Are JPM's COMEX Silver Positions Only A Hedge Against Physical in the Warehouse?
Many people have emailed me an article going around the internet about JPM's short position being a hedge against physical silver that they own. A certain bullion banker claims that the banks don't manipulate gold or silver although the hedge funds do with computer programed algo trading. This bullion banker, David R, claims that all the banks do is arbitrage buying physical while simultaneously shorting COMEX contracts. Here's the article that I was sent:
My take: NOT A CHANCE IN THE WORLD for the following reasons:
1) There were over 100 BILLION ounces of COMEX silver shorts sold in 2011 according to the CME data. How much silver was physically purchased to counter these shorts when JPM controls over 30% of the short according to CFTC's own data? Is David R. saying that JPM bought 30B ounces of physical in 2011?! Utterly ridiculous.
2) David R. claims that he can show the physical silver in JP Morgan's vaults. But wait...JP Morgan is the custodian of SLV which is supposed to hold 322M ounces of the physical silver in Trust for the ETF. If JPM is using the SLV inventory to justify their shorts it's the biggest fraud in history.
3) If there are grand warehouses of silver stockpiles...who owns them? How many times have they been "rehypothicated"? Is it leased-in silver that must be paid back? Are they part of a silver storage program? Are they "Moly-Bars"?
4) To suggest that the large bullion banks don't use "algo trading" and it's only done by the hedge funds is naive at best. Why wouldn't the largest, best funded traders use the best technology to improve their trading results? The simple fact is that the Bullion Banks have been using computer rigging programs since the 1970's as I've shown many times on the Road to Roota. YES! The name Roota or "RootA" comes from the computer language called BASIC invented by John Kemeny and none other than Alan Greenspan for the purpose of rigging the markets!
Greenspan's Golden Secret
5) The question of "manipulation" should be obvious to anyone who looks at the data from the CME. It's about CONCENTRATION and what effect it has on price. Do the trades of one or two traders distort the price of silver? If these traders were removed from their long or short positions would it change the price? On the long side the answer is "NO" as there is no large concentration held. On the short side the answer is "YES" as there are just a handful of short holders (JPM being the largest with over 30% of the net short currently).
6) If David R.'s analysis of the situation were correct then JP Morgan would have accumulated over 75M physical ounces of silver since July. That's how large JP Morgan's COMEX silver short has grown in that time frame. How come it takes Eric Sprott months to get his hands on 10M ounces for his PSLV fund and yet JP Morgan seems to get 7x more at the drop of a hat?
7) So David R. lays out a challenge to us crazy "Tin Foil Hatters" who don't believe they own physical silver: "They are clear as day on the "Notes to consolidated financial statements under 'physical commodities.' You can see the assets." So of course I took the challenge and was shocked to find that JP Morgan lists $26B worth of all "physical commodities" on their financial statements as of year end 2011. So, crazy me, I went to the OCC website and found how many "physical commodity" derivatives JP Morgan held at the end of 2011...
Are you ready for it? According to David R. JPM hedges commodities 1 for 1 right?
Drum roll please...
And the total derivative value of JPM's commodity book is....
Oops. Guess he shouldn't have said to check. That just shot David R's credibility strait into the gutter!
And of course...
8) Since when did we start taking the word of admittedly one of the largest bullion bankers in the world?! It's like a mouse telling you he didn't take the cheese!
Doesn't it always seem like the "great silver destroyer revelations" come out right around the time that silver is about to take off? From everything I watch it is time to batton down the hatches and prepare for the silver fireworks.
If this article was a message from the bullion banker community to the awake and aware bullion investor then I believe the massage was delivered loud and clear...
BUY MORE PHYSICAL SILVER BECAUSE THE BANKSTERS ARE DESPERATE!
May the Road you choose be the Right Road.
PS - There is a picture of huge stacks of what appears to be physical silver in some of the article postings. If you wonder why it looks a little odd it's because no warehouse in their right mind would stack silver 30 bars high without racking or pallets! Gotta love PHOTOSHOP!
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