finds a trick that works for a while, then fails - many times, fails spectacularly. Was this "smart money" or luck?

The largest profits of course, come from entities like MS and Dell and Google. Most of these in the initial stages have enormous problems securing capital. Where is the "smart money" in this arena? Nowhere to be found.

Another example - all the big brokerages / investment banks pushing internet stocks - even to the richest of rich clients. Why did the brokerages make out like bandits - because of intelligence, because they are the "smart money"? Nope - privilege and insider information, playing both sides of the fence, etc ...

But getting back to the article at hand - read it - in one part he claims the smart money knows the tops and bottoms with certainty. In another part he writes they're writing covered shorts. If you can reliably call tops and bottoms, Why bother? You're throwing away profits over and above what you could make with naked shorting.

I just searched for an interview on financialsense where the guest commented on this - I think it was a commodities trading book - if I remember which one it was I'll post a link

[Mega]

Re: this may be HUGE - Silver lease rates

Can you explain WHAT the hell your talking about!
In English as well please!
Mike

[Guest]

Re: this may be HUGE - Silver lease rates

Spartacus -

I don't know at all whether Fekete's theory has truth or not, and I only posted it to get your opinion and that of others.

However your main objection seems to be that covered shorts (i.e. silver long holders who are shorting solely to derive an income while they continue to hold large quantities of the bullion long term) can't be the real reason for the short positions on silver because this would involve some kind of "clairvoyance" or reliable predictions as to how to trade the market moves in bullion? You say "no one can predict market moves so this thesis makes no sense".

I am certainly not convinced of Antal Fekete's thesis, but your objection does not sound definitive to me. Look at the Forex market. It is huge, and the reason it's huge is because traders are arbitraging quite predictable moves in Forex reliably enough to make fat profits from it and have been doing so for decades - the big trading houses are making a lot of money trading currencies, and we know Jack Crooks does very profitably.

These parties do so by predicting approximate moves very reliably long term, and being good technicians in that specialty.

Tradeable trends in commodities are no different than Forex. They are eminently and entirely tradeable. Therefore your objection that big bullion holders cannot be deriving a very active income from covered short positions because no trader can be clairvoyant seems to not be borne out by looking around at other trading, in my view.

To me Fekete's theory actually makes a fair bit of sense. Why? Because the massive naked short position in silver which Ted Butler postulates relies on these naked shorts being extraordinarily rash and foolish by placing massive naked positions within a well established bull market and then doubling down on them to retain a quite shaky control!

So according to Ted Butler's theories, massive naked shorting of silver this far into a bull market is probably one of two things, or both combined:

A) Ready and willing collusive shorting to extract fat profits by regularly cornering longs - while also - critical to risk - being backed and underwritten by "larger interests" (aka government / bullion banks, or Silver Users Assoc.) who have an interest to cap the price

or

B) All of the above in A, but without the government / bullion bank indiscriminate backing. This scenario would involve these massive naked shorts, betting on their own dime, having at some point in the past two or three years suddenly understood that they were playing an increasingly risky game in an increasingly bullish market for Precious Metals - i.e. realising they were trapped and looking for a resolution or way out .

In this B scenario, these shorts would now understand their very large positions (2/3+ of global silver production) were beginning to trap them because there would be insufficient bullion on the spot market to even buy these shorts out.

If they wanted out, I cannot understand why the massive accumulated short position which has been growing in recent years has not at least been reduced. Rather, it increases. This implies doubling down in desperation, and seems a quite strained logic to me. The idea of doubling down on massive short positions in an obvious and well established silver bull market frankly seems contrived as a rationale.

Therefore the thesis of naked shorts who don't have the deep pockets of government backing begins to seem by no means a more plausible theory than that which Fekete is proposing as an alternative explanation. The only way a huge and growing naked short position in silver makes sense in terms of any concievable risk / reward is if it's backed by government money with an agenda to cap.

When you compare the two theories, one begins to seem more plausible than the other, because it's grown naturally over time, and is purely market driven.

Here's another question. Why such a massive collusion? Such a massive short position in silver - as an imagined secretive collusion between government and bullion banks - to cap the SILVER price? Why? The market the government needs to cap is the GOLD price. The Silver market is tiny, and cannot by itself subvert any fiat currency.

If these are naked short positions on such a massive scale, any intelligent participant knows full well if they are ever squeezed terminally, this could bankrupt some very large players. The only way these parties would engage in such extreme risk is if they were insured by discreet government backing.

Compare this tortuous logic with the simple market logic Antal Fekete proposes - silver shorting is profitable! But it's only an acceptable profit on such a scale if your shorting is covered by a long position! Very simple - the ever larger short positions are driven by exactly the same market logic as drives all commodity trading - a favorable ratio of risk to reward.

This theory has no logical stresses or strains in it. There is no massive naked short risk, with two or three gargantuan players trapped within it who have not only declined to exit those positions in the past two years, but have actively doubled down on them. That kind of theory strains the logic until the rivets start popping out of the structure altogether.

I am by no means convinced of Antal Fekete's argument - but by no means does it appear absurd either.

Respectfully,

[Spartacus]

Re: this may be HUGE - Silver lease rates

I read Butler's claim as the commercials have found a way to take money from the technical trading funds, and the trick's held for years.

They do it because it's profitable, and no back-room dealing is necessary for "collusion" - the large shorts just watch each other and at some point they see an opening and pile on the short covering - the shorts need no back room communication - if they're ever investigated, no smoking gun emails will be found - they don't need any such email, they just watch each others' actions.

Spartacus -

I don't know at all whether Fekete's theory has truth or not, and I only posted it to get your opinion and that of others.

that's what I thought, no worries

However your main objection seems to be that covered shorts (i.e. silver long holders who are shorting solely to derive an income while they continue to hold large quantities of the bullion long term) can't be the real reason for the short positions on silver because this would involve some kind of "clairvoyance" or reliable predictions as to how to trade the market moves in bullion? You say "no one can predict market moves so this thesis makes no sense".

I don't know the answer. I'm just objecting to Prof. F's
1. lack of proof in the article
2. ignoring proof that contradicts him (see end)
3. and ignoring solid arguments on the other side - brushing them aside with no argument - not "no reasonable argument", but in fact, NO argument

I don't agree with Butler either, but at least he tries to provide facts.

So according to Ted Butler's theories, massive naked shorting of silver this far into a bull market is probably one of two things, or both combined:

A) Ready and willing collusive shorting to extract fat profits by regularly cornering longs - while also - critical to risk - being backed and underwritten by "larger interests" (aka government / bullion banks, or Silver Users Assoc.) who have an interest to cap the price

or

B) All of the above in A, but without the government / bullion bank indiscriminate backing. This scenario would involve these massive naked shorts, betting on their own dime, having at some point in the past two or three years suddenly understood that they were playing an increasingly risky game in an increasingly bullish market for Precious Metals - i.e. realising they were trapped and looking for a resolution or way out .

Or D: Each party found a strategy years ago that made them some money. They're still using it. They'll keep using it until it stops making money - the bull market has not yet affected how they make money on this strategy, why would they stop until it does?

No collusion is necessary - each party is making money without secretly communicating with any other party .

The Silver leasers don't have to know anything about what the commercials do on COMEX. They're making money by leasing.

The COMEX commercials may know, but don't need to know, anything about the other commercials or about the leasers - they just know that when the COT reaches certain levels, they can short and when the COT gets to certain other levels, they cover their shorts.

No collusion needed.

They're like the bond traders that make billions for 10 years then lose 50 billion in a week.

f they wanted out, I cannot understand why ...

This is mind reading. Or rather negative mind reading. It assumes the dealers believe certain things and assumes they wouldn't act certain ways based on those beliefs.

We don't know if they think we're in a bull market. We don't know if they're "doubling down out of desperation". They're making money - what desperation?

all that we know for certain is that the commercials have sold short at certain points and covered at certain points. they probably made money doing this.

the ever larger short positions are driven by exactly the same market logic as drives all commodity trading - a favorable ratio of risk to reward.
This theory has no logical stresses or strains in it. There is no massive naked short risk, with two or three gargantuan players trapped within it who have not only declined to exit those

look for "naked" here:
http://www.financialsense.com/fsu/ed...2007/0423.html

I've read some more Szabo, by the way - after calling Butler a conspiracy theorist for some time,

http://seekingalpha.com/article/7663...s-head-slw-cde

he realized Butler's at the very least partially right, and goes on to defend the naked short selling (WHICH HE SAID NEVER HAPPENED, and anyone who believed it happened must be dismissed as a conspiracy theorist)

Cognitive dissonance can be SO MUCH FUN ; ) - deny that something illegal is happening, and when you find out it IS happening, DEFEND IT !!!!

[Guest]

Re: this may be HUGE - Silver lease rates

Spartacus -

Nowhere do you factor gargantuan risk into your analsysis. "Commodity trading business as usual" is what you describe. Yet that "business as usual" in this configuration actually would be a rare bird indeed, when one can clearly discern truly enormous, company bankrupting liability on the downside of the naked short position being employed for a merely pedestrian profit.

You discard the entire 'collusive' idea, and suggest the trade back and forth between commercials and specs is typical market action in commodities, a 'profit for both'. Last time I checked, such a phenomenon does not exist. For one to profit regularly over time, the other must pay - regularly, over time. I mean, how could they be handing the 'profit' back and forth between them?

If it's 'business as usual', which of these parties is skating over monumental risk with the blithe confidence that the modest cash profits from the buying and selling of silver bullion short positions provides a decent risk / reward ratio compared to the liability of having to deliver 250 million ounces in the event their bet went bad?

[Spartacus]

Re: this may be HUGE - Silver lease rates

Am I sure Butler is right? absolutely not. I don't have all the answers.

Do I agree with Butler? NO NO NO .... I'm convinced there is some hidden information we don't see yet. I've written this many times, you replied to this at one time - I'm nervous about my Gold investment, but especially about my Silver investments.

BUT ... I just know BAD arguments when I see them.

All Fekete presents is hand-waving, mind reading, "argument from incredulity" and name-calling (conspiracy theorists, "uninitiated"), etc ... . He never addresses the meat of Butler's arguments.

Why do you think it's impossible for Silver traders to blow up?

We iTulipers discuss this kind of thing every day - hedge fund blowups, Amaranth, Enron, the airplane fuel blowup in Singapore a couple of years ago, the huge copper short blow-up a while ago.

There IS naked shorting - can't be denied - even a former Butler critic/name-caller admitted it After calling Butler names, Szabo admits Butler was right and then defends the COMEX.

No one even bothers to deny the COMEX's numbers show a massive short position. Fekete never even mentions it.

Again, I have Silver investments.

Also, I think I'm missing something, some crucial fact and Butler's missing something -

BUT

Fekete's arguments are non-arguments.

For one to profit regularly over time, the other must pay - regularly, over time. I mean, how could they be handing the 'profit' back and forth between them?

EDIT: sorry, I goofed on this one point

[acrabbe]

Re: this may be HUGE - Silver lease rates

Spartacus -


If it's 'business as usual', which of these parties is skating over monumental risk with the blithe confidence that the modest cash profits from the buying and selling of silver bullion short positions provides a decent risk / reward ratio compared to the liability of having to deliver 250 million ounces in the event their bet went bad?

ScotiaMocatta seems to be the bank representing the majority of these concentrated massive short positions in the silver market. This all makes perfect sense if you first keep an open mind, and remember that silver has industrial as well as investment purposes. Important to note is that in some of its industrial uses, silver is considered an irreplaceable commodity due to its unique properties - thereby making it indispensible to certain large commercial manufacturing interests who use (relatively) large amounts of physical silver purely for production purposes.

Ok, so given all that, it doesn't seem far fetched that these commercials are shorting the hell out of silver to keep the price down so as to protect their bottom line and margins in their core manufacturing business. The easiest way to do this is in the actual silver trading market since it's 1) so small, 2) has alot of nice derivative products that allow you to short into it so naked that you might as well be skinny dipping on the exchange floor, and 3) an inflation hedge and safehaven during times of uncertainty (second only to gold) so much so that governments and central banks welcome its price suppression mainly because this price suppression aids them in their information and propaganda war on joe sixpack. Why do they manipulate CPI numbers to an almost laughable, and now completely ridiculous degree? The same reason they allow massive deriv positions on the precious metals complex to suppress the price appreciation.

We can get into more minutia, like "are they selling and buying back and forth between themselves?" well, no. Due to the size and volatility of the silver market, technical levels are extrememly important. A savvy manipulator can whipsaw large specs and retail traders into panic selling/buying using a combination of massive derivatives firepower and good knowledge of key technical levels. This is not farfetched in the least.

However, there's no need for discussion of minutia like that. It's a pretty straightforward situation. If it walks, talks, acts like a duck. It's a duck. Look at the massive hedge books of some of these gold producers. So massive in fact that their hedgebooks threaten to completely destroy the profitability of their businesses in the event of a price increase in gold. Doesn't make sense. Oh, but wait. Barrick CEO and CFO both just unloaded ALL OF THEIR STOCK OPTIONS (CEO kept minimum he is required to, something like 47,500 shares). Why would they do that? Well, look at gold over past few months, then look at their MASSIVE hedge book exposure.

It's not farfetched to think the gov + CB's were using gold producers as proxies to cap the price. This is not tinfoil or conspiracy stuff. Why do CB's sell tons of gold bullion into the market in hopes of damaging gold sentiment when that sentiment begins to crescendo? And everytime they do it they fail, and the price breaks out soon after anyway! The ultimate contrarian indicators - desperate central bankers trying to protect their reason for existing. Fiat.

A conspiracy is merely a secretive plot between two or more people. Yeah, THAT'S not likely to happen, eh???? :cool:

Sometimes it's better to read the writing on the wall in front of us rather than search for an explanation as to why the writing shouldn't exist, couldn't possibly exist, can't possibly apply to us, etc. See what I'm getting at here?

Look at the gold/silver ratio. Based on gold, silver is extremely undervalued right now. What else could be suppressing price in such a small market during wildly inflationary times? And growing ever more inflationary by the week.

Silver is in the late stages of a bull market began in 2002 from $4. We'll probably see $30 silver by Dec 2008, and that's not farfetched at all. Not even close to the inflation adjusted all time highs.

Based on the insane amount of fiat money creation over the past 25 years, gold and silver should (be) trade(ing) at or above their inflation adjusted highs of $2300 and $130 an ounce respectively. Why aren't they? I'm sure the massive cloud of derivatives hanging over the PM complex has something to do with it. To hint or imply that the effect of this monstrous cloud of derivatives is a net neutral position or had a negligable effect on the price of the PM's seems utter denial, which is the first stage of death/enlightenment.

BTW - I trade precious metals options professionally and have a great deal of vested interest in the market. Hence the attention and research. FWIW.

respectfully

[Guest]

Re: this may be HUGE - Silver lease rates

Acrabbe -

Thanks very much for your input, and I'd personally welcome more of it here. Also thanks to Spartacus for his well considered views. FWIW Spartacus, I'd be very pleased indeed if Butler were the more correct of the two pundits discussed on silver (and I bet I own a fair deal more silver than you, my friend! )

Acrabbe, I'll resume this discussion tomorrow as I'm getting by on five hours sleep from last night. Just one comment of yours struck me:

<< Silver is in the late stages of a bull market began in 2002 from $4.>>

At $13 silver and five years out, I'm curious as to why you describe this as a "late stage" market in silver today? You see this market going up like a Roman Candle and burning itself out in two years? Curious because I've heard this from one other source as well.

Thanks.

[Spartacus]

Re: this may be HUGE - Silver lease rates

Thanks from me too

Think these are related?

http://www.reuters.com/article/hotSt...22174420070926
http://communities.canada.com/nation...-insiders.aspx

Sometimes it's better to read the writing on the wall in front of us rather than search for an explanation as to why the writing shouldn't exist, couldn't possibly exist, can't possibly apply to us, etc. See what I'm getting at here?

Yes, "argument from incredulity"

I definitely agree with this, and, at the same time IMHO it's very important to read good critiques - if your original reason for getting in is disproved, you may want to get out, post-haste.

Why aren't they? I'm sure the massive cloud of derivatives hanging over the PM complex has something to do with it. To hint or imply that the effect of this monstrous cloud of derivatives is a net neutral position or had a negligable effect on the price of the PM's seems utter denial, which is the first stage of death/enlightenment.

This is one of my guesses as to what is invisible to us - that thing that Butler is missing - that there may not be shiny metallic stuff backing the shorts, but the shorts think they're protected by some derivative position or other

FWIW Spartacus, I'd be very pleased indeed if Butler were the more correct of the two pundits discussed on silver (and I bet I own a fair deal more silver than you, my friend!

No worries, mate - I want to find that hidden information and it won't help to get pissy when anyone tries to give me the information.