No one knows the machinations of the day-to-day silver price better than Ted Butler.
Ted publishes bi-weekly commentary at www.butlerresearch.com, with a special focus on the silver market, which he’s been closely following for over 30 years. Ted is an expert’s expert.
So naturally, that’s whom I turned to for an in-depth perspective on what’s really going on with the silver price. As usual, Ted tells it like it is.
I think you’ll be fascinated by Ted’s tremendous insights…
Ted Butler on Silver Price Manipulation
Peter Krauth: Ted, you’re widely recognized as the foremost expert on manipulation in the silver futures market. How do you define manipulation, and how are the main players benefiting from that?
Ted Butler: Manipulation is another way of saying someone controls and dominates the market by means of an excessively large position. So, just by holding such a large concentrated position, the manipulation is largely explained. In real terms, whenever a single entity or a few entities come to dominate a market, all sorts of alarms should be sounded. This is at the heart of US antitrust law. It is no different under commodity law.
Price manipulation is the most serious market crime possible under commodity law. In fact, there is a simple and effective and time-proven antidote to manipulation that has existed for almost a century, and that solution is speculative position limits. Currently, the Commodities Futures Trading Commission (CFTC) is attempting to institute position limits in silver, but the big banks are fighting it tooth and nail.
As far as any benefits the manipulators may reap, it varies with each entity. But if you dominate and control a market by means of a large concentrated position, you can put the price wherever you desire at times, and that’s exactly what the silver manipulators do regularly. This explains why we have such wicked sell-offs in silver; because the big shorts pull all sorts of dirty market tricks to send the price lower.
PK: Could you tell us when and how you got started researching this matter?
TB: It started around 1985, when a brokerage client asked me to explain how silver could remain so low in price (in the single digits) when the world was consuming more metal than was being produced. I accepted the intellectual challenge, and it took me more than a year to figure out that the paper short positions on the Comex were so large as to constitute an almost unlimited supply. It was this paper supply that was depressing the price.
PK: Who are the main players in this manipulation scheme? On average, what percentage of Comex silver contracts are “controlled” by these main players?
TB: Under US commodity law, the names of individual traders are kept confidential. However, it is no secret that the commercial traders are the big shorts. It is also no secret that these big commercial shorts are mostly money center banks and financial institutions. Based upon government data and correspondence, the largest such short almost certainly is JPMorgan Chase & Co. (NYSE: JPM), who inherited their big silver short position from Bear Stearns when JPM took over that firm in 2008.
Together, the eight largest commercial silver shorts on the Comex generally account for 50% to 60% of the entire net Comex silver market, with JPMorgan alone holding around 25% or more of the entire market. I would hold that those percentages of concentration and control constitute manipulation, in and of themselves. By the way, there is no comparable concentration on the long side; only the short side of silver.
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