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Comment for Sunshine Act Sunshine Act Meeting: March 25, 2010

  • From: Ted Butler
    Organization(s):

    Comment No: 21202
    Date: 4/11/2010

    Comment Text:

    10-005
    COMMENT
    CL-00903
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    Sent:
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    enoriega 1 @imap.mail.rcn.net
    Sunday, April 11, 2010 6:54 PM
    Metals Hearing
    Y
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    April 11, 2010 - IRI Interview
    posted: 4/11/2010
    Here's a sneak preview of an interview I did last week with Jim Cook of
    Investment Rarities, that's
    currently being mailed to IRI clients and should be published on the
    Internet next week. This interview
    was concluded before the release of this month's Bank Participation Report
    on Friday, which indicated
    that JPMorgan did not add to its gold and silver COMEX short positions
    (through Tuesday, at least.) I will
    write about this in the next day or two, but I thought I should send this
    interview in the interim.
    INTERVIEW WITH TED BUTLER
    Mid April 2010
    Years ago, Jimmy Stewart played the lead in a movie titled, Mr. Smith Goes
    to Washington. In this case,
    it was Mr. Butler goes to Washington. Who did you meet with?
    A: I met with the senior staff responsible for regulatory matters for about
    an hour and a half.
    Q: Was the Chairman of the CFTC, Gary Gensler there?
    A: He stopped by to introduce himself and chat briefly.
    Q: What, in a nutshell was discussed?
    A: Basically my long-held premise of a manipulation in COMEX silver via the
    documented concentrated
    short position. They asked an awful lot of on-the-money questions, to
    which I replied directly.10-005
    COMMENT
    CL-00903
    Q: Did you have reason to believe they agreed with your arguments?
    A: Since they didn't offer any challenges to what I said, and their follow
    up questions didn't seem
    argumentative in the least, I sensed they were in basic agreement.
    Q: What stands out about the meeting?
    A: The seriousness with which they approached the issue.
    Q: The following day, the public hearing took place. What did you think of
    that?
    A: I thought it was great. Here we had a public meeting that revolved
    around the very issues I have
    petitioned the CFTC on for 20 years. Much to the Commission's credit, the
    fact that they had rejected
    my contentions in the past didn't deter them from addressing the issues
    openly.
    Q: What issues were raised?
    A: Whether we should have position limits in silver and gold.
    Q: What else?
    A: Why there is such a big concentrated short position in silver.
    Q: What about whether the price is manipulated?
    A: Yes, all of that.
    Q: Who was on the other side?
    A: The big banks, the exchange and all others from the silver
    ~establishment" were opposed to hard
    position limits.
    Q: What was their argument?
    A: That is would drive liquidity and business from the COMEX to markets
    overseas.
    Q: What were they angling for?
    A: To preserve the status quo of allowing the biggest traders to continue
    to control the market. The big
    banks and the exchange are certainly not interested in having a level
    playing field.
    Q: What about their argument that position limits would reduce liquidity?
    A: It clearly was a bogus case, because causing a few large short traders
    to reduce their positions would
    actually increase liquidity, not decrease it. Legitimate hard position
    limits in silver, for example, even if
    those limits were reduced to the 1500 contract level I recommend would only
    affect less than 1% of all
    traders on the COMEX.
    Q: Did that point come out?
    A: Not at the meeting. But I will be sure to make that point in the future,
    in the public comment period.
    Q: What exactly is the public comment period?
    A: The time when the Commission seeks written input from the public on
    specific issues that goes on
    the official record.
    Q: Should people comment?
    A: Absolutely. The hundreds of public comments last year on silver and
    gold are what led to this recent
    CFTC hearing. It's very important to email or write to the Commission on
    this issue. All comments must
    be received by April 26, 2010.10-005
    COMMENT
    CL-00903
    Q: Was JPMorgan at the hearing?
    A: No.
    Q: Why ~vouldn't they attend?
    A: My guess is that they didn't ~vant to ans~ver specific questions and
    incriminate themselves.
    Q: The ~vhole thing sounds like a revie~v of all the issues you have raised.
    Do you agree?
    A: Absolutely. That's ~vhat made it so great.
    Q: Would it be safe to say that this meeting ~vouldn't have taken place if
    it ~vere not for you?
    A: All modesty aside, I don't see ho~v.
    Q: What happens next?
    A: There has been tremendous attention placed upon the meeting and the
    important issues are being
    openly discussed and considered.
    Q: I'm more interested in ~vhat happens next to the price.
    A: The price of silver is going a lot higher.
    Q: I've already had some complaints that nothing happened after the
    hearing. What do ~ve tell these
    people?
    A: Tell them the same thing you told them at $4, $5, $7, and every other
    price over the past ten years.
    Look, silver's the best investment to come along in most people's
    lifetimes. Have some patience.
    Besides, the price did go higher in the days follo~ving the meeting.
    Q: Do you think position limits ~vill be changed do~vn~vard?
    A: Yes, in silver. At a minimum, the position limits in COMEX silver ~vill
    be adjusted do~vn~vard relative
    to gold.
    Q: When might this happen?
    A: My feeling is after the price has moved up a lot. And I think that ~vill
    be soon.
    Q: What about exemptions to position limits?
    A: Everyone kno~vs that is the key. If they don't crack do~vn on JPMorgan
    and the other big shorts, the
    CFTC ~vill be discredited.
    Q: Do you think the big short sellers expect these changes?
    A: I think JPMorgan does. I think the others may be missing ~vhat's coming.
    Q: They must be taking actions to protect themselves, don't you think?
    A: I think JPMorgan is taking action, not the others.
    Q: What can they do?
    A: Close out their shorts by buying them back or delivering against them,
    and most importantly, not
    selling short on the next price rally.
    Q: Do you see any signs of this?
    A: Yes, as regards JPMorgan. And they are the key.
    Q: What happens if JPMorgan does sell short on the next rally?
    A: I think there ~vill be a public outcry and both JPMorgan and the CFTC
    ~vill come under severe
    criticism. I kno~v I ~von't hold back.
    Q: You have been very complimentary and supportive of the ne~v Chairman of
    the CFTC, Gary Gensler,
    in spite of much disagreement. Why so?10-005
    COMMENT
    CL-00903
    A: Look, I judge people by what they say or do, not on some preconceived
    notions. He's said and done
    the right things.
    Q: I see many are jumping on the bandwagon about position limits. How does
    that make you feel?
    A: Good. After 20 years, it's about time.
    Q: You are the sole person who raised the issue of position limits on
    silver. Do you think the CFTC is
    finally on board?
    A: I think the leadership is.
    Q: Exactly what impact do you see these rule changes having in silver?
    A: The silver manipulation will be terminated.
    Q: What will that do to the price?
    A: It should go much higher.
    Q: You've expressed to me privately and to our broker staff why you think
    people should buy silver
    now. Would you state the case here?
    A: A number of factors have converged, in addition to the regulatory
    matters. The most important of
    these factors involve strong signs of an emerging wholesale shortage of
    silver.
    Q: What signs?
    A: Over the past 5 or 6 weeks, there have been unusual movements in COMEX
    warehouse silver stocks
    and deliveries by JPMorgan, as well as the withdrawal of a significant
    amount of silver from the big
    silver ETF, SLV. Taken together, these unusual movements suggest the big
    dealers are scraping the
    bottom of the barrel to come up with the timely delivery of silver to their
    wholesale customers. It
    appears to me that the big dealers are borrowing silver from Peter in order
    to pay Paul. This is a
    juggling act in which one misstep will unravel the whole silver scam.
    Q: How much silver has been taken out of the SLV?
    A: 9.5 million ounces in five weeks. Frankly, it's beginning to look like
    there isn't enough silver to go
    around.
    Q: I know you think silver is better than gold. Why?
    A: I don't sense the same juggling act taking place in gold. The critical
    difference between gold and
    silver is that gold is not consumed industrially, while silver is. As a
    result of this critical difference,
    there is less silver bullion in the world than gold. Silver's industrial
    consumption sets up the likelihood
    of a shortage, a condition not present in gold. Silver has investment
    demand on top of industrial
    demand. Gold has mostly investment demand.
    Q: What does this mean to buyers of silver?
    A: You can make a lot more money with silver than you can with gold.
    Silver can rise much more
    percentage wise.
    Q: Can you be more specific?
    A: I can see gold rising in price 20% or so, under the right circumstances,
    say up to $1,300. I can see10-005
    COMMENT
    CL-00903
    silver easily rising 100% to 200%, to $35 or $70. In almost any scenario,
    I can see silver outperforming
    gold by five or ten times. With silver you are going to get the biggest
    bang for your investment dollar.
    Q: But gold and silver performance has been roughly equivalent over the
    past ten years, haven't they?
    A: I realize that, and both have performed better than stocks or bonds or
    real estate. But I am
    convinced that the facts point to silver vastly outperforming gold. May I
    speak in blunt terms?
    Q: I think my ears could handle it.
    A: I think that gold investors ~vho don't hold a significant silver exposure
    have been lucky to date that
    gold has kept pace ~vith silver. And I think these gold investors are being
    given a tremendous
    opportunity no~v to convert some or all of their gold holdings to silver.
    Q: That's not likely to happen in a big ~vay, is it?
    A: If all the gold investors ~vere to make the s~vitch there is not enough
    silver. But some can. I hope
    they do because silver is going to beat the stuffing out of gold
    price-~vise, and there are going to be a
    lot of gold-only investors ~vho ~vill regret not making the s~vitch.
    Q: What can happen ~vith investor demand if prices rise?
    A: Initially, it ~vill increase. It's human nature for investment demand to
    gro~v as prices increase. Later
    on, at much higher prices, investors may begin to sell. When ~ve get to
    those much higher prices, ~ve'll
    monitor investor behavior.
    Q: Are the industrial users still oblivious to the events unfolding in
    silver?
    A: Absolutely. The example I like to use is that they are like a giant
    herd of ~vildebeests on an African
    plain, feeding but sniffing the air for the scent of lions. When they do
    get the scent, they are all off and
    running. When the users get the first silver shipment delay notices, they
    ~vill all panic and rush to build
    silver inventories. I don't see ~vhat can stop it.
    Q: What about these pool accounts and silver storage ~vhere there is paper
    silver but not real silver?
    A: That is a very big problem still, even though so much as been ~vritten
    about it over the years. If you
    don't have the serial numbers and exact ~veights of the 1000 oz. bars being
    held for you, ~vith the
    ability to take delivery immediately of those exact same bars, you don't
    o~vn silver. Period. How
    anyone could continue to hold unallocated and not specifically earmarked
    silver is beyond me.
    Q: As far as mainstream financial ne~vs is concerned, you are still a voice
    in the ~vilderness. Ho~v come
    so fe~v people see ~vhat you see?
    A: Because they don't take the time to study the facts. It's much easier
    to just assume you already
    kno~v everything you need to kno~v about silver and skip time-consuming tasks
    of actually studying it.10-005
    COMMENT
    CL-00903
    Q: Is that good for silver buyers?
    A: Of course. It gives those who do take the time to learn the real silver
    facts the opportunity to buy
    before the crowd wakes up. Just ask those who loaded up at single-digit
    silver prices. The same will
    be said about buyers at today's prices.
    Q: Any new breakthroughs in the uses for silver?
    A: Every single day. When you have a material that is the world's best
    conductor of electricity, best
    heat transfer agent, best reflector of light, and best biocide, how could
    there not be new breakthrough?
    Silver is the most versatile metal of all.
    Q: Is industrial demand for silver still growing?
    A: Sure. As long as world GDP and population grows, silver industrial
    demand will grow. But what's
    really remarkable is the composition of silver demand.
    Q: In what way?
    A: How many commodities can you name where its main demand engine was
    crushed and other new
    demands emerged to maintain and increase total demand? None. Yet silver
    lost its main demand
    sector in photography and still overall demand increased. That's
    incredible and shows just how
    versatile silver is as a vital industrial material.
    Q: What impact do you think China has on silver?
    A: Huge; both from a production and refining perspective and as a consumer.
    China is currently the
    largest consumer of all metals and that doesn't look to change except
    accelerate. The long-term
    future of the price of silver will be determined by China.
    Q: How will they react to a big surge in the silver price?
    A: I'm not exactly sure, but if you stick around for a while, I guess we'll
    all see with our own eyes.
    Q: China recently made silver ownership legal. Are the Chinese people
    known to be buying silver?
    A: There were reports to that effect a while back, but information from
    China is sketchy. I think it's
    safe to say, however, that they will play a major role in the future.
    Q: What about the inflation factor? Is silver one of the things to own to
    offset inflation?
    A: Sure, but that's kind of elementary, so I don't write about it much.
    There's not much value added in
    telling folks what they already know.
    Q: Retirees on fixed incomes are getting hurt by low interest rates. They
    are afraid to risk their
    precious capital in silver. What do you say to them?
    A: I understand their dilemma. Sufficient and dependable income from
    savings is hard to come by in
    today's ultra-low interest rate environment. I'm not a magician who can
    turn silver into an income-
    producing asset. But I believe it is a safe asset that can grow to many
    times its current price. I believe
    you will be able to sell it at a profit in the future that will more than
    beat the current rate of return of10-005
    COMMENT
    CL-00903
    bonds or CDs, just as it has for the past 5 or 10 years. I think people
    should look at it as an alternative
    for some of their current savings type accounts.
    Q: I feel like ~ve've passed a tremendous milestone in the silver debate.
    The main theme you
    introduced years ago has had a complete airing. Ho~vever, that takes us to
    the next part of your
    equation, which is your prediction of a dramatic price rise. Ever worry
    you could have miscalculated?
    A: Sure I do. But the amazing thing is that, ,vhile I've al,vays ,vorried
    about being ,vrong, the more I
    study the situation, the more I am convinced that the price explosion is
    still ahead. It's kind of,veird,
    even though the price has moved dramatically higher over the past 10 years;
    the bullish case is more
    compelling than ever.
    Q; All along the ,vay you have exhibited great caution and care about the
    facts you've presented. For
    me that's given you great credibility. It also gives me a lot of
    confidence in your forecasting. I know
    you don't like to be put on the spot but ,vhere could silver go eventually?
    A: The reason I'm al,vays hesitant to mention specific prices is because I
    don't kno,v and I don't like to
    ,vrite things that I'm unsure of. In the case of extreme future prices for
    silver, ho,vever, considering the
    dynamics of ,vhat could happen to prices in a shortage and short-covering
    panic, my hesitance is in
    picking too lo,v of a price.
    Q: Won't higher prices cause silver substitutes to be used?
    A: Sure, but that ,vill take time to unfold. In a panic to the upside,
    there ,vill be scant relief due to
    substitution in the short term.
    Q: What if the big short has been covering its short position over the past
    ~veeks and months. Could
    they get this done ,vithout driving up the price?
    A: To a certain extent, but please remember the price has already gone up
    and they have a lot more
    covering to do.
    Q: Tell us again ,vhat happens if they stop shorting in the future?
    A: The biggest price controlling mechanism ~vill have stopped and ~ve're in a
    ~vhole ne~v era.
    Q: Would you say we're off to the races with silver now?
    A: When we're truly off to the races, you won't have to ask me, as it will
    be obvious. The trick is seeing
    it just before they shoot the starting gun. That could be now.
    Ted Butler
    April 11, 2010
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    COMMENT
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