A Trader Tells me there is no Manipulation.
(But I tell him a few things, too!)
Silver Stock Report
by Jason Hommel, May 18, 2008
I have been a futures trader for nearly 40 years, had many dealings
(mostly unpleasant, of course) with the CFTC and the NFA after its
inception too. I know the smartest and best and biggest
futures traders in the world and have traded side by side (and
still stay in regular touch with) some of the
dozen fellows in the original "Market Wizards" book, and can tell
you stories about them that never made it into publication for public
It's an honor to hear from you. Thank you for writing. If a
man of your intelligence and experience does not understand me, it's
clearly my fault, and my lack of experience. As it is, I've never
traded a futures contract, and I try to avoid them, even though, in
reality, I have often waited for deliveries for several months for other
I will try to clarify my philosophy below, to answer some
of the things you say.
And my experience is limited to my 10 years
of studying and trading the markets, and reading and answering tens of
thousands of emails. And I've read the Bible, and studied it
diligently, and I try to apply its wisdom.
Oh, and I've read
that book by Jesse Livermore. (Just trying to be funny.) I
don't think I ever read the "Market Wizards" book, I'll look it
A fellow whom many regard as ALL history's most
successful futures market trader has said that I understand the markets
better than he does.
Thank you for the testimonial.
I worked at Commodities Corp in the '70s and
I was born in 1970.
, which back then was regarded as THE premiere futures speculating
firm in the world, and was the "nursery" for many of today's super
traders. I made fortunes in the silver market during the '70s,
some on the short side in the early '80s, and have been raking in
profits on the long side for the past 5 years. I think
I could probably make it into the Guinness record book if I tried, for
the longest held futures position in history, and it happened to
be in silver, for reasons similar to the ones that make you bullish
on silver. This past December (2007) I finally had to "roll
forward" my last remaining longs in the Dec 07 silver futures
contract (COMEX) because it was expiring and I wasn't planning to
take delivery from the exchange. I closed out longs
bought in January of 2004, which meant the time from my purchase to my
sale was just a month shy of 4 years. You may know
that most futures trades are offset within a day or two, and a couple
weeks is considered intermediate to long term by many futures
traders. I think this trade is almost
surely the longest held futures market transaction in the history
of futures markets.
I don't have time to give you a lesson on futures, but your recent
comments about manipulation of the silver market reveal your
ignorance of futures markets. I am EXTREMELY pro free
markets and agree that position limits are a counter-productive mistake
just as virtually all economic regulation is, but such position
limits are applied to virtually all futures markets and do not
result in downward manipulation.
How do you know that position limits do not result in downward
manipulation? I think they do. Clearly, we have a
philosophical disagreement here.
What's wrong with simply letting
longs bid the price up to unrealistic levels? Nobody forces a short
to short, so why protect them with limits on the longs?
Clearly, you are on my side that there should not be limits, and
that limits are a barrier to free market forces. So, if they are a
barrier, what distortion do they create? They can't create higher
than normal market prices, hence, the opposite must be the result.
Therefore, how can you say, for sure, and prove, that they don't result in
lower than normal prices?
The existence of position limits does not
bias a market in either direction. Every intermediate
move in silver for the past 5 years has been fully understandable and
explainable without any need for a straw man to blame it
on. Silver is going to go much higher, you are right,
OVER THE LONGER RUN, but the 4 "proofs" of manipulation you gave
recently (in an attempt to explain -- wrongly as it turns out -- a price
decline while there were reported shortages of certain forms of the
material) would cause any experienced and knowledgeable futures trader
to laugh. You are embarrassing yourself before anyone
who is intelligent and informed on this subject, even if you are
gaining disciples from amongst those who are ignorant and/or who are
looking for something to hate or something on which to blame their
inability to make profits in the market, or their recent heavy
I apologize. My biggest mistake is in blaming a short term move
on manipulation, which implies that there are times of no
Instead, I blame the big 100 year dip in
silver prices due to the existence of paper money, which is a much bigger
manipulation, and much more important.
Now, if paper money is a
manipulation, then futures contracts (which are simply another form of
"silver certificate") are also a manipulation, by their nature and very
existence, in my philosophical opinion.
I argue that the futures
market itself, by it's nature, is manipulative. Every single
contract, is therefore manipulative, in my philosophical opinion.
Tell me truthfully. If futures market did not exist, would
you buy real silver, or would you go to some smaller outfit like MONEX and
pay 25% down, and pay 15% interest on the borrowed money for the rest, to
I assume you would avoid places like Monex, and
Since you did not buy physical, then potential demand
for physical is less than it would have been. Since demand for
physical is less than it would have been, prices for physical silver are
lower than it would have been.
Please prove me wrong here, if you
You are, furthermore, wrong that position limits are not
symmetrical. They may not be at a
specific given time, because there are no limits on bona fide
hedge trades. These can occur on either the long
or short side, but most often occur on the short
side. This is the natural situation in almost every
futures market and it is economically NECESSARY and NOT a bias
despite the seeming asymmetry. It is a natural and
proper consequence of the very economic function and "raison
d'etre" for futures markets in the first place.
OK, you are assuming that the shorts have over the counter long
positions from buying products from refineries, or miners, then? But
no silver miner today has leveraged any of their silver.
I suspect that the CFTC is lying about any bona fide
hedge trades. Or the "bona fide" necessity is to "keep the dollar
alive", not to balance any silver long positions.
The economic JOB of speculators is to buy in order to take on
the risk of holding an inventory of a fluctuating item, while
those in the actual business wish to transfer
that price-fluctuation risk to speculators by hedging their
inventories with short sales in futures markets, enabling them to
concentrate more fully on production with less fear of being bankrupted
by an adverse price fluctuation.
Oh, I fully understand that "justification" for futures, but I don't
believe it is a rational justification, I think it's an irrational
justification. Not all risks in business can be offset, and they
shouldn't be. One way to offset risk is to not engage in the
business activity, and that is also a legitimate free market
IE, if miners don't want the risk of declining
prices, they should not begin the business in the first place, and
instead, do something else! Because offsetting the risk will just
bankrupt the speculator on the other side of the trade, as well as
bankrupting other producers, and no good comes of it.
IE, the NATURAL role of hedgers in the narrow area of the
futures market is to be SHORT and the natural role of speculators is to
be LONG, and your recent letters show that you wish to fight
this natural and highly desirable situation because it
is somehow evil or unfair, which it most certainly is not in
I have no desire to fight anything. I only wish to bring
understanding to the area, and to point out the risks involved.
In the full context, there can only be "heavy" shorting or
buying in futures by hedgers IF there is, has been, or soon will
be correspondingly heavy trading by them in the opposite
That's your theory. My theory is that they are naked short, and
that they are short to prop up the dollar, and that the players are
bullion banks that will one day implode like Bear Stearns.
truth, neither you nor I know who the shorts are, nor do we know if their
positions are offset, despite the claims of the CFTC.
Position limits being imposed or not have NO effect
on a futures market's price.
(needless repetition, and no proof here.)
Nevertheless, if you understand markets,
even if there were "extra" selling on one side in
futures, it couldn't have more than a fleeting effect on price.
No, it has a permanent effect, until the positions are
unwound. Until the positions are unwound, it has an
Also, as long as the futures market exists, it
diverts investment demand away from physical silver, and into the futures
contracts, and people such as yourself will be led to avoid buying
physical, which is also manipulative, and results in a lower price for
But in fact, there can be no such imbalance
since futures in and of themselves are a contract market, always
requiring exactly the same number of short sales and long
purchases. Exactly. Always.
This is so elementary as to be ridiculous for you to assume that this
needs to be said.
I will say that this is exactly why
futures are manipulative. For example, let's say you are totally
convinced by my philosophy, and all your trader buddies, and you all stop
buying on the long side, and instead, buy physical silver. What
If there were fewer people ready to buy on the long
side, the futures contract prices would drop, and spot silver would rise,
and the markets would go into backwardation. Then, it would be
profitable for others to sell physical spot, and trust the contracts, and
profit from the difference, as long as there were not
Hence, the manipulative nature of the contracts is
obvious; as it results in a draw down of physical inventory, as people
trust the promises instead.
And would-be manipulators merely dig themselves into
deeper holes -- they cannot keep a market down if there is genuine
demand for the actual item, except for EXTREMELY short periods,
rarely more than just several days at most.
And why should there be genuine demand, when traders such as yourself
are more willing to hold futures contracts, instead of physical
And of course the manipulators are digging themselves into
deeper holes. But if they are setting up entities to take the fall,
then they don't care. We've seen outfits like JP Morgan help outfits
like Enron set up offshore outfits designed to hide losses and go
bankrupt. Since the shorts are anonymous, you have no idea if they
are setting up dummy corporations who are plannned to go bankrupt at
certain prices. Or even worse, they could be setting up major
corporations to go bankrupt, you have no idea.
Unless the actual or "cash" market complies, a
"manipulation" in futures alone can accomplish nothing but harm for the
(and it also harms the holders of physical silver who have been
trusting in it for their life savings, and who now must sell to make ends
and result eventually in an exaggeratedly volatile move in the
direction OPPOSITE to the one the manipulators briefly are able to make
YES! That's exactly why I'm happy that the manipulation
exists! I intend to profit when it ends! The time to sell
silver will be when the majority of the people of the earth are using it
for money! And when there are very few paper markets for
silver. At that point, I can spend my silver for whatever I like,
and whatever other investment that I like, there will be ultimate
liquidity, since silver will be the definition of liquidity.
Short squeezes (which ARE sometimes do-able
-- I accomplished one briefly in the palladium market and would have
accomplished one briefly in cotton except that I decided to take my huge
profits and walk away rather than place them at risk by
attempting to carry the squeeze to its full completion) push the
price up by cornering the supply of the deliverable
commodity - ie, by owning all or most of
the ACTUAL item
itself. IE a GENUINE shortage of the
material must be present in the real world in order for a short
squeeze to be possible.
Yes, and don't we see silver shortages increasingly today,
more than at any other time in silver? Major dealers report having
no silver, and not knowing when they can get silver. Amazing set up
for the short squeeze.
Owning futures is the means to that end, but the
futures would not be manipulable upwards if the real situation in
the cash market did not permit it. As for manipulating
downward, that is an almost impossible task even if you came up
with a plausible scenario purportedly enabling it.
The scenario you describe is laughable. You
don't understand the cause and effect relationships, you apply
the laws of supply/demand wrongly to futures markets
because you don't fully understand their nature.
I'm sorry, you are not being specific in your charges.
Your argument for manipulation as the cause of
the recent price decline are as valid as that of the child who blames
the sunrise on the fact that Daddy set the alarm clock.
I lived thru the Bunker Hunt squeeze and the awful things that were
done at the time. I understand what happened and deplore much of
I have a reputation for being a good forecaster of the future.
What is your net worth? I'll tell you if you can get that much
physical silver, and how hard it would be.
BARRON'S Magazine called me "the thinking man's
trader," and their top market reporter at the time told me I understood
the stock market -- which is NOT my main milieu -- better than any
of the big "gurus" on Wall St, and he knew them all because most of them
curried his favor in the hopes of good PR from BARRON'S Magazine.
Yes, but how well do you understand the nature of money itself?
Do you know what money, actually is? That it is only silver and
gold, and that everything else is a debt, or a promise to pay money?
To me, the bullish case, long term, for silver is not
very difficult to see. Many people do see it and have
seen it coming for a long time, myself included and yourself
included. I consider it to be a mundane and
simple analysis, which happens to be correct, for very obvious reasons.
Congratulations. However, if you are blinded to the manipulative
nature of futures markets, I think you only understand about 1/3 of the
story in silver, and you miss the other 2/3rds of the story, which is the
monetary problem, and the futures contract problem.
And of those
other 2/3rds of the story, the monetary side is probably 95% of it, and
the futures manipulation is the other 5% of the manipulation, in my
But if you understand markets, you also understand the
recent sell offs without needing to resort to some kind of conspiracy
theory of market manipulation. You understand why
they HAVE to happen, and why the MOST LIKELY TIME for
them to happen is precisely when the then-current "fundamental"
factors appear to dictate most strongly the exact
I understand there will be volatility, sure, especially in silver,
because the market is so small. When silver is money, and the market
is large, then it is more stable, sure.
I also understand
contrarian analysis, sure. But the biggest contrary analysis in
silver is the fact that less than 1 person in 1000 is interested in silver
today, despite the fact that 90% of people are concerned about
This is exactly what has happened, and instead of
seeing it as the to-be-expected routine event that any professional
trader would see it as, you are perplexed by this perfectly routine
event and flail about to come up with a theory of
manipulation to explain the "mystery" which is not at all a mystery
but in fact precisely what a seasoned trader would have anticipated and
possibly even timed correctly if he were particularly experienced and
No, you are totally wrong about me. I do not scream
"manipulation" because there is a dip. I write about it primarily
because of the current shortage of physical silver that coincided with the
drop in prices, and because the CFTC wrote their ridiculous "no
manipulation" report that needed to be refuted.
I have claimed
since 2003 that paper money and futures markets, by their very existence,
are manipulative. I'm sorry you misunderstood my philosophy about
that, I'll try to be more clear in the future.
Furthermore: whatever definition of manipulation
you are using has to be so loose or so broad (in order to encompass the
phenomena you cite as evidence for manipulation), that a great
many factors on the bullish side -- just as powerful as the
allegedly bearish ones you cite -- would also have to qualify as
"manipulation" under such a broad, loose definition.
But it would be just as big an error of thinking to that, as to do what
you have done. The "manipulation" on the short side is every
bit as fictional as the "manipulation" I could easily demonstrate on the
I might also add that I trade individual managed accounts in the
futures markets and my clients are largely OTHER profession futures
traders who ask me to trade some of their personal monies -- some with
names you might recognize, assuming you are familiar with the legendary
names in this industry (NOT the names famous to the public, but the
names recognized by their peers in the industry as the top traders in
I don't really know them, nor have much reason to. I'm 38, and I
don't trade futures. I'm a loner, with a big email list. I
keep my phone number private. But I'm happy to have met you.
My track record the past 5 or 6 years is so far
ahead of the #1 ranked "public" futures trading
individuals and/or Managed Funds that I won't cite it, because you
probably won't believe it if I tell you.
I could see that you could have made over 1500% or more during that
time with your trade in silver.
And if you are as successful as you
claim to be, then I think you will have an extremely difficult time
getting actual real physical silver, and that it would probably be too
much for you to lift if you are as old as you appear to be with 40 years
of experience, and so even if I were to convince you, you probably could
not find the silver, nor lift it, so you have many problems ahead of
One of my clients is in the business of raising money for
successful futures traders, and he raises money in the hundreds of
I have a gift for your clients:
How to Get Into Silver, for
Billionaires February 27, 2008
free to re-write any or all of it to suit your needs, and no need to give
me any credit; I don't care. Just get the information out there to
He puts his own money with others like me, and he
knows almost all the top futures traders in the
world. He tells me that my performance in
the account I manage for him -- which is representative of all my
managed accounts -- is far and away ahead of #2, and he has his money
allocated amongst numerous of the world's top futures
I have a liking for silver as you do, a sort of bias in favor of
it, but I try not to let it blur my objectivity.
Are you sure you are not letting your familiarity and bias in favor of
futures markets, blur your objectivity?
I think you cannot see the
forest, because the tree of the futures market is getting in your
Look at the big picture.
It is the reason I spent time reading some of your missives,
despite the fact that I trade many different markets and never have
enough time to keep up with them all in the detail I wish I
could. That is also why I am spending so much of my
precious time writing this -- because it bothers me to see what appeared
to be correct and intelligent and informed turn into something incorrect
and ignorant on the subject of manipulation. I can
assure you that people as smart as anyone you've ever known would, if
they read your recent stuff, dismiss you out of hand, and for GOOD,
I appreciate and understand that and know that. But you have not
given me any sound reasons. They may sound sound to you, but not to
me. Communication of ideas is like that.
, if all they'd seen was your most recent issues.
Because your previous issues were fine, I am taking the time to tell you
this so you perhaps won't continue on this tack and undermine your own
credibility amongst the more sophisticated of your readers.
See, you assume futures traders are "sophisticated". I
think futures traders are deceived.
I think people who buy
physical silver are much more sophisticated, wise, smart, intelligent,
But I do want to appeal to those people who
trade futures, and I hope your letter will help with that.
Of course, it may be that you are so blinded by your own
bias in favor of silver, that you are willing to let the
minority of intelligent people downgrade their opinion of
you so long as you can convince a majority of your
less-well-informed readers to act in a way that you think will
further your hoped-for direction of silver prices.
Yeah, something like that.
Silver is going to go higher, and it will do so at a
more rapid pace than the average price increases caused by monetary
inflation, and this will go on for several more years at least before a
major bear market can develop from much higher prices.
But your attempts to accelerate that process are almost surely
going to backfire at times if you are not honest with yourself and
if you continue to go off half-cocked without a real grounded
understanding of your subject.
You tell me that this is not well-grounded:
Gold is the perfect commodity for exchange for the following
- Gold is liquid and easily traded, with a narrow spread between the
prices to buy and sell (about 1%).
- Gold is easily transportable, because it has a high value for its
- Gold is money because it is divisible, you can divide it into coins,
or re-melt it into bars, without destroying it.
- Also, gold is interchangeable. It can be substituted for another
piece of gold with no hassle.
- Gold is also nearly impossible to counterfeit, as genuine gold is
- When measured by weight, gold is easily countable, and verifiable.
- Gold is money because it is a great store of value. It is not
subject to decay, rot, or rust.
- Gold has an intrinsic value, because it is rare, highly desired by
the world over, and is a luxury item.
There is not a single other commodity with those attributes,
except, perhaps, for silver. Since gold is too valuable to be used for
small transactions, there is potentially more monetary demand for silver.
When gold becomes money again, silver will be desperately needed to make
You have a lot of information about silver, but you have a
gravely flawed understanding of how its price and the futures market are
I don't think so, and you have not shown so.
Silver is not being manipulated down. It is easy
to pinpoint those who WANT it cheaper, just as is the case for
any economic good that's widely traded, and if you look strictly at
the actions of those people in isolation, you can claim silver
prices were manipulated down becasue their actions tend -- in isolation
-- to weigh on price. But the behaviors you cite regarding
short sellers only are in fact routine and apply on both
sides, long and short, actually, and they also apply all the time
in many other markets where prices rise AND/OR fall under very
similar conditions and circumstances. You have taken a
spring shower and labelled it the hurricane of the century.
I'm sorry if you are all wet. I'm not, I'm not in futures.
Futures are the spring shower, paper money is the hurricane.
I think I have my labels right.
Look, I don't blame the shorts for
the manipulation; the longs are equally to blame, in my opinion.
hope you do well with the leverage, I really do. But one day, how
can you say that you won't get burned? How can you say the rules
will not change against you? How can you say you will be able to
cash out and get physical silver before it's too late?
Furthermore, you can't even validly point to heavy short selling as
a bear factor except EXTREMELY briefly.
You said this already. Again, until the positions are closed out,
they have an effect. Sorry.
Indeed, professional futures traders love to learn of
heavy short selling in a market because that is BULLISH and
interests them to buy the market for an imminent bull move (and
NOT merely cuz the shorts will have to cover, but for other very
important reasons that I'll bet you will have difficulty articulating
even if you are aware of them).
Again, this is why I've been promoting this for years, and asking
people to buy real silver. You are making my case.
Indeed, I could make a case just as good or better than yours, if I
were as ignorant of futures markets as you are, that YOU are
manipulating the market by actively cultivating disciples to your
bullish view on silver and feeding them frequently with information that
urges them to take physical delivery, thereby enticing thousands of
investors who otherwise would have no need or interest in owning
silver to actually purchase some and thereby "create an artificial
Of course I'm trying to help the silver market go up. It's called
advertising. And it's perfectly legal for people to buy what they
want with their money.
It's also legal to short sell silver that
does not exist, but that's not a free market process, according to my
understanding of Biblical Capitalism; it's manipulative, deceptive, and
wrong. And it's very wrong when those who do that, put limits on the
longs, and lie and claim that there are no limits!
A lie is a
lie. And if they use lies to justify what they do, then what does
Were I to argue this, you could easily argue against
it. It is not a very strong argument, though there is
some small actual merit to it. The point is, it could be
made every bit as strongly if not more so than your argument
that there is manipulation on the short side. That is simply
not the case, other than for all the usual types of activities people
normally take all the time in these markets, including the base metals
as well as the precious metals, and including lean hogs, live cattle,
lumber, cotton, and frozen orange juice, as well as stock
indexes. Where your arguments are correct, they
are not relevant to the downmove in price, and the arguments you give
which are potentially relevant to a downmove, are not correct
because they misconstrue the nature of futures
I think you misconstrue the nature of futures markets, because you play
in them. To my view, you are like a drug user, and I'm trying to
tell you that smoking pot is harmful, and you are saying it's never harmed
you yet, while you are still 60 years old and still living in your
I don't mean to be purposely disrespectful, but
that's my view. I have your best interests at heart, and I genuinely
feel that a default in silver futures is virtually guaranteed at some
point because I think the regulators are asleep at the
Also, history bears out the point. In 1934, gold
certificates defaulted, as gold prices then rose from $20 to $35.
Then, in 1971, gold certificates defaulted on foreigners, and gold then
went up from $35 to $850.
Don't you think that today's version of
gold and silver certificates, in the futures markets, are guaranteed to
default? And if not, why not?
Since the shorts are
kept anonymous, and since there are position limits, isn't that evidence
of shortages, and a problem?
Indeed, your own participation in the silver market probably did
contribute a little to the recent decline. It is a
fluctuation, nothing more, and the huge number of your subscribers means
there is bound to be a large number of people who bought and took actual
delivery of silver in the forms you recommend, a larger number than
otherwise would have been the case.
Well, I admit that, and even did the math to show that as a
possibility. With 80,000 readers, and only 75 million oz. of
investment demand per year, that means my readers can only buy 937 ounces
each year, or 18 ounces per week, to be the equivalent of current
This has undoubtedly contributed to the spot
shortages of bars since we do have a potentially tight sit'n in silver
overall, especially should investment demand increase even
moderately. Your own activity has probably "pushed" silver
prices a tad "ahead of the schedule" they would have followed in your
absence from the markets.
That's the whole point of writing my letter, in my opinion, to get
people into silver!
There are other similar but much larger factors
operating in the market than yourself, but your recommendations have
undoubtedly added some activity to the long side, created some increase
in physical demand. And one of the inherent
characteristics of ALL markets -- to which you seem to give MUCH shorter
shrift than reality demands -- is the fact that there is FEEDBACK
in all market pricing. The truism that "high prices
are their own best cure" and "low prices are their own best cure"
applies not only in the extremes, but everywhere in the middle too, over
the short, long, intermediate, very short, and extremely long terms.
So then, my bringing attention to the real shortage at 19 major coin
dealers might have helped limit silver prices from going lower than they
otherwise would, perhaps? Excellent!
On any time level you choose to observe, these truisms
operate, and a market's behavior over any period will be the sum of the
effects of these principles over all the infinite time intervals you
might arbitrarily set for your analysis of their variously timed
effects. All change occurs through time, and
that includes prices. No market goes straight up or straight
down without some interim fluctuation, even if it's relatively small
compared to the net direction over the entire time period being
examined. This is in the nature of markets themselves and will not
change as long as there are markets which are even relatively freely
I've always taught that, I think, and never said the opposite.
Markets are "ornery" by nature, and all the logic
brought to bear on markets often frustrates very intelligent newcomers
to trading because they don't fully understand the nature of the beast
to which they are attempting to apply their "flawless" logic.
Being right about market direction is NOT merely a matter of getting
your economic facts right -- you have to get them right BEFORE others
do, or else the market's direction may very well be PRECISELY
OPPOSITE to what is dictated by the application of logic to
the economic facts. Markets are known for surprising everyone by
collapsing hard on the best news, or for exploding upward when all the
known information appears to indicate an extremely bearish
situation. Your complaint that the recent decline in silver
is inexplicable because of the bullish facts you have cited is simply
gross naivetee of the highest (lowest?) order, in the eyes of any
experienced and knowledgable speculator. I have seen
far greater apparent paradoxes many, many times in many, many
markets, disparities between what the apparent facts "should" have
caused to happen and what actually did happen.
silver decline in the face of shortages of silver bars, etc, is a banal,
routine, ordinary event that would be
more surprising by
its failure to occur on occasion than by its actual
Yes, I understand that crazy events are to be expected in this world of
paper money excess which is more like "Alice in Wonderland" and "Wizard of
Oz" than reality. But I speak of how reality ought to be, not how
things should be crazy.
My understanding is that you are so used to
what is crazy, you have no perspective of what should be normal.
Your complaint and your arguments in support of it are sophomoric,
and reveal your status as a tyro in the markets generally, or else
as one who is so biased in favor of his own position that he has
lost his objectivity. You should be WELCOMING
the decline with joy
I do, and did. Read again. http://www.silverstockreport.com/2008/cftc.html
the end, I have three statements showing how happy I am with how things
as one of those routine, apparently perplexing (to those whose
straightforward analysis overlooks certain of the characteristics
inherent to all markets) events, one which is like a gift from God that
enables sophisticated traders to step in and take advantage of the
opportunity to "buy low." Such
opportunities arise only BECAUSE a market does something
which, according to the obvious facts, it
In other words, even if you were 100% correct that the silver
market is being manipulated downward (which you
Oh, I am 100% sure of myself. It's you who remain
even if that were absolutely true, then the tone of a letter from a
wise and experienced trader/investor would not be to stage a protest
I protest nothing.
against those who are hurting your profits for the moment, but
rather a wiser, experienced admonition to avoid being taken in by this
event, to gird yourself against demoralization, and to realize that
these "manipulators" are digging an even deeper hole for themselves with
every act of downward manipulation they engage in, that this is
creating a golden (silvered?) opportunity to load the boat with cheap,
artificially cheapened silver, thanks to the gift these manipulators are
offering us in the attempt to bluff us out of our positions, and that we
should WELCOME the event, and be happy that our sophisticated
understanding of the nature of markets enables us to identify it as the
welcome opportunity it truly is.
I do exactly that! I've said that I'm happy about it for years,
that I'm happy about the opportunity of the manipulation. You don't
know me, sir.
In 2003, I wrote about the manipultion: "it helps
those who are younger and still working, and who are able to continue to
buy gold and silver at today's liquidation-sale prices."
Your choice however has been to take the tack of
looking for a conspiracy behind the decline and describing it in
pejorative terms, with "blame" deserved by the evil
manipulators for their allegedly nefarious activities.
Well, look how the Bible puts it: I'm rather nice by
Warning to Rich Oppressors
1Now listen, you rich
people, weep and wail because of the misery that is coming upon you. 2Your wealth has rotted, and moths have
eaten your clothes. 3Your gold and
silver are corroded. Their corrosion will testify against you and eat your
flesh like fire. You have hoarded wealth in the last days. 4Look! The wages you failed to pay the workmen who
mowed your fields are crying out against you. The cries of the harvesters
have reached the ears of the Lord Almighty. 5You have lived on earth in luxury and
self-indulgence. You have fattened yourselves in the day of
slaughter.[a] 6You have condemned and murdered innocent men, who
were not opposing you.
1After this I saw another
angel coming down from heaven. He had great authority, and the earth was
illuminated by his splendor. 2With
a mighty voice he shouted:
"Fallen! Fallen is
Babylon the Great!
She has become
a home for demons
and a haunt for every evil[a] spirit,
a haunt for every unclean and
the nations have drunk
maddening wine of her adulteries.
The kings of the
earth committed adultery with her,
and the merchants of the earth
grew rich from her excessive luxuries."
4Then I heard another
voice from heaven say:
"Come out of her, my people,
so that you will not share in her
so that you will not receive
any of her plagues;
her sins are piled up to heaven,
and God has remembered her crimes.
This is the choice of a bad loser who can't admit even a temporary
error in his analysis, who was unprepared for the apparent paradox of a
market moving counter to what the economic facts appear to indicate, and
who is more interested in proving that he didn't err or in proving
something else about himself than in actually making real profits
for those he is advising.
Oh, I'm fully prepared. Not having used leverage, I've not lost
an ounce, and cannot be traded or tricked out of my position.
I am giving you good advice, which I suspect you may
neither appreciate nor fully understand. I expect you
instead to defend your position, even though at least certain major
aspects of it are thoroughly indefensible, and provably so.
For a bottom line simple analogy, your arguments are about as
meaningful and sophisticated as pointing to people who fill their
automobiles' gas tanks to the brim and claiming they are responsible for
manipulating gas prices higher;
I believe that's a false comparison. I would be fully on the side
of anyone who wished to do that, as people have a right to buy gas, and
such people are a very small part of the overall market.
contrast, when 4-8 people sell over 1/2 a year of mine supply of silver,
and do it anonymously in the futures markets, selling silver that they
might not have, that's manipulative.
or people who buy their milk by the gallon instead of by the pint
as artificially manipulating the price of milk
higher. It's very disappointing to observe the kind of
irrelevant, sophomoric, ignorance coming from your publication these
last few issues, very disappointing indeed. I hope your
subscribers are not taken in by what I'm sure is not due to any
dishonest motives on your part, but merely your obvious ignorance of
certain traits inherent in markets by their very nature, futures markets
Thank you for airing your complaint in a most professional
manner. If your arguments are any indication of the level of
understanding of the smartest and most well capitalized traders in silver
futures, I think you have helped me to make my case that I'm exactly where
I want to be, and that I'm doing exactly the right things.
conclusion, if you would like to research what some other well capitalized
former futures traders are saying about getting physical gold and silver,
I suggest you read the writings of Bill Murphy at www.lemetropolecafe.com or Ted
Butler at www.butlerresearch.com.
Bill at one time had the largest position in copper, and Ted at one time
had the largest position in oranges. They know their
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